3 Challenges Every Growing Family Business Faces (and how to tackle them)
Growth is an exciting time for a family business, but it also comes with a myriad of challenges. It’s important to be aware of these challenges so that you are prepared to address them head-on when they do present themselves. Here are three of the most common challenges faced by family businesses in a growth phase, along with some tips on how to tackle them.
#1 – Cash Flow
One challenge that family businesses face during growth is managing cash flow. This can be tricky because as your family business expands, you often have more expenses and may not yet have increased revenue to match. This is part and parcel of the expansion process and does not mean that you are being reckless or overspending, but nonetheless it can put a strain on your finances and cause significant stress.
There are a few things you can do to manage cash flow during this time:
- Review your expenses and see if there are any areas where you can cut back, even temporarily, in order to free up some cash.
- Take advantage of credit products like lines of credit or business credit cards, which can give you access to funds when you need them.
- If possible, try to negotiate longer payment terms with your suppliers so that you have more time to generate revenue before having to pay them.
- By taking some proactive steps, you can help ease the pressure on your cash flow and keep your family business running smoothly, even as you invest heavily in growth.
#2 – Quality Control
Another challenge family businesses face during growth is maintaining high levels of quality control. As your family business expands, you may need to outsource some work or bring on new team members who are not as familiar with your standards and procedures. This can sometimes lead to a decline in the quality of your product or service.
There are a few things you can do to combat this:
- (1) Be clear about your standards from the outset. When onboarding new team members or working with new suppliers, make sure they are aware of your expectations and what you consider to be acceptable quality.
- (2) Set up systems and procedures that everyone must follow in order to help ensure consistency.
- (3) Conduct regular audits of your product or service, both internally and externally, to make sure that quality standards are being met.
By taking some measures to proactively manage quality control, you can help ensure that your family business continues to produce a high-quality product or service, even as it grows.
#3 – Budgeting
When your family business is growing, it can be difficult to calculate and keep track of your budget. This is because you may have more expenses than you did in the past, and your revenue may not yet have increased to match. As a result, it’s important to be diligent about tracking your budget and making adjustments as needed.
Here are a few tips for managing your budget during a growth phase:
- (1) Review your budget regularly and make adjustments as needed.
- (2) Keep track of your actual expenses and compare them to your budgeted amounts.
- (3) Make a forecast for the upcoming months so that you can anticipate any changes in expenses or revenue.
By staying on top of your budget, you can help ensure that your family business remains financially healthy as it grows.
Final Thoughts
As your family business expands, you will likely face a number of new challenges. But by being aware of these challenges and taking steps to address them head-on, you can ensure that your family business continues to grow and thrive.