Family businesses with articulated strategy strive better than one man businesses that have no concrete strategy. Without a good strategy, the bright business idea will not be passed down the generation and that might mean an end to the business.
Most one man businesses metamorphose into family business by bringing in a trusted family member that assumes the responsibility of stirring the everyday activity of the enterprise for continuity sake.
If you have a small one person business and you are thinking of how to transform it into a family business, read on as this article will give you tips on how to manage a small business especially one that is run by a family and guarantee sustainable success.
A family business needs a well thought out strategy if they are to take their place amongst the numerous prosperous family businesses. A strategy is a long term road map that if followed will hopefully lead the business to its desired objectives.
HOW TO DEVELOP FAMILY BUSINESS STRATEGY
Family business strategy will be looked at under the classic heading of Suitability, Feasibility, and Acceptability. For any business strategy to be successful, it must be evaluated based on how suitable the strategy is, how feasible it is will be to carry out the strategy and whether it will be acceptable to the stakeholders.
Suitability: a strategy, no matter how good it sounds cannot make business sense if it is not suitable to the philosophy of the business. Small businesses generally go with strategies that tend to be focussed. Family businesses are known for identifying a small niche market that medium and big businesses will not bother venturing into.
Feasibility: it is simply a waste of time pursuing a strategy that is both physically and technically not feasible. Family businesses combine a well prepared feasibility report and market research when developing their business strategy. Small family businesses should not pursue opportunity created by new legislation for example if it does not have the resources to see the project through.
Acceptability: the risk appetite and general business philosophy of small family business owners play significant role in shaping the strategy of the company. Owners that are risk averse will tend to adopt conservative working capital management policy for example. The business risk preference of key stakeholders in family business should be considered when deciding on strategic direction of this kind of business.
Stages of Small Family Business Strategy Development
Generally, strategies are developed in three interlinked phases. The first phase is the strategic analysis stage. This is where current position of a business is evaluated through strategic business analysis. Tools like SWOT, PESTEL, balanced scorecard, Porter’s five forces, etc are used to gain useful insight on the position of a company. This will assist decision makers in carrying out their management function of ensuring that assets are put to their best use.
Armed with the detailed information obtained from the above strategic analysis, managers will now have to follow a strategic direction or choice. The family business can chose to either be a cost leader or a differentiator. It is very common to use the classic theory of judging a strategy from the triangular pillars of; suitability, feasibility, and acceptability.
The last phase of strategy development is the strategy implementation stage. This is where action is taken. Capable hands should be employed to carryout processes that will deliver anticipated result. Management accounting control tools should be used to monitor and feedback into the system for improvement. One of the main reasons why small businesses fail is because they employ incompetent people to handle sensitive tasks.
Philosophies of family business strategy
In as much as all that have been discussed in this article are vital to developing and implementing small family business strategy, the foundation of building a solid family business still lies around what I can the philosophies of successful family businesses.
- Catch and induct them young
- Guide your trade secret
- Protect the brand
- Give back to the society
This article is written to help small and medium scale businesses develop better strategies that will lead to establishing a sustainable business success. Make sure you put to practice most of the things you read in this article. It is not enough to read this article and forget about. The key is Practice! Practice!! Practice!!!