The primary desire of family business advisors, like myself, is to see family-owned businesses live on for many generations. But some family businesses are beyond saving and want to die peacefully.

Those businesses need hospice.

Hospice is a service and philosophy of care for terminally ill patients. Hospice has four primary goals:

1. Relieve the pain and suffering of the terminally ill;
2. Make possible a “good” death;
3. Help the family; and,
4. Assist in the search for meaning.

While best known for helping a terminally ill person and their family, there’s a growing need to extend hospice to terminal family-owned businesses.

Terminal family businesses can be characterized as having one or more of the following situations:

• The next generation has no interest in continuing the family business. Less than 40% of first to second generation hand-offs are successful. Less than 15% of second to third generation hand-offs survive.
• The siblings of the next generation dislike one another, don’t talk to one another, don’t trust one another, refuse to work together, and/or refuse to define a unity strategy. I recommend Doug Box’s new book Texas Patriarch for an actual, first-hand account of what happens in a wealthy family that can’t get along with one another.
• The business has outdated products and processes, serving a declining market and customer base, with little or no hope of change or improving. I’m not just talking about buggy whips. I’m talking about examples such as Uber grabbing the taxi market.
• The family lacks the will, ability or initiative to turn around their bleedingbusiness and seek to sell the body to someone. Most family business owners have over 75% of their retirement money tied up in the business. They need a way to cash-out.

A hospice story

Certified family business advisors are trained and equipped to provide hospice-type services. Lisë Stewart, founder and president of Galliard Family Advisor Institute, recently shared a hospice-type story.

A third generation family member asked Lisë to go with him to meet with his grandfather and father. She asked “Why?” He replied, “I need your support when I tell them that I have no interest or intention of joining the family business.” That’s an example of family business hospice care.

Is your family business in need of hospice? I’m ready, willing and able.

Church announcements are symptomatic of a common business problem. Leaders intend to communicate useful information but fail to make it understandable to all of the audience.

For example, this is the announcement made from the pulpit of my church yesterday: “If you are a first-time visitor, please tell us more about yourself by filling out the bottom of The First Cup and either put it in a giving box or visit Starting Point.”

• Visitors don’t know First Cup is the name of the piece of paper they may or may not have been handed entering church;
• Visitors don’t know what’s a “giving box” or where they’re located; and,
• Visitors don’t know what’s Starting Point and where is it located.

Here is a clear test to make sure you aren’t speaking in code: Could a first-time guest understand exactly what you are saying if they knew nothing about your church?

Speaking in Financial Code

Well-intentioned business leaders make the same error as church leaders. They inadvertently assume everyone in the audience shares a common level of knowledge.

For example, with the intent of communicating clear goals for the coming year, a CEO says: “Our top three financial objectives for 2017 are to increase margins by 5%, improve cash flow and add at least 5% to our ROCE.”

Most employees have never had an accounting or finance course.

• Employees don’t know much, if anything, how to calculate Gross Margin (also known as Gross Profit) much less how they can help improve it;
• Employees may have heard about Balance Sheets and P&Ls but few have seen a Cash Flow report. In fact, over 50% of business owners don’t know how to read, interpret or use a Cash Flow report; and,
• Employees may have heard the acronym ROI (return on investment) used but few have heard about ROCE (return on capital employed) or how to improve it.

The Jack Howe Question

My dearly departed friend and mentor Jack Howe taught me a lot about business. When someone asked me a question I don’t understand, Jack taught me to reply “What do you mean by that?“ One of two things happens: (1) The questioner explains the question using simple language you now understand and can clearly answer; or, (2) They drop the question because they don’t understand what they’re asking.

Finance for Non-financial Employees

If your employees say “What do you mean by that?” when they’re given financial goals for 2017, give me a call. I’ll teach them how to read, interpret and use a Balance Sheet, Income Statement and Cash Flow report during a 1/2-day onsite workshop.

To request a free workshop agenda email TomPryor@icms.net .

President Dwight Eisenhower and President Abraham Lincoln share something unusual in common. Neither had the support of family or friends when they ran for president.

No one in Lincoln’s family voted for him. And no one in Eisenhower’s home town of Denison, Texas voted for him. Though both lacked the moral support of family and friends, both won their presidential elections.

Lincoln and Eisenhower’s situations reminded me of something I learned decades ago.It’s more difficult for you to win over family and friends than the general public. A pastor was the first to warn me of this. He explained, “Your family remember how you acted before you became a follower of Jesus Christ. They’re going to be skeptical that you can change.”

The same attitude is often exhibited by your boss. “You can’t have any good ideas. You work for us.”

Good news! Lack of support from family, friends or bosses does not dictate your fate!

Lincoln and Eisenhower won because they sold big ideas not themselves. Lincoln promoted the end of slavery. Eisenhower promised to stand up to the communists as commander-in-chief.

