Issues in the Family Business

Posted on May 16, 2012 by JeffLee

The list below contains the issues that most family businesses face:

  •  Participation–who can participate in the family business and under what circumstances.
  •  Leadership and ownership–how to prepare the next generation to assume responsibility for the business.
  •  Letting go–how to help the entrepreneur let go of the family business.
  •  Liquidity and estate taxes.
  •  Attracting and retaining non-family executives.
  •  Compensation of family members–equality versus merit.
  •  Successors–who chooses and how to choose among multiple successors.
  • Strengthening family harmony.

 All of these issues and the others you include in the Family Business Assessment Inventory  can potentially cause business conflict and family stress. But there are three steps you can take to manage conflict and stress in a family business:

  1.  Identify issues that may cause conflict and stress.
  2. Discuss these issues with the family.
  3. Devise a policy to address them.

 

The Small Business Management Guide for Kindle

 

(or the free kindle reader App for phones or computers). Over 400 pages of real life small business management advice and tools. Just $9.99 or if you are an Amazon Prime Member you can read it for Free.

 The Small Business Management Guide For Kindle at Amazon

 A printed version is available for $29.95

 The Small Business Management Guide Printed Version at Amazon

 

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Challenge No. 8: Satisfying Customers by Providing High Quality

Posted on May 16, 2012 by JeffLee

First and foremost, recommend owners, commit yourself to providing quality. This establishes and maintains credibility with your customers.

“You must be willing to commit yourself to supplying the absolute best product of the industry you go into. Not being an also-ran but telling yourself, ‘I am going to throw a touchdown every time I open the doors in the morning.’”

Deliver the best possible product or service and do everything you can to ensure that your customers are satisfied. This is the creed by which small business owners everywhere live. Upholding it is a constant challenge.

Another business owner put it in direct terms: “Your customers are going to dictate whether or not you are going to succeed. If you don’t please them and if you don’t listen to them, you won’t succeed.”

“My theory in business,” explained one owner, “is if I do a good job for you, I hope you tell one or two of your friends. If I do a lousy job for you, you’re going to tell everyone you see. Never forget that you have competition.”

It’s important to build and develop credibility because it builds your business. Yet, as one owner stated, “Growth and reputation are the hardest things to come by.”

The owner of an interstate trucking company explained that “the one common thread through every type of business is people. It’s still a people’s business. You’d better have credibility. You’d better have the talent to do what you’re supposed to do, first of all, but that’s only just a part of it. Get credibility and maintain that credibility. Know that the people you’re servicing are going to say good things about you to other people – because that’s how you’re going to build your business.”

This commitment to quality is indeed vital. Just look at how seriously small business owners take it: “Make sure your quality of work is still top-notch and has been from start-up. Make sure you haven’t slid or suffered, that your name and your recognized quality are still there,” advised one.

Customers are the foundation of your business. Thus, it is absolutely essential to do everything possible to please them. Often, initiating dialogues with customers can be of enormous value in helping to provide better service. “We wanted to evaluate the reputation of the company we purchased,” explained a printer, “so we went directly to clients to find out exactly what they thought about it.”

“The response was tremendous,” he continued. “They’d never had someone who really cared enough about their business to ask them how they wanted the products produced for them. That feedback on a direct basis with my other partners was invaluable. It turned things around for us.”

Small business owners find that quality is still the best way to please customers. “Make that product better than anybody else can,” advised an owner. “Do the best job that you possibly can.”

As a business grows, it’s important to maintain quality – but when sales begin to increase, it can be a major challenge to keep the original commitment to the quality and benefits of your product. Thus, most businesses set a goal for controlled growth.

“Whatever credibility you may have built up on your reputation or your performance suffers if you’ve got more work than you can handle,” offered an owner. “You can’t properly perform it. You can’t properly manage it. Your work starts getting shoddy. That will destroy quite a bit of effort you’ve put into getting there.”

Sometimes satisfying customer requires taking extraordinary measures, but owners believe it’s the best way to maintain their reputation and protect their business.

 

The Small Business Management Guide for Kindle

(or the free kindle reader App for phones or computers). Over 400 pages of real life small business management advice and tools. Just $9.99 or if you are an Amazon Prime Member you can read it for Free.

