Many family businesses are not focused on the primary goal of business- profits should come first.  My experience with family owned businesses is that many times they are primarily a source of jobs for relatives and their friends. Often the background and experience of those employees have no relation to their job responsibilities.

Shocking laggard employees often become necessary to offset their feeling of  job security.  Job performance should certainly improve once the employees realize that their job performance is more important than their relationships.

A common denominator of struggling companies is a lack of strong financial reporting.  I have prepared financial statements for the presidents of family businesses.  In many cases, the only number that received any attention was the bottom line.  After noting a profit, that statement was promptly placed in his top desk drawer, never to be seen again.  The absense of any questions/suggestions by the president always puzzled me. In many cases, these individuals were in no position to discuss inventory turnover, days’ sales outstanding or any other numbers or primary ratios.  Failing to focus on the basics, such as profit and loss statements, and failing to pay attention to the cash flow, can only lead to problems.

Another problem could be the absence of a carefully planned budget.  This problem comes to mind in two prospectives.  One $60,000,000 company I worked for had a chief financial officer while I was the controller.  When I brought this concern up to him, his reply was “We use last year’s numbers as the budget”. The question in my mind was “What if expenses could be better controlled by an organized budget process?”

Getting good people is a great goal but 100 times more difficult than conventional wisdom.  Mediocre people predominate  no matter how hard you may try to weed them out.  A monitor system should be put in place to check on their progress.  If a six month sales goal is set, it should be monitored every day.

An extensive control system is extremely important for a company to succeed.  One area that should be included is sales with new customers.  If a company is not growing its customer base it will become a company fighting  just to keep its current customer base.  Other important considerations should include the current bank balance, and how much of the line of credit has been used.  At one company I worked for, the accounts payable supervisor printed checks but didn’t mail them until  he checked the blance at the bank via online system.

Careful monitoring and early intervention are absolutely necessary as opposed to acting later when you see something going off track.  “An ounce of prevention is worth a pound of cure”.  As long as everything appears to be on track, slow reacting could be fatal to a company.

A family member should be tactfully policed or indoctrinated by the principal of the business.  If not, then they feel entitled, which can adversely affectthe morale of the workers.  This could be like a terminal disease for the company.  As a family member, he or she should set an example of the highest level, which nonfamily members should strive for.