All family business have a story to tell, from founders dream of an enterprise to making it happen in reality, every story is a blockbuster storyline. If you see, all the stores travel through similar timelines like a love story with certain milestones like:
Love affair – This is the first step when the founder identifies some unmet gap in the marketplace and starts thinking about building a business around it. This may happen out of choice or by chance or may be forced by circumstances, but this is where the business idea is born in the mind of the founder. He starts talking about it, taking other people’s ideas trying to convince them about his own ideas, taking feedback.
Love marriage – This is the time for action, where the founder takes the bold step of starting the venture with mixed emotions. The founder has a firm belief in the idea, but he faces lots of resistance from his near and dear ones who feel he has gone mad and many times feel that he will ruin his and his family’s life. Amidst the chaos, he finds his pillar of strengths someone from his family or his life partner or from the friends, who’s belief, support and motivation keep the founder going on. This is typically like the runaway love marriage situation where the couple marries against their families wishes and are faced with hardships. There is a lot of hard work, money is tight, business is largely funded by saving and loans from few friends and families. You are unsure of what challenges tomorrow will bring, yet the emotional spirit is high and there is a lot of conviction in what you are doing. The business runs with a few committed people who are mostly the close family members like wife, brothers, cousins etc. as the business can hardly afford regular employees; and one day the business gets a big break, where someone from outside extends help by giving business and monetary support for the business to take shape and get on the fast track of growth. Here the complete attention of the founder is on identifying the customers and revenue generation. Every move is made with an objective of getting more customers on board, so money can flow in and business can survive for some more time. Here the basic belief of turnover is formed, which is “more revenue = more profit”, which is true as the costs are very low as most of the employees are family members and payment is need based.
Love blossoms – At this stage, all the hard work is paid off, with the founder ad the team’s commitment business is able to successfully attract customers. The business’s offering is well received by the customers and they find it a cost effective solution. Rapid growth brings in strong cash flows, money starts flowing in the business, again reinforcing the belief that “more revenue = more profit”. New infrastructure is created to meet the ever-increasing customer demands. Operational processes are defined and systematic workflow activities are designed and implemented to have predictability in the output quality and quantity. The business and the
family starts getting recognition in the local community.
There is social recognition as people start citing the founder and the family business’s example to others as a success story. There is stability on the family front, as the business lower costs and the stream of cash flow helps the family reward itself. It’s like a perfect fairy tale end. In the blockbuster story world, it ends with the tag line, “and they lived happily ever after….” But wait, this is no fairy tale to end like a fairy tale. As life moves on, so does the family business, it enters into a new realm of reality, which brings on very new challenges and the business needs to adapt to these realities to go forward and make itself relevant for the future, the mantra here is to REINVENT.
The big question is Why reinvent? If everything is going on so well…
There are many reasons, some of the important ones are:
- As your business grows, you invest in building infrastructure and hiring people. This comes at a cost and starts putting pressure on your profitability. You start losing your cost effective advantage.
- The competition at the marketplace grows, there is a new breed of competitors that start emerging to compete with you on cost, on service at the same time promising same quality levels. The customer starts comparing you with them. Generally, in such situations, you are caught unaware and you have no distinguishing factor which can help you justify your higher prices.
- With the blooming period still on, stability builds into the system, with it the pride of doing things in a certain way leading to not open for alternative thinking. This starts building complacency.
- In the initial period, you need people to perform multiple tasks and the entire focus is on getting customers on board, which is sales driven. As the pace of growth starts picking up the focus shifts to building operational systems that can deliver consistent products or services. But as growth takes momentum the business starts needing specialists in the field of operations, finance, sales; if this is not done, then the whole pressure starts building on the business founder and the organisation becomes person focussed.
- The family grows, the next generation starts working in the business, it’s time for the business to decide on the roles, rules and expected contribution to the business to avoid confusion. For the business to support additional members, the business should have
- Profitable growth otherwise excessive family employment starts taking toll of the business.
Only when you reinvent successfully, your story becomes a timeless classic. That’s the challenge of loving, living and creating a legacy…