Strategic planning a must for family firms
Family businesses account for 50 percent of our nation's GDP, and 35 percent of Fortune 500 companies are family businesses, according to Gaebler Ventures, a Chicago-based business incubator and venture capital fund.
Family operations continue to be a strong economic force across a wide range of American companies, from small businesses to large corporations, and often form the backbone of most local economies.
While strategic planning is important to every business, it is imperative to the family business. In family businesses, there are two important entities at stake: the family and the business.
Most parents have a vision for their families just like business owners have a vision for their businesses. Too often, however, business owners do not articulate and share their vision with the people in a position to either help or hinder them from achieving it. If there is not a clearly defined vision and solid business plan, family relations may be unnecessarily stressed by misdirection, misunderstanding and misinformation.
In a family business, it's impossible to leave such stress "at the office," so it becomes a 24-hour dilemma. Worse case is that if the family vision and business vision do not complement each other, something will fail.
That may be the family, the business or both.
In the early or entrepreneurial phase of the family business, the business and family must work together to establish and grow the business cohesively. Fundamental questions must be addressed, including whether a family member will run the business. If not, how will the leadership be structured while maintaining ownership? How will the authoritative roles of the family and business leadership work together? How will the business be financed and what will happen to the profits?
From a marketing standpoint, the business must define and assess the market for its product or service, its brand promise to customers, how it will deliver on that promise, its identity and key message points and vehicles for communication.
Once the business is established, strategic planning remains critically important. Members of the family are likely managing different aspects of the business, making independent decisions and communicating less. As the business grows and expands, the family may hire professionals from outside to help manage the business.
These professionals must be in tune with the vision and strategic direction of the company, and the family must be open to their feedback and ideas. If the family member(s) who started the business believe that no one knows the business as well as they do, they may not listen to the professionals they hired to grow sales, enhance customer service or improve operational efficiency.
The strategic planning process vets all of these issues and, if done properly, results in a dynamic road map that can be consulted, reviewed, adjusted and shared with investors, family members, employees and other stakeholders.
In addition to clearly articulated vision and mission statements, a well-developed plan includes financial and other measurable objectives, a market/situational analysis, organizational structure and customer profiles as well as operations, sales and marketing strategies and tactics accompanied by budgets and timelines.
The bottom line is that planning in the family business must align with the family's preparations, including succession and estate planning. Many small-business owners envision passing along the company to children or other family members. This should be part of the plan to ensure a smooth and successful transfer of the business.
Strategic plans are not set in stone; they should be evaluated monthly or quarterly and revised annually based on current and anticipated conditions. Since core values and interests are generally aligned in family businesses, the planning process should be an enjoyable exercise. Often, it results in a more focused, enlightened and motivated team managing the business.
It is never too late to plan for the future. While it is an investment, strategic planning doesn't have to be expensive and can actually save money, because it gives the business a viable tool to work more effectively and efficiently. More importantly, the process requires an investment of time and a willingness to be open, honest and candid.
Smart business people would never consider building a home or commercial building without architectural plans or traveling without planning accommodations for lodging, food and weather. Yet many smart business owners run their businesses with no written strategic plan.
Leaders of family businesses must make time to visualize the opportunities ahead for the business and family and then draw a road map to get there. It is an investment in the future — one that is too often overlooked.
Lynn Burkholder is president of Harrisburg-based RLB Marketing LLC, which provides business and marketing services to small and medium-size companies and organizations. She has experience working for and consulting with family businesses.