Who cares about the family business…An ugly truth?
Published at The My Business My Family "S=MC2" program. Future proofing the family business.
The Family Business Struggle…Is hidden in full view
Some assumptions, who, what and facts:
1. It is a simple fact that family businesses are the global financial engine, let no "boffin" tell you otherwise.
2. Our Nations, Governments, Corporate leviathans, big business, churches, and other larger commercial entities cannot exist without the family business.
3. Why are family businesses so important? Because they are smarter at street level operations, they perform efficiently and effectively in an environment that big business fear to play. Family businesses are agile, they are resilient and function masterly as a vital big business cost of goods (CoG's) input, and for many large corporations their very existence relies on successful family businesses and/or their employees as their their ideal clients. Big business is not structured to survive successfully without family business support, it is not the other way round.
4. Why is there such a gap between our family businesses success stories, and corporate business success? The answer lies in the fact, family businesses must survive in a super/hyper competitive environment. This is a market with low entry barriers, and generally lower set up costs. A set of conditions that bigger businesses exploit, an asymmetric hierarchical power relationship that, each level of government seems prepared to turn accept. We need only look at things like farm gate prices, or pyramid labour hire/recruitment practices, all power-based acts designed to maximise corporate value and minimise the family business opportunities for success.
5. We know that family business by-enlarge are the global commercial life support system, they provide necessary functionality to the big business process. The family business is much more than a community service and therefore a far better understanding and appropriate support mechanisms.
6. So where is this family business support mechanisms? It apparently lies in the controlling over systemised government departments who, have latest best-practice corporate standards of compliance to measure things by. Alternatively there is a glimmer of hope in self-interested small business networking and support organisations. Many of our thought leaders, economic guru's, captains of business and state officials, speak highly of the family business, expressed in a caring tone, one that implies empathy and understanding. However, far too often, it is nothing more than condescending disconnected jingoism.
7. What are these things we call the family business? How do they exist? who knows? it is difficult to find any structured report or consistent public document demonstrating real interest in such things. How refreshing would it be for the family business to read exactly what they are getting into? Even just one document that deconstructs the swamp we know the family business must survive in. There are lots of concerns out there in business land and government departments, However, no real interest. A disinterest which virtually guarantees never to acknowledge the family business as its own true sector or industry, why?
8. We understand that economic research drills down into detail, we also understand it resolves specific questions through specific predictable modelling, and we get that they consider two separate conditions to determine the effects one has over the other, allowing the model to demonstrate the behavioural characteristics that show the cause and effects of such a process (i.e. how peoples spending habits change, to a change in tax levels). This process is repeated throughout a set of conditions to map a specific economic profile. Teams of clever people use these results and create a knowledge base of understanding. It provides a form of wisdom that is used to interrogate changes in our micro (individual)-economic behaviour (unreliable at best). And when the results are combined, it may create the Macro (group)-economic picture (more reliable but has an unspecified lifespan).
9. In our super intelligence gathering world, it would be fair to think that every little detail on a family business would be subject to scrutiny, and it is, particularly when the nation’s largest legal system, our tax department demands it. However, we are hard pushed to find any useable prognostic economic studies that purposefully focus on the workings and market relationships of the family business. Most reports tip toe around the devastation perpetually unfolding in today’s family business market, yet where are the papers on the unique levels of risk that our family business must endure, or the excessive costs of capital, or the stress created operating in a hyper-competitive market?
10. Our independent business groups, those well-intentioned groups established to support our family businesses, inadvertently operate under the dichotomy of interest and survival (given they are pseudo profit seeking ventures in a competitive market). This unfortunate dichotomy between support and commercial interest, only compounds the dislocation of the family business, ultimately leaving those in need, in greater need. When a support mechanism requires payment for service, it favours those with the capacity to pay. The very groups that claim to be there for the family business, never had the capacity or intention to help all family businesses, especially those in genuine need (short or long term). Such groups understandably cannot support those businesses without the capacity to pay. However, this is no revelation, there is no need for any academic study to tell us that a struggling family business cannot afford the costs of membership. Even if they could, would a course that offers a $3,500 one day seminar on succession planning, or a $14,000 seven-day course on compliance, be the stuff a struggling family business want or need? There is no doubt that seminars and training are a magnificent way to remain current, However, is this the best we have to offer our struggling economic engine room?
