The dream of any entrepreneur is to build a successful, profitable business that can survive long after he or she retires. Often the goal is to pass the business down to children or close relatives, as evidenced by the fact that 80% of businesses worldwide are family-owned. In the U.S., family-owned companies are responsible for 60% of all employment and 78% of new jobs.
Despite their prevalence, 70% of family businesses last just one generation before they either fail or are sold. Some common pitfalls can cause problems in transitioning the company down the road.
Internal communication is one area in which we’ve seen companies struggle. Dinner table talk often turns into strategic decision making, which non-family members aren’t privy to. This can cause resentment and misalignment among key employees.
In our experience, family-owned businesses often suffer from a lack of measurement. Start-ups rely on gut decisions—scalable second-stage businesses can and do use data.
Whether you’re bringing in an outside CEO or your own child, there are measures you can take to successfully manage that change:
1. Narrow your target
In the beginning stages of growth, you take any work or order that comes your way. But a leadership change is a good time to narrow your focus to improve your brand and increase profits. After assessing market opportunity, revenue, and profits, you may want to:
- Retire low-margin, low-revenue, or overlapping products or rethink product families
- Package / define capabilities to streamline processes
- Target specific markets that value your offering
- Analyze commonalities in your best customers
Many businesses find that the 80/20 rule applies: 80% of your profits come from 20% of your customers.
2. Get out of the way
Enable clear accountabilities to empower your leadership team and let you take a step back. Use moments of cohesion to create buy-in between former and new leadership, as well as the rest of the team. Here’s our sequence:
- 1-Page Business Plan – to articulate specific and measurable business goals and priorities
- Positioning Workshop – to establish your unique differentiator and “sweet spot” in the market
- Marketing Roadmap – to outline winning marketing strategies that align with these goals
Learn more about driving change and business alignment in our interview with Dr. Jim Kestenbaum.
3. Stop guessing, start measuring
First-generation companies grow by word of mouth, but that isn’t always scalable. The key to continued profitability is to move from guessing to measurable, predictable growth.
Invest in an inbound marketing platform like HubSpot to automate and measure marketing activities. Inbound or content marketing leverages the expertise you’ve built up over the years to help customers find you, through blog posts, application notes, white papers, and web pages.
Your sales team can also benefit from this digital approach. If you don’t already use one, implement a customer relationship management system, such as HubSpot’s free CRM. Your salespeople will be able to track interactions with leads throughout the pipeline, helping them reach the right prospects at the right time.
It’s a shift in thinking of sales and marketing from art to science. Implementing these new technologies may require a new breed of talent, including:
- Daily use of tools
- Focus on behaviors that lead to outcomes
- Moving away from “dialing for dollars”
- Considering the customer’s needs and timing, not yours
- Thinking about the full sales cycle
Learn more about the ramifications of staff changes to the business.
Need some direction? Launch Team can review your marketing strategies and channels and provide a prioritized, actionable plan for improvement. Request an assessment today.