If you own a family business, you may not know how common it is to drop the ball when it comes to growth. Unfortunately, more than 66 percent of all family businesses shut their doors after just one generation, after failing to prioritize growth over “getting by.”
So how do you beat the odds? It’s not enough to maintain the status quo. Here are some of the most common “growing pains” for family-owned businesses, and strategies to increase your chances of long-term success for you and your family:
Making the Transition
Transitioning the family business to the next generation takes a lot of planning to execute correctly. According to Forbes, it’s one of the most critical factors when it comes to family business failure. Most business owners dedicate their lifetimes to building the family brand and day to day operations, but have trouble with transition planning.
Without a transition plan, your family business could flounder and fail if circumstances change, leaving you too sick or incapacitated to continue. Or, in the event of your passing, your surviving family could lack the logistical capability to transfer the business from your estate to their ownership.
Don’t put off transition planning just because it’s hard or unpleasant. In fact, the earlier you start putting plans into place for a future transition, the more you can relax and focus your energy elsewhere, knowing that you have a solid plan in place to accomplish your long term goals.
But how do you create a transition plan for your family business?
- Start transition planning early. It’s easy to think that you have time, but in reality, no one knows what the future brings. When it comes to transitioning, start planning as early as possible. Why not today?
- Get business life insurance and set the beneficiaries as the family members who will take over the business. These funds can be used to pay estate taxes so your children or spouse aren’t left with a huge IRS bill and no way to pay it. Always check with a licensed tax accountant to maximize your plans effectiveness.
- Create a clear vision for business development post-transition. Where would you want to see your family business in 20 years, even if you aren’t a part of it? A vision board is a great tool for planning out the future of the business.
- Write a continuing mission statement once you have the vision nailed down. This is a clear, verbal articulation of how the business should continue to evolve once it’s in the hands of your successors. It should be a practical, written plan that your family members and employees can follow to a T, including timetables and information about execution.
- Get the help of an estate attorney. There will be plenty of legal transitions involved in this process, so make sure that you’re handling your preparations correctly to ease the process. An estate attorney can look at your transition plan, discuss the legal and logistical aspects with you, and answer any questions you may have.
New Market Demands
It doesn’t matter whether you’re running a retail shop or serving up hot food at the family diner. Consumer demands change, and you have to be prepared to adapt and evolve with the times. What customers want in 2018 isn’t the same as what customers wanted 20 years ago when Grandpa owned the shop, or even 5 years ago.
Don’t be tempted to ignore new market demands in favor of preserving the “family brand” in its original state. You can change up the family business to reflect what customers want today and still stay true to the family vision.
- Know the end consumer. The end consumer is the demographic who shops at your store, eats at your restaurant, or buys your product. How old are they? Where do they live? What other brands do they like? Most importantly, what’s their pain point? Draw up a vision of what your end consumer looks like so you know who you’re targeting.
- It’s all about feedback. Feedback when creating a new product, feedback after your product has been in circulation for a few weeks, feedback after the point-of-sale transaction. Why? Because feedback from the consumer gives you vital information about what they need, and whether you’re meeting that need. You can collect this information by conducting market research surveys, or using an mPOS-linked loyalty program that collects customer data (Square has a good one).
- Involve the customer! Not sure which of three new pizzas to add to your menu? Customers love to feel like they’re involved in the product design aspect, so why not sell all three pizzas for a limited time and let the customers vote on which one to keep permanently? You can easily apply this feedback solicitation model to any kind of product, not just restaurant menu items.
- Above all, be flexible. Running a successful business is all about accepting and embracing change and evolution through the years. Businesses that grow are businesses that succeed. Let the market demand dictate where your business goes, and keep your family values intact along the way.
When to Renovate?
Renovating your family business may seem like a huge undertaking, and for good reason! A full renovation can involve everything from new floors and walls, to new equipment, new website, new signage, and more. So why invest the time and money?
It’s simple: a newly-renovated business is up-to-date, modern, and well-designed. Customers care about the experience: they’d rather step into a shop that’s inviting and neat with a carefully-chosen color palette and a great logo design. And who can blame them?
Take a good, hard look at your business from an objective perspective. What do you see? Details like faded paint, a logo that looks like it hasn’t been changed since 1980, and dingy old furnishings can turn customers off and keep them from returning. If you have to wonder if you might need a renovation, then you probably do.
- Figure out a game plan. Take inventory of your existing property and its characteristics. What’s old and outdated? Are there components that were updated recently and can stay? Are certain items more critically out-of-date than others?
- Hire a team. Angie’s List is a great place to locate contractors, and features customer reviews so you can get an idea of the contractor’s’ reputation at a glance. Make sure that when you sit down for an interview, you ask about critical factors such as time frames, pricing, and insurance.
- Create a realistic timeline. Break the remodel down into tasks and sub-tasks, and assign a deadline to each one. This helps you manage the remodel project more easily, and it keeps your contractor team on task.
- Draw a mock-up. Use software such as Sketchup to create a mockup of the desired remodel, including the layout, the color scheme, and the lighting that you want.
- Measure results. After the renovation, measure your sales and compare them to the baseline from before you started the renovation. This gives you an idea of how well-received the remodel is from the POV of the customer.
Get Up-to-Speed on Marketing
It’s commonplace for family-owned businesses to rely on home-brewed marketing techniques that have been tried-and-true for generations. But what worked for Grandpa’s general store doesn’t work for today’s family-owned restaurants, grocery stores, and retail establishments. The digital age has changed marketing at its core, and family-owned businesses need to get up to speed, fast!
A digital marketing plan can vary dramatically from business to business, and there’s no one solution that works for everyone. Instead, you’ll need to tailor your marketing approach to your family-owned business needs. Here’s where to get started:
- Consider a flexible marketing budget. Especially in the early days of renovating your marketing plan, you may stumble upon marketing opportunities from month to month that could give you real advantages. A flexible marketing budget lets you allocate marketing dollars to new advertising strategies without the pressure, which is especially important when you’re exploring new methods of marketing for the first time.
- Rebrand! Do some market research and see how your competitors are presenting themselves. Make note of what they’re doing better than you. Then, sit down with your stakeholders (or in this case, the family) and talk about business values. How do your values translate into your brand? What’s your mission statement? And how can you convey that in your branding? Create a strong, instantly recognizable brand presence using tools such as color psychology and vision boards.
- Freshen up your online presence. Are you on Facebook and Instagram? Do you have a website? When’s the last time you’ve touched any of them? Your digital presence is crucial to helping new customers find you. If you’ve already rebranded, now’s the time to apply your new brand to your social media and website. This probably means a website redesign and updating your social media voice and posting content.
- Learn what SEO is. Then, apply it to your website. SEO stands for search engine optimization, and it’s the practice of tweaking your web content so that it performs well on Google, netting you more productive traffic. If you’re not an expert at SEO, you might want to consider hiring a consultant to help get you up to speed and identify goals.
Transition planning, market research, renovations, and marketing are a lot of moving parts to deal with at once, but don’t get overwhelmed. Pick one area at a time for improvement, and get the ball rolling. What’s important is that you’re making progress toward improving your business and setting it up for long-term success, generation after generation.
Call Mulligan Funding at 855-326-3564 to discuss your financing options today!
The information shared is intended to be used for informational purposes only and you should independently research and verify.
Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.