The Family Business - Finding Success

By: Bob De Contreras

The downsizing of large public companies, and the failure of many private companies since 1999, has led to a large number of displaced employees developing their own family businesses. However, these family run businesses are up against unfavorable odds. Only five percent of businesses that were started in 1994 have survived to 2004. The life expectancy of those firms that made the 10-year cut is 24 years.

Seventy percent of all family-owned businesses don't have succession into the second generation and less than 10 percent make it into the third generation. Thereafter, there is a one-percent survival rate with a family member in charge.

Winning with Information
The survival rate is unfortunate because family-owned businesses contribute more than 50 percent of the GNP and create more than 60 percent of all new jobs. Family firms are among the most significant contributors to the well-being of the community in which they operate. Understanding why businesses fail and taking preventative action will open the door to further successful economic growth. Causes of failure include lack of information, lack of planning, poor management, and under-capitalization. You can significantly increase the chances of preserving your family business and keeping it viable by taking the time to periodically review the progress of your business.

Analyze the state of your business. Look for trends in your development. Separate the business into segments and review each segment and its components for contribution. Are there areas of the business that do not contribute to profitability and why? This has to all be done with total objectivity, not wishful thinking!

Planning for Success
Develop a plan to keep the business viable. Establish an objective for every area of the business where failure would endanger survival. Decide on the specific actions required to reach each objective. Prepare a budget that includes both money and people required to support the actions. All goals should be realistically attainable. Determine how results will be measured as well as the timetable for accomplishment.

Develop a plan to preserve the heritage into succeeding generations. Analyze the family situation for areas of conflict. Evaluate each family and non-family member of your organization for capability, levels of commitment, and contribution. Include all elements that relate to transfer of management and the preservation of wealth. Don't rely on buy-sell agreements and estate plans alone to guarantee a smooth transition. Plan carefully for management succession. Don't waste your time trying to eliminate family conflict. Instead, resolve conflict by learning to manage it.

Plan for life after the business. Put it all on paper! Remember, unless your plan is in writing, it is only conversation. The longer lead-time you allow for accomplishing your plan, the greater your chances for success.

Managing for Results
The most successful companies are managed from the bottom up. The idea is to have everyone in your organization manage his/her area of responsibility based on knowing how their performance contributes to personal success and the success of the company. Delegate responsibility and the authority to carry it out.

Take a close look at your company's management style for levels of involvement and participation. Do you tap into the most powerful source of problem identification and resolution; for example, the knowledge your people have about their jobs? Or, have you created an atmosphere that sends the message, “If I want your opinion, I will give it to you?”

Develop a mission statement for the business. Communicate why you are in business and how you operate to serve the needs of your customers and your people. This will help you establish a clear vision for the business. For example:

"My Company, Inc. is a leader in the __________ industry. We are dedicated to providing ____________ that meet customer expectations through innovation, personal attention, and consistent high quality. We will act as responsible citizens within the community and provide our people with a safe, healthy environment where individuals can learn, grow and be rewarded in proportion to their commitment, capability, and contribution to the team effort."

Create a family mission statement that makes clear the family's values and responsibilities to unity and preservation of the heritage. Learn to manage conflict and through open dialogue, identify issues and resolutions in a win-win environment. Plan for family fun time, apart from the business.

Provide Sufficient Capital to Sustain the Business
Just as the proper balance of financial ratios indicate the strength of your business, so does the proper level of intellectual capital indicate the health of your business. The lifeblood of your business includes a sufficient level of positive cash flow as well as the involvement and training of your team (both family and non-family) at all levels. Your customer's positive perception of fair value provides the revenues for profitability. Your internal customers, your people's satisfaction provides you with the means to grow and prosper. The most valuable asset your company has is the people who help you meet your objectives.

Our economy’s lifeblood for growth will continue to be more dependent on the success of the small businesses. The days of reliance on the corporate job and government welfare are waning as more and more people take the initiative to start a business and add value to our economy. Likewise, it’s best that we become more and more familiar how to run successful businesses.

