Family businesses enjoy a success rate far greater than for other kinds of businesses. In the U.S., family businesses provide 65% of all wages. In Pennsylvania, family businesses form the backbone of most local economies. Family businesses possess ingredients for tremendous success – a common purpose, shared values and a tolerance for risk. There are 1.2 million husband and wife teams running companies. The number of family businesses run by women has grown 37% in the past five years with average annual revenue of $26.9 million last year. Family firms typically outperform non-family firms. Return on Assets is greater in family businesses, with a 6.65% greater return than non-family firms.
Family Businesses need to plan. They need to invest the time to develop a “Strategic Plan.” Strategy is a high level plan to achieve one or more goals under conditions of uncertainty. Strategy is important because the resources available to achieve these goals are usually limited. Strategy is also about attaining and maintaining a position of advantage over adversaries through the successive exploitation of known or emergent possibilities rather than committing to any specific fixed plan designed at the outset.
Henry Mintzberg from McGill University defined strategy as “a pattern in a stream of decisions” to contrast with a view of strategy as planning while Max McKeown (2011) argues that “strategy is about shaping the future” and is the human attempt to get to “desirable ends with available means”.
Kim Inglis recently wrote, “A successful family business is one that works harmoniously through the four stages of its evolution: entrepreneurship, growth, governance, and maturity.
Each stage has challenges and differentiating factors inevitably determining the long-term viability of the business, and it is helpful for entrepreneurs to understand the macro and structural issues at play.”
In each phrase we need a plan of action, a strategic plan. It’s not a ‘vision” that imagines the future. It describes some mission critical rules, routes and steps over the next 3-5 years. It’s not ambition, over reaching, over optimistic; it needs to include Where are going? What are our goals?
- How are we going to get there?
- Who is responsible for what?
- What are the time lines?
- When and how do we evaluate our progress or lack of it?
- What do we do if the unexpected happens?
- How does this fit with our vision for the family and the business?
- Have we done our homework and are working with accurate information?
- Are our products approaching obsolescence?
- Are we diversified enough?
- Are we growing enough, not too fast, not too slowly?
- What do we see over the horizon that will affect us?
- Have we taken into account the needs of the family and the business?
The strategic plan should answer these questions:
Many positives come from planning; teams work together, develop, grow and stay. Retention is higher for Teams that plan. Execution improves; a good plan provides a checklist, milestones, some critical metrics and numbers. Plans improve CAP, communications, accountability and profits
Not all evolution mandates revolution, family businesses require adaptive evolution to grow, survive and move through the phases- entrepreneurship, growth, governance, and maturity.