The Small Business Management Guide For Kindle at Amazon

A printed version is available for $29.95

The Small Business Management Guide Printed Version at Amazon

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Challenge No. 7: Managing People

Posted on May 16, 2012 by JeffLee

Finding, keeping, and managing good personnel, both hourly employees and management, ranks among the major challenges for small businesses. Many owners believe that it is critical to success. An owner who recommended, “Make sure you have good employees before opening your doors”, expressed their thoughts.

Finding qualified employees can be a real challenge. For example, in addition to competing with larger companies for business, small business owners find that they must also compete with each other when it comes to hiring good employees. “One of the big challenges facing relatively small businesses like us,” noted an owner, “is attracting the best talent we can get. For small companies to get somebody good, they’ve got to offer a lot.” Another owner explained that “it’s difficult competing against the big guys who have lower costs of doing business.”

 Nonetheless, small business owners believe in their ability to compete for good employees because they can offer some benefits that big companies cannot – such as flexible schedules, loyalty and other intangible benefits.

 The road to building a competent staff is often paved with challenges. Many small business owners find it difficult to select the right employees. Retaining good help is particularly difficult. The owner of a civil engineering firm hit the nail on the head: “It’s very hard to keep people who are loyal to you and who want to put the hours in. Otherwise, they’d be in their own business.”

 Motivating employees through encouragement and guidance helps to build and retain a competent staff. Here, too, a realistic and supportive attitude can help meet the challenge:

 Motivating employees to consistently deliver quality is critical to business success, particularly for a service business. Owners must communicate their goals effectively and train their employees to help achieve these goals. All this requires a delicate balance act.

Generally, owners rely on employee training to ensure that their staff is competent and has the right attitude. For instance one owner said, “one of the things that can help is an internal education program and a proper training program. Also, have a quality assurance review of what you’re doing before the product goes out the door.”

 Compensation is a second effective method to motivate employees into conveying a positive attitude and working responsibly. As you might expect, many owners find this a particular challenge. While small businesses typically do not have the resources to pay high wages, they need to adequately compensate employees in order to attract and retain them.

 Benefits are another important way to attract and retain good employees. A fair and generous benefits package helps employees feel both valued and secure – - two important characteristics that small business owners feel they can offer to their employees. Even the smallest of businesses can offer such benefits through group programs.

 Being creative with intangible benefits is another effective way to retain employees. A bookstore owner recommended that you “figure out other ways to compensate them. We give them special discounts on what they buy within the store. Also, I try to be flexible about their hours.”

 When an employee doesn’t work out, then what? Many owners find this one of the most challenging aspects of the business. Often, the difficulty of firing an employee leads owners to retain weak players longer than they should.

 

The Small Business Management Guide for Kindle

(or the free kindle reader App for phones or computers). Over 400 pages of real life small business management advice and tools. Just $9.99 or if you are an Amazon Prime Member you can read it for Free.

The Small Business Management Guide For Kindle at Amazon

A printed version is available for $29.95

The Small Business Management Guide Printed Version at Amazon

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Challenge No. 6: Managing Time Efficiently

Posted on May 16, 2012 by JeffLee

The long hours and variety of tasks required managing a small business demand good time management skill. Every small business owner feels stretched, especially during start-up. Running any kind of business involves many different responsibilities and little time in which to fulfill them. This is a continual challenge that is especially taxing during start-up. A pharmaceutical consultant summarized the problem:

“When you’re starting off, you’re doing everything yourself. You have to be a part of everything that’s going on. You have to be at every point of the operation … the challenge is while you’re working on your business, you’re not spending time working on cash flow, attending to business management or planning for the future.”

A contractor gave a more personal picture of the long hours required to keep a business running: “When I started out, I was out running the equipment trying to get the job done, but I was also out beating on doors and passing out cards, talking to people at 10:00, 11:00 at night and trying to line up the next day’s work. There are only so many hours in a day.”

The freedom to delegate responsibilities to people who can fulfill them is important to small business owners, who often find their time stretched to the limit. “One of my top pieces of advice to an aspiring young business owner is to surround yourself with good people,” said one successful owner.