The Family Business – Finding Success Case Study

By: Bob De Contreras

We have worked with some exciting family owned businesses over the last year. All are doing well and each has a lesson or two to teach others. I can safely name some names without getting into too much trouble. They all have a unique story and are proud of what they have done.

Davis Chamblee started Vision Technologies in Wendell, NC. He is not only a very accomplished electrical engineer, but has also invented some unique devices that protect homes and businesses from the damage that can be caused by near-miss lightening strikes. I now know more about surge protection and grounding than most humans and my home is living proof that his products work. Davis is a principled man who runs his business on the same principles he lives by. His business vision is founded in his faith and the power of high integrity relationships with people. What Davis has learned over the last year is the importance of having a solid marketing and sales proposition and managing a group of high quality customer prospects through the sales process. By properly communicating his value proposition to the right people, he has gained access to many more new customers. Coupled with a sales partnership, he has increased his sales coming through this very rough economic period. The lesson from Davis is that businesses are run by good old fashioned hard marketing and selling. The world of customers doesn’t beat a path to your door. You have to beat the path to them.

Bev’s Fine Art is an amazing place. Bev and James Kesterson started their art gallery over sixteen years ago in North Raleigh. Today, they have some of the finest art in the southeast, and are a guiding light to the local art industry. Not only that, all three of their children have leading roles in the company. Wendy and Aaron sell art and Ken does all the framing. Along with the whole Bev’s Fine Art team, they provide very high quality art work and have a comfortable and inviting gallery to visit. During the hard economic years, their business suffered because there was less spending on art. Bev and James tightened the belt, reached out with effective marketing programs, refined their sales discipline and skill, and with a lot of hard work have handily pulled through these tough times. Their unique strength though is the resolute toughness of the family and their ability not only to work with each other, but to stand for each other every day. The lesson they offer is to pay attention to the basics in family relationships and pay attention to the basics of solid retail marketing and sales.

A different gallery is Cedar Creek. It is one of the southeast’s most well know pottery galleries; best known for their Fall Pottery and Glass Festival, where they open the kilns for the new season. Pat and Sid Oakley founded the gallery which is now nestled in the beautiful hills of Creedmoor, NC. Their daughter, Lisa helps run the business and is a master glass maker. Sadly, Sid passed away early this year, leaving the family to decide the future of the business. Pat and Lisa confided in friends as they dealt with their grief as well as the dilemma of what to do with the business. When it came down to it, their decision was to continue the business, founded in their belief and joy in what they do as artists and what they offer the public. In order to continue without Sid, they needed to bring in a new gallery operations manager who would handle the running of the business, as the family continues to pursue the roles they had when Sid was running the business. The lesson they bring is, when making tough decisions, go back to the basics of your mission and purpose and let it guide you. The rest is focused execution of the business. Now with a new operations manager, they are getting on track in a new era for Cedar Creek Gallery.

Bill and Carol Moran founded Communications Technology in North Raleigh. Both former IBMers, they offer a wealth of experience in customer care and management. Founded in their marketing and sales backgrounds, ComTec provides telemarketing services to small businesses, both for lead generation and customer surveys. They had come to rely on one customer for a large portion of their business and needed to diversify their customer base in order to protect themselves from adverse impact if their large customer had to downsize. They pulled together a list of customer prospects, developed a new value proposition and conducted targeted marketing programs to find new customers. Go figure. Since when does a telemarketing company use telemarketing to market itself? Well, they did. They are now seeing a brand new set of customer prospects and winning new business in areas they never previously imagined. Their lesson is, when faced with a market change, think out of your box by reaching into other markets that can use your service.

These few examples are some of many we have seen that constantly remind us of the basics of running businesses. The last five years have taken us through one of the roughest economic transitions in our country’s history. The good news is that we are stronger now, and it’s all about people learning, and sometimes relearning, how business should be run with the basics of supply and demand guiding them.

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            Bob De Contreras                                                  
            Rich Kramarik