Contributed Collaborative Post
Making up a significant portion of entrepreneurial ventures and established enterprises alike, family-owned businesses are the backbone of economies around the world. According to the 2019/2020 Global Entrepreneurship Monitor (GEM) Family Entrepreneurship Report, a staggering 75 percent of entrepreneurs and 81 percent of established business owners co-own and/or co-manage their businesses with family members. In addition, 62 percent of established business owners report that most of their current employees are relatives. This underscores the pervasive influence and prevalence of family businesses in the global marketplace.
Yet, while many family businesses start with a single visionary who takes the risk and pursues their entrepreneurial dreams, not all can achieve sustainable growth and success. The complex interplay of family dynamics can present unique challenges that, if left unaddressed, may undermine the business’s longevity and prosperity. Thus, in order to navigate these challenges and scale a family business from its humble beginnings to a recognized brand, families must implement sound business strategies rooted in pragmatism rather than emotion.
Below are several approaches that can help family businesses not only survive, but also grow and thrive in an ever-evolving business landscape.
Establish a Clearly Defined Vision
In scaling a family business, having a clear vision is vital. It serves as a guiding light, ensuring that everyone is on the same page and working towards common goals. Moreover, with numerous paths to growth available, a solid vision provides a framework for decision-making and resource allocation. It also fosters unity among family members and enables them to make informed decisions aligned with the business’s long-term strategy.
For example, let’s say a family owns a small bakery and wants to expand its operations. Without a clear vision, they may struggle to decide whether to focus on opening new locations, diversifying their product line, or investing in online sales. On the other hand, if they narrow their scope to becoming the premier artisanal bakery in their region, they can align their efforts and resources towards that goal.
Create a Clean Hierarchical Structure
In a family-owned business with multiple family members involved, having a clearly defined hierarchy is crucial. Without it, internal politics and differing opinions can impede growth and create unnecessary tension.
A clean hierarchical structure ensures that everyone knows their role and responsibilities within the organization. This promotes accountability and minimizes confusion, allowing for smoother operations and decision-making.In a family-owned restaurant, for instance, one family member may oversee operations, another may handle finances, and another may manage marketing. This division of roles ensures that each aspect of the business is effectively managed without overlapping responsibilities.
Innovate and Adopt New Technologies and Systems
There are conglomerates and corporations today that are more than 100 years old. While they started out as small businesses founded by their visionary ancestors, these enterprises remained strong over the years through a lot of hard work and innovation.
Simply put, for a business to grow, it has to embrace change. Sadly, in some cases, family enterprises remain stubborn and set in their ways. In situations like this, someone has to step in and lead the business into the future.
A good example here is a family retail store. To keep up with the increasingly digital consumer behaviors, they can utilize an omnichannel approach to keep their loyal customers coming while expanding their market. For starters, they would need to build their own website and perhaps an app (although this can come much later), as well as other infrastructure to support this retail model. They also need online payment solutions that accommodate credit and debit card payments, as well as digital wallets and QR code payments.
Welcoming innovation and adapting to changing market dynamics are essential for the long-term success of family businesses. By incorporating modern strategies like omnichannel retailing, they can remain competitive and thrive in the digital age.
Build a Strong Team
In a family business, transitioning from a familial dynamic to a united management team at the workplace is vital for success. A cohesive leadership team sets the tone and culture of the organization, especially during periods of growth.
Consider a family-owned manufacturing company expanding its operations. By appointing family members to leadership roles based on merit and then supplementing the team with external talent, they ensure a diverse skill set and expertise. This approach fosters effective decision-making and propels the business forward.
Listen to Trusted Mentors
In scaling a family business, having a mentor is invaluable. After all, scaling up requires significant investment, strategy, and partnerships, and navigating this complex process can be daunting for anyone. A mentor with vast business experience can provide reassurance and share their knowledge, improving the company’s chances of success. They can also offer practical advice, identify potential pitfalls, and provide support along the way.
Scaling a family-owned business is a massive undertaking filled with both opportunities and challenges. With the strategies mentioned, families can confidently forge ahead and establish an enterprise that stands the test of time.
This is a contributed collaborative post