Another owner said that when he “bought an existing business, I came from a corporate atmosphere. The first thing I put on my list was to delegate. Hire the best, most qualified people you can, whatever the area is; and then delegate. Give them the responsibility, as much responsibility as you can.”

Stores are full of books on time management, and indeed, small business owners reported that this is one of their favorite topics. Some owners reported that they also attended time management seminars.

Based on the input of owners, telephone calls and appointments are two key areas of time management. Several owners reported that they group their calls during specific times of the day – first thing in the morning, right before lunch, and at about 5:00; people are most likely to be in their offices during these times.

The owner of an advertising agency who spends substantial time on the road and in clients’ offices, said that she schedules groups of appointments wherever possible. She has disciplined herself to set aside Mondays and Wednesdays for appointments and uses the other three days to be in her office. “By sticking to this schedule as much as possible,” she said, “clients know when they can reach me. Also, I can schedule work more efficiently.”

Another successful technique that many owners use is referring back to their business plan. This helps them set priorities and ensures that they spend their time where it will be used most effectively.

The penalties for not using time wisely can be stiff. Many owners reported that they knew of many businesses that had failed because the owner hadn’t “worked the hours.” At best, inefficient time management can prevent a company from running smoothly and cost-effectively.

Owners summarize their time-management methods in a three-point plan:

Be disciplined about your time. Making a business successful demands your time. Again and again, owners stressed the importance of putting in the hours. Stick to your original plan. When in doubt about where to put your time, check your business plan for priorities.

If you have the opportunity,responsibilities to those who can fulfill them.

 

The Small Business Management Guide for Kindle

(or the free kindle reader App for phones or computers). Over 400 pages of real life small business management advice and tools. Just $9.99 or if you are an Amazon Prime Member you can read it for Free.

The Small Business Management Guide For Kindle at Amazon

A printed version is available for $29.95

The Small Business Management Guide Printed Version at Amazon

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Challenge No. 5: Managing Finances Effectively

Posted on May 16, 2012 by JeffLee

From the start of a company … “You know, the first year you’re just trying to keep the doors open. You’re a one-man operation so you’re kind of close to everything…I always thought, gosh, more sales, you’re in hog heaven.”… To managing growth…

 

“But managing growth is almost as tough, if not tougher than, start-up. If you don’t have enough working capital, increased sales can really give you a problem because of the (increased) receivables, because of the commitments (to suppliers) coming due before the money comes in. “…cash flow is the pervasive financial management issue for small business owners. It manifests itself in ongoing capital, managing inventory, extending credit to customers and managing accounts receivable.

 

Many small businesses struggle just to make ends meet, especially during the start-up period. A “hand-to-mouth” existence often continues beyond the first year. Often, a little juggling is required:

 

“I looked at the checkbook this morning and it didn’t look real healthy, and I know Friday’s payday. I do have a little job we can start tomorrow, weather providing, and I know I’ll make enough off that job plus what I already have to make payroll this week. Then I’ll put off another job that I probably shouldn’t, because it’s a job that I know I won’t get paid for within thirty days.”

 

Inventory is a pivotal area for non-service business. “You maintain your profit margins by turning your inventory quicker,” explained a sporting goods distributor.

 

The key to success is maintaining good inventory, the appropriate amount and a good mix of merchandise. “Don’t keep any dead inventory around,” continued the same retailer. “If you’ve got bad merchandise, get rid of it. Keep a clean inventory, a saleable inventory.” The ideal thing is to be able to turn your inventory more often.

 

Careful control will also help. “To help cash flow,” explained a different owner, “I monitored my inventory as carefully as I could.”

 

Another challenge to successful financial management is extending credit to customers — a necessary part of many businesses. Customers often expect it. However, many owners find it difficult to evaluate the credit risk of potential customers. One suggested “looking at their financial statement, and then trying to make a good decision.” Another thought is a good idea to evaluate risk based on the amount of potential business: “If a guy wants work done, yes, I’m going to check him out.”

 

Monitoring accounts receivable to assure a steady cash flow is a universal concern of small business owners. “Cash flow’s the biggest problem,” said one owner. “If you can’t keep track of your receivables and follow upon them, you’ll always have a cash flow problem.

