Category:General Business Business Management Entrepreneur Family Business Leadership Management Success In Business Team Building
A Mom and Dad are now in their 70s. They are still active in the business, yet the reality is they need to be stepping back and delegating more control and decisions to the three children in the business. The three kids have been a part of the business for multiple years so they know how it works and how to provide the service and deliver the product. Sounds like a great scenario, right? Well, that depends.
So often the product and service areas are running smoothly, yet the next generation doesn’t have a great grasp of the business portion.
Financials: How do you read those financials? Why is the overhead rate so important and how does that relate to cost of goods sold and profitability? Who is our banker and why is that relationship so important? How does the profitability trend? If seasonal, what is it per season? Business is math, marketing is math, team is math, sales is math, so why wouldn’t financials be math? If you don’t like math, then find someone who does and can translate it to what you can understand. As the transition begins, understanding the numbers becomes more critical than anything else. High profitability can cover up many sins, but good math can weed them out and increase profitability even more.
Management of the team: How does Mom stimulate, encourage and manage the team? Will the team be ready, willing and able to work for the next generation? Does the next generation have the leadership skills in place to be wise beyond their years? It takes five components to ensure you have the team you want:
- Leadership strength
- SMART goals for the entire team (Specific, Measurable, Achievable, Results driven and Time based)
- Consistent rules that everyone lives by and can grow by
- Right attitude
- Support for risk taking
Vision: Who will now carry the vision for the business? Who will take the trends affecting the business and start to make plans now to make the necessary course adjustments? Who balances the visionary to keep a level of reality in place? One business I worked with had an environment where the husband was the visionary. He always had new ideas, new thoughts, new opportunities that he wanted to follow. The wife was more of the money manager and brought a dose of reality to the business. She is the one who asked the hard questions regarding return on investment, the downside to an idea, etc. That is a valuable role to have in any company. However, that must be moderated with the vision that sometimes can’t be seen by anyone else. Too much caution allows opportunities to pass and therefore be missed.
My parents had one such opportunity. Dad was offered the opportunity to get in on the ground floor of a development that was taking place in the area where they lived. At the time, the area was essentially in the middle of nowhere. Actually it was in between somewhere big and somewhere else that was growing. The place in between was a risk. The cows that lived in that field were pretty content. Now today that area is a bustling, vibrant area. Dad always said that was the one that got away. This isn’t to blame Mom; she always provided that caution, yet usually went with the visionary.
The next generation needs to have the visionary and the realist. There must be compromise between the two. One without the other can run the business into the ground. The visionary without the realist who asks the hard questions creates a business that follows every new trend. Not all trends are good. The realist is usually so cautious that they never get on the upswing of the bell curve. They are the late adopters and implement something after it is mainstream, passing up the opportunity to gain a competitive edge. It is sort of like installing a fax machine in 1995 when email was becoming the predominant tool. The fax machine was leading-edge back in the 1970s and was going out of style by the time the 90s rolled around.