James Pinchbeck, partner at Streets Chartered Accountants, considers the importance of family businesses focusing on fortitude.
One of the key characteristics of many family businesses is their often-exceptional resilience to cope with the challenges faced. Whilst in the past such challenges may have included one-off situations, even a crisis, we now seem to have moved to a time where we appear to have a number of challenges affecting or impacting businesses. Whilst typically the quality or mindset of resilience might have served them in good stead in the past, perhaps it’s time now for family and owner managed businesses to focus more on fortitude. Being resilient, that is bouncing back or persevering, might be good in the short term, but perhaps fortitude, having the motivation, drive and determination to succeed might be better in the longer term.
All businesses, including family ones, have and are dealing with the impact of recent and current events, be it Brexit, the pandemic or the conflict in Ukraine. We should really take into greater account and consideration the growing impact that environmental changes are having in terms of extreme weather conditions, floods and fires, which previously were rare and uncommon to now being more typically the norm and sadly an everyday occurrence. In light of these events businesses, like all of us, are seeing rising costs, pressures on cash and the cost of finance. Whilst household incomes are being squeezed, so too are business margins and working capital.
Like many families, family businesses will no doubt be focusing on the finances, cutting their cloth accordingly and looking after the pennies, even make do and mend. A focus on maintaining margins, safeguarding working capital, effective debt collection is also bound to be given greater importance. So too is any decision around any capital investment or new or re-financing.
Perhaps though the area not being focused on is developing the motivational mindset, drive and determination not only to work through the situation but to come out of it stronger. A lack of focus could be down to too great a focus on the here and now, more the operational day to day challenges as opposed the medium to longer term strategy. Whilst a work ethic is commendable and can be often harnessed and shared by all, employees, managers and directors alike also need, even crave, a sense of direction and purpose along with a game plan. Such a plan need not be a long-winded business plan, it could and perhaps more ideally needs to be short with a clearly and easily communicated direction of travel to include strategic intent and vision along with measurable outcomes – even rewards. Ideally such a plan should inspire, even excite those charged with making it happen, creating goals and aspirations.
As ever and not least in challenging times effective business communication is often key to success. This should not just be for the family members engaged in the business, it should include the wider workforce. Certainly, in times of uncertainty or change, there is a real danger communication becomes less or less effective.
Given the challenges faced, perhaps it might be worth as a family business reviewing how the running of the business and decision-making affects or impacts you and the wider family. With growing pressures, it might be good to review individuals’ roles and responsibilities, when, where and how you consider or discuss the business. You may also want to consider the need for and benefit of seeking external advice, or taking on a Non-Exec Board member or Chair to draw on their knowledge and experience.
Whilst previous generations may have weathered the storm and have been resilient, the pace of change along with the impact of more global events outside our control really do seem to point to family business owners needing to draw on their fortitude.
See this column in the September edition of East Midlands Business Link Magazine here.