 

Cash flow is also an area where the experts are full of helpful advice: “Keep a close eye on your receivables. Don’t let them go too far out. I’ve got suppliers that give me 30 days and on the 31st day, they’ll call. Stay on top of who owes you money and don’t let it slide. You don’t want to make more sales, necessarily; you want to get paid for what you sell first.”

 

“The basic thing we did was to make sure that when a job was completed, the invoice was out in the mail the next day. We also followed the job through to make sure there weren’t any problems. Using this two-step approach, our receivables usually came within the terms of a normal 30-day period. This kept our cash flow steady.”

 

Many small business owners use professional services to help manage the financial aspects of their businesses. Accountants are the most frequently relied-upon advisors; many businesses also tap the expertise of a lawyer, especially when incorporating their business or purchasing an existing one.

 

The Small Business Management Guide for Kindle

(or the free kindle reader App for phones or computers). Over 400 pages of real life small business management advice and tools. Just $9.99 or if you are an Amazon Prime Member you can read it for Free.

The Small Business Management Guide For Kindle at Amazon

A printed version is available for $29.95

The Small Business Management Guide Printed Version at Amazon

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Challenge No. 4: Having Adequate Capital

Posted on May 16, 2012 by JeffLee

Here are some thoughts on “Adequate Capital” to consider in developing a business plan:

“The first thing we did was to establish financing and credit relationships. Make a bank contact. A lot of our successes have been dependent on that relationship.”

 

“Establish a good working relationship with one or more banks early in the game. There’s always a large contract that comes up when you need working capital.”

 

The Small Business Management Guide for Kindle

(or the free kindle reader App for phones or computers). Over 400 pages of real life small business management advice and tools. Just $9.99 or if you are an Amazon Prime Member you can read it for Free.

The Small Business Management Guide For Kindle at Amazon

A printed version is available for $29.95

The Small Business Management Guide Printed Version at Amazon

 

“Have enough capital to withstand slow periods and competition … all of those things that nobody told you were going to be there. Many people go into small businesses who have enough capital or enough assets to open the doors — but not enough to withstand the pressure from competition and accounts receivable during all of that first year.”

 

Small business owners concur that having sufficient capital is essential to surviving the first year, which inevitably brings unforeseen challenges.

 

How much should you capitalize? Based on the experience of others, you should count on obtaining more than you think necessary: “Double your estimates of the cash you need to have during the first year,” advised a retailer.

 

“Look at whatever you’re going to do,” advised another, “and then look at the worst possible thing that could happen. Prepare for the worst case scenario. Borrow twice as much as you think you’re going to need. Or, have access to that amount.”

 

Credit lines are an important part of capitalizing a new venture, as indicated by some of the business owners quoted at the beginning of this section. A line of credit enables a company to meet ongoing capital requirements or to capitalize on business opportunities.

 

However, obtaining credit from suppliers can be difficult for the new company. “In starting out a small company, you may have to pay cash for a while.”

 

To help tell their business story to potential creditors, many small business owners find maintaining a business credit report on their company helpful. “It gives you a standing in the community to be rated,” believed one owner. In addition, owners recognize the value of keeping their company’s report current.

 

This difficulty in establishing credit is only temporary. “After they’ve done business with you for a while,” assured the same owner, “they’ll start giving you terms.”

 

Some small business owners perceive that suppliers are becoming even more discriminating about extending credit, demanding detailed financial information even from established customers. One way to meet this challenge, say owners, is to form basic business partnerships with bankers, local vendors, and Dun & Bradstreet, to keep your company’s business information report as accurate as possible. Nothing is as important as to “Know Your Banker”.

 

The Small Business Management Guide for Kindle

(or the free kindle reader App for phones or computers). Over 400 pages of real life small business management advice and tools. Just $9.99 or if you are an Amazon Prime Member you can read it for Free.

The Small Business Management Guide For Kindle at Amazon

A printed version is available for $29.95

The Small Business Management Guide Printed Version at Amazon

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Challenge No. 3: Having the Proper Attitude

Posted on May 16, 2012 by JeffLee

“The first thing I tell my kids is, if possible, find something that you love that has the potential of being a successful business. Enjoy what you do. Ideally it’s something you’d do for nothing.”

