Published at The My Business My Family "S=MC2" program. Future proofing the family business. Published
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 struggle in. Family businesses are agile, they are resilient and function masterly as the vital big business cost of goods (CoG's) input. Big business is not structured to survive successfully without family business support.
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, 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 happy to turn a blind eye on this topic. 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 life support system of global commerce, they provide incredible functionality to the big business process. Functionality that is the actual life force behind these large businesses. The family business is much more than a community service.
6. So where is the perceived family business support mechanisms? in the controlling hands of self interested organisations. Many of our thought leaders, economic guru's, captains of business and state officials, speak of the family business with 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? who really knows? There has rarely been a consistent and serious interest in the family business, lots of concerns, but no real interest. A disinterest which virtually guarantees never acknowledging the family business as its own sector or industry, why?
8. We understand that economic research drills down into detail for specific modelling, considering two separate conditions to determine the effects one has over the other in the change 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 specific economic profiles. Teams of clever people use these results, and create a knowledge base of understanding. It provides a form of wisdom that can be used to interrogate changes in micro(individual)-economic behaviour (unreliable at best), and when they total the results, they create the Macro(group)-economic picture (more reliable, but has an unknown sunset clause).
9. It would be fair to think that every little detail on family business would be subject to scrutiny, and it is, when the tax department demands it. However, we are hard pushed to find any detail of ongoing economic studies that purposefully focus on the workings and market relationships of the family business. All reports tip toe around the devastation unfolding in todays family business market, no papers on the unique levels of risk, capital, or operating in a hyper-competitive market.
10. Our independent business groups, those well-intentioned groups established to support our family businesses, inadvertently operate under a dichotomy of interest (given they are pseudo profit seeking ventures in a competitive market). This unfortunate dichotomy between support and commercial interest, can only compound the dislocation of the family business, ultimately leaving those in need, in even greater need. When a support mechanism requires payment for service, it favours those that have a capacity to pay. The very groups that claim to be there for the family business, never actually had the capacity to help all family businesses, especially those in real need. Such groups understandably cannot support those businesses that are cash strapped (otherwise they would fall under the registered charities act). This however 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 economic engine room?
11. Without fear of contradiction, family businesses are treated simply as another disposable commodity, rather than an actual high value sector, supplying critical big business infrastructure. It would seem the sheer competitive nature of family business and their relationship to its market, is, its 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 economic study. For some unknown reason, family businesses are denied the opportunity to be recognized. This removes any connection that links the individual family business to the global economy. 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 being considered in a part of the bigger picture or in a Macro sense, recognized in their totality. As one family business fails, another, family business opens to fill the gap. A process which operates so effectively and efficiently, it barely registers as a disturbance in the market.
12. Why is there no real desire to support our challenged Family Business? The answer probably lies in the fact that, there is more money to be made from a failing family business, than saving one. The failing family business events are so bountiful, that an entire industry has been established around it. Putting the family business into liquidation is a more profitable option than supporting them through the longer road of success. Should a family business hit hard times, and they still have capital or assets (including the family home), then an administrator will most likely be appointed ($25K minimum). 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, by orders delivered through overwhelming officialdom. 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, resemble a process of systematically getting the balance sheet to an accountable zero as quickly as possible. Any capital and/or assets from the business, the owners and their family are distributed amongst others, where far too often a negative return to the families of the business owner. An act that ultimately impacts generations of families.
13. Family business success stories do exist, and no doubt give those charged with supporting small and family businesses, the opportunity to feel a little better. However, in my opinion the lack of economic intelligence and the systemic failure in understanding the family business process, their challenges and risk levels, is totally bewildering.
14. We have no problem training businesses on how to apply Fibonacci's 800-year-old golden ratio to those dealing on the trading room floors, yet we cannot find the resources for rudimentary entrepreneurial coaching to 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 of real scenarios playing out daily in our family businesses, is completely underdone. It seems much easier to look away from the carnage than get involved.
15. 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 eligibility test. Where eligible employers are described as 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 fro the support mechanism.
16. The world of professional economic study seems to have failed in articulating the family business profile, a failure denying the family business an economic identity. Those seeking important economic data do not appear to have a great deal of interest in such outcomes. 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, it probably resides more in...
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