Are you feeling like no one believes in you? Learn from Lincoln and Eisenhower. Identify something bigger than yourself. Something of importance that will add value to lots of people. The acceptance and appeal of that one big idea will raise your measure in everyone’s eyes.

My story

In 1985 a senior leader from Motorola HQ stopped me in mid-presentation, looked at my boss and said, “Don’t include anyone from accounting at quarterly operational reviews in the future. I only want to hear from people who can improve results, not report them.”

The leader did not believe in me. I could have gotten mad. Or I could have quit. But instead I sought out a better way to account for costs and improve decision-making. I found it. It was new. It’s called Activity-Based Costing (ABC). Finding and implementing that improved method resulted in Motorola’s leadership offering me a promotion in 1986. I turned it down, however, because my finding ABC opened even better career opportunities.

Your story

Find and promote something bigger than yourself and then people will believe in you.

Does your cost system need to be precise? Probably not.

Does it need to be accurate. Yes!

What’s the difference? The four pictures above begin to provide an answer.

Accurate costs are random but near the target. For example, I have a refrigerator with a thermostat that keeps it a constant 38.0F. I test it with a dollar store thermometer 10 times. The temp readings range from 37F to 39F. Therefore, my inexpensive measurement system is accurate …close to the 38.0F target … but lacks precision.

Precise costs are repeatable but not necessarily accurate. Using the refrigerator example, an expensive scientific thermometer would have decimals and register precisely the exact same temperature during each of the 10 tests. The precise measure might be 36.05F after each of the 10 measurements or it could be precisely 38.05F each time. How could an expensive measurement system be consistently different? Not calibrating the measurement system before use is commonly the root cause.

Precise implies accurate but that assumption is wrong. Precise systems are more expensive than accurate systems but often not what we need.

You may be thinking “Why should I care?”

Short answer is “To have a profitable business, you’ve got to match the accuracy of your cost system to your type of business“.

Select the situation that best describe your business:

1. Low Accuracy-Low Precision: If you’re the sole provider of a new product or service that delivers high value to customers, you don’t immediately need an accurate or precise cost system. Charge customers whatever price you want as long as net profits exceed 10%.
2. Low Accuracy-High Precision: If you have competitors with published prices, you need a precise cost system. A precise cost system, like Activity Based Costing (ABC), will consistently enable you to define, implement and measure continuous improvement to eliminate waste and compete.
3. High Accuracy-Low Precision: If you Bid & Quote for new business, you need an accurate cost system. If your bid is based on inaccurate costs, one of two things will happen; (1) your batting average on bids will be low; or, (2) you’ll win unprofitable orders you wished you hadn’t won.
4. High Accuracy-High Precision: If you compete in a market that has excess capacity, you’ll need a precise and accurate cost system. An Activity Based Cost system works well here because it measures Non-Value Added excess capacity. To take sales revenue from competition, you may want to price your product or service based on a highly accurate cost that excludes the precise expense of excess capacity.

Barometric pressure is precisely useless information. It’s precise because it has two decimal points, e.g., 28.35. But to me it’s not accurate because I don’t know what the number implies, what I should do or what I should expect.

If your choice of cost system has your head spinning like barometric pressure does to me, give me a shout. I’ll help you match your needs to the best costing method. 

“My hiring process assumes that if you’re hired, you won’t be fired.”

If you told that to everyone you interviewed for a job opening, what impact would it have on them? On you?

Job seekers would know from the onset that your hiring process is going to be different. And you will be much more methodical in your decision making. 

Radio talk show host Dave Ramsey says no one is hired at Ramsey Solutions without at least 10 interviews. Dave and his leadership team assume a mindset from the onset that the person hired cannot be fired.

The “no-fire” mindset has resulted in a better quality of people being hired. And it’s resulted in happier people being hired. Turnover is rare.

My life maxim is “Success is NOT logical“. What I am recommending you do the next time you hire someone is not logical. But it will lead to greater success.

I met three family-owned businesses during my 2016 Summer vacation. I fear only one will survive. 

Cook’s Mens Store has operated 51 years on the town square in Memphis, Missouri. But according to John Cook, the 83 year-old founder, 2016 may be its last. Why? Because wishes alone don’t work. John told me that he wished his daughter would someday run the store. But that’s unlikely. She’s in her 60’s and has a good job at a university were she’s worked for decades.

Gardner-Collier Jewelry is a fifth generation family-owned store on the town square in Kirksville, Missouri. Mr. Gardner told me that he wished one of his children or grandchildren would have interest in becoming the 6th generation to run the store. None are interested. This year may be Gardner-Collier’s last. Why? Two reasons. First, the store and its inventory looks like it did when my grandmother shopped there in the 1960’s. Second, wishes alone don’t work. The Gardner family has no written strategic plan to grow the business and has no succession plan.

“The future will not just happen if one wishes hard enough.  It requires decision—now. It imposes risk—now. It requires action—now. It demands allocation of resources, and above all, human resources—now.”