 

Small business owners agree that the proper frame of mind, realistic expectations and strong personal commitment to your venture are at least as important to a business’ success as industry knowledge.

The Small Business Management Guide for Kindle

(or the free kindle reader App for phones or computers). Over 400 pages of real life small business management advice and tools. Just $9.99 or if you are an Amazon Prime Member you can read it for Free.

The Small Business Management Guide For Kindle at Amazon

A printed version is available for $29.95

The Small Business Management Guide Printed Version at Amazon

“Want to win,” recommended one owner. This absolute drive to do what you love is necessary in order to withstand the demands of starting and running a business. Small business owners unanimously agree that starting a business requires long hours — even longer than most had anticipated.

 

“Make sure you want to devote a lot of time to it,” advised one owner. Another disclosed how the demands could hit closer to home: “My biggest first-year challenge was long hours” he said. “I knew they were going to be long. I didn’t know they were going to be that long. It affects your family you’re not there to do all the family things you had been doing before you went into business — and that in turn affects your business.”

 

Long hours and the normal strains of business usually add up to stress — and coping with that stress is a major challenge for small business owners. A supportive family and the will to succeed see many owners through that critical first year.

 

The hardest challenge for me and my wife during our first year was the stress, disclosed one owner. “A combination of things helped me deal with this. Certainly, my love for my wife, who is my partner, and a great deal of love and affection for the business. We really like what we do … not every day, but most of the time it is fun. They say that business is tough when you love it, but it would be impossible if you didn’t.

And I think that had a lot to do with making it.”

 

Maintaining the necessary high energy level over time is another major challenge — but with the right attitude, it can be a fun challenge.

 

“Early on I worked the hours. But I never noticed it…. Getting up in the morning and going in there and chasing that business around was the most fun I ever had. Talking to people about it. Sitting down with other people in the same kind of business. I mean, I just lived and breathed it for a good three and a half, four years, sixty hours a week. But it was fun. Just a thrill.”

 

Another extremely successful small businessman who had recently started his fourth business explained why he had come out of retirement — for the second time — to do it all again: “It’s more fun than I’ve ever had,” he said.

 

Realistic expectations are also important. “Be realistic,” advised one owner, “don’t expect the worst, but don’t expect the world.” Every business has its setbacks — “Prepare yourself for failures,” recommended one owner — but commitment and the right attitude carry owners through.

 

Finally, owners stress that to be successful you must have the right motivation. A “get-rich-quick” mentality is unrealistic and will probably lead to eventual failure … while a deep commitment to quality can help you take off in the other direction.

 

“The idea of integrity, to be in business to serve others, is the only way in which to be productive. Chasing the almighty dollar may help for just a little while, maybe weeks, months or years, but it is still just a little while. To be able to always have people receive you in a positive manner in your business, performance is very important. Without it, I don’t care what you are selling.”

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Challenge No 2: Knowing the Basics of Business Management

Posted on May 16, 2012 by JeffLee

“I found I had to become a business person, something I didn’t realize I was going to have to do. I had to learn a lot about accounting, about bookkeeping, about the banking business.”

 

In addition to knowledge of a specific field, small business owners need to know the basics of managing a business — for example, the principles of accounting and bookkeeping, production scheduling, personnel management, financial management, marketing, planning for the future, and more. Many owners feel they were under prepared in these areas, particularly in the financial aspects.

One of the best management skills to have, according to a golf equipment manufacturer, is fearless self-knowledge. “Be qualified to run your business,” he advocated. “Be aware of your own weaknesses and go out and get help to make up for those areas…to get through that first one or two years.”

Other executive skills are also important. A computer-engineering consultant stressed her need “to be able to do briefings properly, comfortably, to gain confidence of groups of people…to quickly communicate my capabilities and my company’s capabilities.”

Executive skills also include goal setting and decision-making, and human resource development. This last aspect is important, noted many owners, because it builds the future of a business. Not only must you find and retain good employees, but you must continually train them to ensure that you have a qualified staff as the business grows.

Another common theme expressed among the many small business owners interviewed was the need for good sales skills. During start-up, many of them found themselves sales people for the first time.

