I had the privilege of visiting Bremen Castings last week to interview the company for a BizVoice article. Having been a family business for seven decades, the company's executives know a thing or two about how to keep the lights on as time passes. Outlined on the Midwest Handling Wholesaler site, here are Bremen Castings president JB Brown's four gems to live by for family businesses:
Honor Thy Father: A large percentage of family-run businesses do not make it past two generations, so the key to longevity is ensuring the business is managed with effective leadership. When there is a strong management team, a solid business plan can be implemented which takes into account the highs, lows and future direction and goals of the company.
Cash is King: Since family members are often the majority stock holders in a family business, strong cash flow is imperative to ensuring stocks (and voting power) stays within certain hands rather than being sold for a liquid dividend. “No company is going to survive very long without generating a positive cash flow,” says Brown. “We keep tight books and prepare for the hard times by getting ahead of the curve.”
Instill an Estate Plan: Some owners of family businesses become so engrossed within their companies; they forget to look at the big picture and understand how various situations can affect both the business and the family’s assets. “A defined estate plan is essential for smooth functioning of both the family system and the business system,” adds Brown.
Enlist Outside Expertise: Although the brunt of the business may belong to the family, it is important to enlist non-family members onto a board of directors to help with important decisions regarding the company’s future. An outside board can instill a sense of accountability and perspective on everything from conflict resolution to financial planning.
In writing BizVoice articles and meeting many of our members at events through the years, I can tell you that quite a few thriving Hoosier businesses have been passed down through families for one, two, or even three generations. Entrepreneur.com offers an article about the importance of succession plans, and it’s worth taking note if your business may one day be in the hands of a child or younger relative:
You may already have several children and other relatives gainfully employed in a multitude of positions within your company, some of whom are also being either groomed for or are already in higher-level jobs. But to stay on course, you need to periodically evaluate both the impact to date and the potential of each employee (family member or not) in the organization. There is a huge difference between filling tactical jobs within the organization with trusted family members vs. considering them as viable candidates to one day strategically lead the company or join the senior executive management team.
All too often there are no viable candidates from within the respective ownership family trees to be ideal successors. And yes, I hear you loud and clear: There are perceived checks and balances already in place. For example, you may already have (or plan to hire in the near term) professional managers from outside the family in certain pivotal operational, finance, sales and marketing positions. Nonetheless, family members are still systemically being placed in key roles or are being seriously considered without much rational thinking taking place. The emotional aspect of children or a spouses pleading on their own account or for other loved ones can take its toll on the objectivity of even the most seasoned of owners.
It is only when you look at your own life map that you realize that being born into a family business is merely the starting point. It is nothing more than drawing an inside post position for a highly competitive horse race. Regardless of the nurturing provided as a child becomes an adult in terms of education and on-the-job training, there is no guarantee that such family members will ever be suitable for the company’s most prestigious positions. Ask yourself a few questions:
• Are all viable candidates (including family members) to fill critical positions thought of by senior management and their trusted advisors as enhancing the chances of the company’s continued success?
• Is a process already in place that never makes exceptions for permanent hires who cannot meet the standards of a detailed job description and desired qualifications, with extra enforcement emphasis on the most critical positions?
• Have the owners provided the company a documented plan and timetable of succession planning for key positions in the event of both timely and untimely separations of individuals (including themselves) in such key positions?