This statement by Peter Drucker is especially relevant and important for leaders of family-owned businesses, like Mr. Cook and Mr. Gardner. Wishing the next generation will take over the business is not enough to make it happen. It requires performing specific activities.

Survive & Thrive

Now to the 1 of 3 family businesses that is thriving and will survive. It’s a 4th generation family business. Through a series of questions I asked Chuck & Debbie Kigar, I learned there are 3 primary reasons the Kigar family business is succeeding:

1. Diversification. The family business started in the 1920’s as a family farm. As a strategy, the 3rd generation, Chuck and Debbie, added installation of video security systems and a Bed & Breakfast to the family business mix. Many of the camera systems have been installed on local farms.
2. Experimentation. The family purposely experiments with new technologies in the old farming operation. This year they’re trying a new method of baling hay in white plastic wrap. “Baleage” has reduced harvest from 4 days to 1 plus provide animals a higher protein content feed during the Winter.
3. Invitation. Chuck & Debbie purposely invited, not forced, the 4th generation to work in the business. Their son attended his freshman year of college on a sport’s scholarship. He opted out of his sophomore year to return to the family business, including the B&B. He WANTS to work hands-on in the business.

Conclusion

I did not go on vacation with the intent of interviewing family business owners. But because I am a family business advisor, I am by nature inquisitive. I returned home both discouraged by two and encouraged by one. I hope both perspectives encourage you chart a path for success.

If you need help with a strategic or succession plan Contact me.

Just because you promise to do something does not mean you’re prepared to do it.

Couples make a lot of promises. To love one another in sickness and in health. Whether richer, or poorer. When things are good, or when they’re worse.

Most couples spend more time on planning the wedding ceremony than preparing themselves for the lifetime commitment called marriage.

We’re all guilty of making promises we’re not prepared to keep.

• Have you promised your boss to make a 5-minute presentation on strategic planning at next week’s staff meeting but don’t know how to prepare?
• Have you promised the family to prepare a succession plan for the family business but don’t know what fulfilling that commitment entails?
• Have you promised to pray for someone’s immediate need for rent money but your “spend more than you make” lifestyle makes you unprepared to give them some money right now?

Last week we witnessed the perfect example of what it looks like when men and women are prepared to fulfill their promise to serve and protect. The Dallas and DART police instinctively ran towards the gunfire. Everyone else ran away from it.

What promise are you unprepared to keep? Name it and claim it. Be specific as to what you need to learn. Then ask people like myself to prepare you. I may not be the best person to prepare you, but I am confident I can connect you to a person who can.

CLICK HERE if you need to prepare yourself to keep a promise.

Budgets are boring. They’re easy to create. Simply take last year’s spending and multiply it by an inflation factor or an across-the-board budget cut percent. Voila, you’ve got a budget.

Easy activities rarely determine an organization’s success. Creating a budget is relatively easy and not mission critical.

Strategy is mission critical. Strategy determines success or failure. Yet leaders spend far less time on strategy than on budgets.

During my 20+ years in consulting, I’ve seen many budgets but few strategic plans.

If you need to excite yourself and your “troops”, there are two steps that must take place before the budget.

Step 1: Strategy
If you’re satisfied with the way things are, then you don’t need a strategy. Just keep do’in what you’ve been do’in.

But if you’re not satisfied with this year’s results, then you’ve got to implement change. What do you change? That’s determined by your strategy.

A strategy is what you intend to do differently to win in the marketplace.

I focus on strategies that fall into one of three categories:

1. Focus on being unique. Define a niche for your existing products or services. Complete the sentence “We are the only organization that _____________.” Author Doug Hall says “If you’re not unique, you’d better be cheap.” Zipcode Honey or Texas Organic Lawncare are examples of niche strategies.

2. Focus on being the best. Provide what your competition does but more efficiently and effectively. If you’re a baker, make sure your cake tastes better than anyone else. If you want to make it unique, fine, but you’ve got to deliver the best quality. Amazon.com and Google are examples of companies whose strategy is to be the best retailer or search engine.

3. Focus on invention. Identify a new customer need and satisfy it with something you invent. Possibly the customer doesn’t even know they have the need. Facebook or Apple are examples of companies whose strategy is to invent social media or smartphones customers didn’t know they wanted.

Step 2: Plan
Define a 1-page plan to implement the new strategy. For an example of a 1-page plan CLICK HERE.

To be successful, a strategy must have a written, doable sequence of activities to achieve a distinct, measurable goal. And to be successful, the plan must be communicated to all employees.

Step 3: Budget
Unfunded plans fail. Create a budget that financially supports implementation of the plan.

A budget is the last step to success, not the first.

It does not require a PhD to predict that technology has and is going to continue to significantly change our corporate and personal life. Peter Diamandis, author of Abundance: the future is better than you think, recently asked readers “What do you believe won’t change over the next two decades?”

One thing that won’t change in the next 20 years is the proven sequence of strategy, plan and then budget.

“Put it in writing” is some of the simplest, wisest advice I’ve been given. Here are several examples: