Family Business Matters

In a speech delivered on April 14 to the students and faculty of Morehouse College in Atlanta, Federal Reserve Chairman Ben Bernanke said he sees "tentative signs" that the steep contraction in U.S. economic activity may be on the decline and that he is confident in the economy's long-term prospects.

In light of the economic meltdown that began more than a year ago, this was encouraging news; however, even when fear and anxiety are at their highest levels in this country, a case can be made that well-managed family businesses are best able to survive during difficult times due to their unique characteristics. As privately held enterprises, family businesses are not beholden to Wall Street and do not have to take contradictory or reckless advice from financial experts; in addition, family businesses rely on support among family members to weather economic storms.

They also benefit from a high level of employee loyalty and in most cases, families in businesses try to hold onto employees longer and are less prone to wholesale layoffs. Finally, family businesses tend to be more entrepreneurial and more flexible than their public counterparts. This provides them with more options and the freedom make the best out of challenging times such as these.

Rather than allowing fear to paralyze their decision making processes, families in business can weather economic downturns by recalling what has sustained them in the past during similar times. They can overcome their anxiety by developing a new sense of purpose.

A simple and relatively easy way to revisit the basics and engender renewed enthusiasm for the family business is to apply what I call the "M&Ms of business planning" -- Mission, Marketing, Money, Management and Monitoring.

The family can devote a half-day off site to these five Ms and calmly review the long-term vision for the family business in light of any short-term changes that need to be implemented. As time is of the essence, using this simple approach can provide a quick review of the components of a business plan and can jump-start creative thinking among family members. It also can combat the tendency of wanting to just "do something -- anything!" in times when panic can take over better approaches.

Revisiting the mission statement is the place to begin. Why is the family in business?

What is their primary reason for coming to work in the morning? Who do they serve and how do they best do it? Has the family business strayed from its mission? If so, what is the mission now?

Once the family confirms or redefines the family business mission statement, reviewing the marketing plan comes next. Allow each family member and other key employees to share their ideas on how to be more creative in reaching customers, build off of customer loyalty, or develop new markets that make sense for the family to pursue.

Next, discuss the management part -- the people needed to continue the mission of the family business -- not only in the next six months, but over the next three to five years. Is this the time to invite a family member who is working elsewhere and whose expertise would lend a needed boost to the family enterprise to come to work in the family business? Will the salary of this family employee be sustainable? What other talents are needed to assist the family business in fulfilling its short- and long-term goals? Is this the time to lure a competitor's best talent? Should family members set an example and reduce their compensation until this storm is over?

Money -- undoubtedly, this "M" has caused some consternation as lenders, vendors and suppliers may all have been challenging the financial health and cash flow of the family business.

What changes, if any, are needed in the invoicing process? Can a long-planned acquisition be postponed, or with interest rates at low levels, is this the most opportune time to take on more debt? Can distributions to shareholders be reduced to provide more working capital to the business? Is there a need to share business updates with the business' banker? The family business owners need to take time to quietly discuss these and other money-related questions so that realistic cash flow projections and sound financial decisions can be made, versus knee jerk reactions.

Lastly, once a plan has been jointly formulated, the final "M" -- monitoring -- becomes a critical focus. If the family has together planned out the other four Ms and agreed on definite steps to take, monitoring the progress on these goals is crucial. To make sure everyone stays on the "same page," having a one-hour update meeting every week to review the implementation schedule is time well spent.

As Warren Buffet has said, "A crisis is a terrible thing to waste." If families in business take the time to plan carefully now in a quiet setting, not only will they survive this storm, they will be much stronger as economic conditions improve. The best way to combat fear, anxiety and depression is to develop an action plan for your family business.

Use the five M&Ms of business planning to generate a renewed sense of mission -- and then, take action!