Family businesses are the cornerstone of many industries. From mom-and-pop stores to some of the world’s biggest conglomerates, many successful businesses started up as family-run operations.
Family-run enterprises also have many advantages. As long-term businesses, they often know customers far better than other companies, and generally have a loyal and solid client base.
How to avoid the risks involved in expansion
Expanding a small family business can be a risky investment: In fact, the failure rate from one generation to the next in family-owned businesses is high. Not all family members can be involved in the business, and it can sometimes be necessary to make other investments, or diversify into areas unrelated to the core family business, all of which can create friction between family members.
A family business can run the risk of looking too inwardly and not seeing the big picture. Get out of the house for a moment and listen to the customers; take the time to hear what they want and respond to their needs rather than the family’s – after all, they’re the ones who’ll be buying your product.
Being aware of the risks should not put an owner off attempting to expand, however, if they really believe it can be successful; rather, knowing the risks involved ought to help the owner of a business on the verge of expanding to better prepare for the next step.
What to consider before taking the plunge
If other family members are taking on new branches of the company, it’s important to ensure they are 100% committed and dedicated to the enterprise, whether it’s a catering business or a healthcare venture. In times of recession, being ‘born into the business’ is simply not enough of a qualification to keep it afloat.
That loyal customer base is what puts most family businesses ahead of their competitors, so put those customers first: Consider who they are, their wants and needs, and why they have always chosen your business over other, rival companies. Leverage the family face in marketing, customer relations and everything the business does: Make it the essence of the newly expanded brand.
In order to succeed in business, a company needs to stand out from the competition and offer a product that is unique in some way. A family business is no different from any other businesses in this regard.
How to prepare
Source suppliers for wholesale prices. Shop around for a good price and try to use as few suppliers as possible. Don’t be afraid to change a supplier if they are no longer cost-effective simply because they’ve been supplying the company for decades.
Personalize packaging: Remember the family image and exploit this in all the marketing and packaging. Recognize the importance of the brand – think of it as the emotional reaction a customer has when they hear the company’s name, as the very essence of the company and what it stands for.
Look at all channels of marketing as viable options. More up-to-date channels, such as social networking, might work for some companies, while for a local food business, for example, more traditional approaches such as putting a flyer into the neighborhood mailboxes might be more effective.
Ensure that record keeping is kept up-to-date. If it’s still done by grandma by hand, it’s time to update. Budgets need to be viable and hiring a qualified bookkeeper to handle the finances will save both time and money in the long run. An increase in staff may mean restructuring the company’s payroll solution; in that case, using the services of an umbrella company would certainly be worth consideration.