As a business grows, the need to further develop management skills intensifies. In addition to such areas as managing people, the ability to plan is an essential skill that builds the future of a company.

“Planning,” according to one owner, includes the idea of budgeting not only for your present conditions, but also planning for the future.” Anticipating what your industry will be like several years down the road, where the competition is directing its efforts, what customers will want in the future, and where profits should be reinvested are some samples of what must be included in planning efforts.

To help with ongoing planning during the life of their businesses, many owners develop a formal business plan before starting or purchasing a company.

“We did a lot of planning before we started,” recalled a publisher. “We did the whole business plan and marketing plan, and planned out how much revenue we were going to receive for the first year and how much money we were going to need to get us through.”

Business plans usually include projections of fixed and variable expenses, and analyze of the company’s break-even point (the amount of sales necessary to cover expenses), competition, and projected sales. A business plan also includes strategies for marketing and growth.

This establishes a permanent but flexible “game plan” that provides guidance when difficult decisions must be made. Other planning tools, such as annual marketing plans, spell out specific steps to be taken to reach short-term goals.

During any kind of planning activity, outside consultants such as accountants and lawyers, and agencies such as the Small Business Administration, can provide valuable expertise.

Finally, one of the most important but often overlooked aspects of planning is how or when to leave your business. A successful financial service business owner insisted that this should be included in the initial business plan. “By the time many people are ready to sell their businesses,” they’re so personally involved in the business that they cannot make an objective decision. The decision to divest oneself of a business is a highly emotional and difficult one. By establishing early-on the conditions under which a business will be sold, you can make a better decision.”

 

The Small Business Management Guide for Kindle

(or the free kindle reader App for phones or computers). Over 400 pages of real life small business management advice and tools. Just $9.99 or if you are an Amazon Prime Member you can read it for Free.

The Small Business Management Guide For Kindle at Amazon

A printed version is available for $29.95

The Small Business Management Guide Printed Version at Amazon

 

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Challenge No. 1: Knowing Your Business

Posted on May 16, 2012 by JeffLee

 ”People who succeed are the ones who know the most about what they are doing.” Without exception, small business owners agree that knowing your industry is fundamental, expert knowledge of your industry practically dictates your success.

 

Small business owners believe that knowing your business entails in-depth industry knowledge, market savvy — such as competitive knowledge and how to attract customers — and a certain practical knowledge of how to find suppliers and distributors. Owners believe the necessary expertise is acquired through a combination of formal and continual study, and on-the-job experience. Unanimously, they recommend that new or would-be owners become as qualified as possible in all of these areas, beginning with professional education.

 

“Get the best education in your field that you possibly can,” advised a manufacturer. “Find out everything that you can and be totally dedicated to spend the time tutoring under the leader in your chosen business endeavor.”

 

This manufacturer valued hands-on experience as well, saying, “I had a number of years in an apprenticeship program, and, at the time, I didn’t realize the value of it.”

 

When it comes to professional knowledge, all agreed that successful small business owners have the experience and background in their chosen area.

 

It is critical to expand this basic knowledge into overall familiarity with the marketplace. A manufacturer advised entrepreneurs to “research to make sure the need exists for the service or product … that people you’re selling to can afford to buy it, and to ensure that they can access it.” By access, he meant having a good business location or distribution system.

 

The Small Business Management Guide for Kindle

(or the free kindle reader App for phones or computers). Over 400 pages of real life small business management advice and tools. Just $9.99 or if you are an Amazon Prime Member you can read it for Free.

The Small Business Management Guide For Kindle at Amazon

A printed version is available for $29.95

The Small Business Management Guide Printed Version at Amazon

 

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The Ten Challenges

Posted on May 16, 2012 by JeffLee

Discussions between groups of small business owners revealed ten common challenges faced by small business owners:

 

  1. Knowing Your Business
  2. Knowing the Basics of Business Management
  3. Having the Proper Attitude
  4. Having Adequate Capital
  5. Managing Finances Effectively
  6. Managing Time Efficiently
  7. Managing People
  8. Satisfying Customers by Providing High Quality
  9. Knowing How to Compete
  10. Coping with Regulations and Paperwork
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