11. Without fear of contradiction, family businesses are treated simply as another disposable commodity, rather than an actual high value asset. A sector providing essential if not critical big business infrastructure. It would seem the sheer competitive nature of family business and their relationship to their market, makes them, their own worst enemy. Our current system leaves no real sign of market failure. The cause and effects of revolving family businesses are grossly underrepresented in the world of research and study. For some unknown reason, family businesses are denied the opportunity to be recognized. This removes any connection that may link an individual family business to the global economy.
12. Small and family businesses are to the global economy, what the small and micro tributaries are to the Amazon or Nile... Family businesses appear to be bundled at every opportunity, an action that has them considered as part of the bigger picture or in a Macro sense, a practice that recognizes them in their totality. As one family business fails, another, family business opens to fill the gap. A process so effective and efficient, it barely registers as a disturbance in the market.
13. Why can’t we see any support for our challenged Family Businesses? The answer probably lies in the fact, there is more money to be made from a failing family business than saving one. Our failing family business events are so bountiful, that an entire industry has been established around it. The process of putting a family business into VA, or liquidation is way more profitable option than supporting them through the longer road of success. Should a family business hit hard times, and they have any capital or assets (including the family home), then an administrator will most likely be appointed (at a starting cost of $20K). This is a tried and tested practice that, on face value would seem fair and equitable for all. However, in most cases it would appear to be the final act of misery, shame, and disgrace, to our mums and dads and their children. A horror ending to a family dream, executed by orders delivered through overwhelming officialdom. Is it too difficult to think the intention of maximizing benefits from a structured forced exit, should comprise of actions that distribute a fair and equitable process to all? But somehow, somewhere along the way it now resembles a process of systematically getting the balance sheet to an accountable zero as efficiently and effectively as they can. Any capital and/or assets from the business, the owners, and their families are distributed amongst others, far too often leaving a negative return to the families of the business owner. An act that ultimately or uncaringly impacts generations of families long after the event.
14. Family business success stories do exist, and no doubt they give those charged with supporting small and family businesses a reason to feel a little better. However, our lack of economic intelligence is only compounded by the systemic failures to either understand or disclose findings on the family business process, their challenges in a hyper competitive market, and subsequent risk levels. A national and state behaviour that is nothing less than bewildering.
15. We have no problem running courses on how to apply Fibonacci's 800-year-old golden ratio to dealing and trading room floors, yet we cannot find it in ourselves to provide the resources practical rudimentary entrepreneurial coaching, something that would support our family business owners. The sheer lack of desire to understand our family businesses, and their individual contribution to our markets, verge on reprehensible. It would appear our desire to understand the micro economic relationships of success and failure, those real scenarios playing out daily in our family businesses, is completely underdone. It would appear it is much easier to look away from the carnage, than get involved. Is it possible others have something to gain from this bizarre behaviour?
16. An example of just how the family business is bundled into a much larger group, can be seen in a recent 2020 COVID19 small business government support package (this is no reflection on the extensive and appropriate response our governments delivered in the crisis, it merely highlights what happens every single time we report on family business). A support package that states, eligible employers are businesses (including companies, partnerships, trustees, and sole traders): With a turnover of less than $1bn and that have lost 30% or more of their income in a comparable period a year ago. To position the average family business within this group simply beggar’s belief, in fact by putting those family businesses within this group it was easier to dislocate them from the support mechanism, a gross unfairness that demonstrated the issue, it was possible to see the "family business struggle is hidden in full view".
17. The world of professional economic study has failed in articulating or reporting the family business profile, a failure denying all our family businesses their economic identity. You could be forgiven in thinking those seeking important economic data, do not appear to have a great deal of interest in such studies. The family businesses economic behaviour, one that creates a mere few hundred thousand dollars per year, just might not fit the description of being important enough to research, however, in reality, the answer probably resides more in an ugly truth...
"who cares about the family business..."
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