January 2007
A Family Business Council
Helps Drive The Family Business
Be Yourself And Sell Yourself
Danger Lurks In Your
Inventory
The Trade Show And How To Use
It
 
A Family Business Council Helps Drive The Family
Business
It’s not too uncommon these days to find that a
family owned business has a board of directors.
But a newly emerging trend is to also create a
family business council (FBC). Just how do they
work and what are the supposed benefits to be
derived from having one?
Unlike a board of directors, the purpose of a
family business council is to provide a forum
within which issues internal to the family – but
nevertheless critical to the successful
functioning of a family business – can be aired
and resolved in an open manner. For instance,
when the decision is made to bring a family
member into the family business, the traditional
relationships can change. The fact is that the
relatives will now have to deal with the family
relationship on a highly visible, continuing
business basis. Sometimes the family and
business roles become confused and blurred,
which gives rise to misunderstandings and
stress.
In fact, there is a many issues that can give
rise to dissension. One of the first jobs of the
family business council should be to adopt a set
of rules that clarifies the main areas of
potential dispute.
- Clearly defining the authority and
responsibility of each family member. Set out,
in the simplest of terms, what is expected from
each individual and what authority and
responsibility each will have in the business.
Get this down in writing and, where appropriate,
communicate the responsibilities and authorities
to the employees. Determine who reports to whom
and what this really means.
- Clearly determine the hours of work and
vacation time rights of family working in the
business.
- Deal with office or workspace issues, parking,
furniture and other resources that will be made
available. Often these small things are taken
for granted, but they can really intensify for
those who feel they haven’t been treated fairly
or with due respect and eventually erupt in a
confrontation between family members.
- Clarify compensation and benefits issues and
put them in writing. It's not an issue of trust;
it's an issue of good business. Unless there is
a forum for discussing these issues openly so
that some sort of consensus can be reached among
the people affected, they can generate tensions
highly damaging to a family business.
On a continuing basis the FBC’s meetings will
provide updates on the performance and status of
the business and allow broader issues, such as
who should be the next head of the enterprise or
whether the business should be sold, to be
debated.
The FBC will share many of the concerns of the
company’s board of directors, but its
perspective is strictly that of the family and
it can provide feedback to the board on how the
board's decisions affect the family.
It is a forum where the family can establish or
clarify its values and policies and determine
how extensively these need to be applied to the
business. For example, if a senior family member
is planning to retire from the organization, it
could be that someone other than that person’s
next of kin would be the best replacement in the
position. The council can make that
recommendation to the board of directors as an
expression of the priority the family gives to
having a successful business.
One of the key functions of the family business
council is to ensure that younger generations
have input into the direction of the business at
a point in time before they take over control of
the organization. This will help the members of
the older generation as they work to prepare the
firm for succession and give the younger members
of the family a greater feeling of "ownership"
throughout the succession process.
To get a family business council formed and hold
its initial meetings, it would probably be best
to engage a facilitator with relevant experience
from outside the family. This person needs to be
a good organizer with knowledge of meeting
procedures and an understanding of family
dynamics. A business advisor or consultant would
be useful in this role. This first meeting can
be used to explain what the council is expected
to achieve for the business. Typically this
would include:
- Provide an environment that fosters mutual
trust and respect among family members
- Provide the opportunity for the attendees to
learn to communicate with each other about
sensitive family and business issues
- Provide an opportunity for key family
stakeholders to define and share their goals for
the company and themselves, and to reconcile
differences. The family can then develop a
vision of where it wants to be in the future.
- Assist family members in learning about the
roles, responsibilities and relationships of the
various stakeholders and groups (management
team, board of directors and family council)
- Facilitate an appreciation of different views
among family members
This is a forum where there should be no fear
about questioning or disagreeing. If you are not
able to disagree, with some objectivity, over
business issues, you'll invariably find that the
family relationship will be dragged into the
disagreement.
A family business council will help preserve the
integrity of the organization so that all
generations, present and future, can enjoy the
rewards of the hard work and dedication that
grew the enterprise to its current state.
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Be Yourself And Sell Yourself
One way or another, business is all about
selling our self. You have to sell you to
your customers, to your bank and other sources
of funds, and even to people you are meeting for
the first time in a social situation. "Selling"
really means just being yourself in a way that’s
interesting to your audience.
That’s why, to make the right kind of impression
on others when selling something, you can’t just
commit a sales pitch to memory and deliver it –
part of the process involves selling you to the
prospect as well. You have to open up to people
and let them see who you really are, so they
know they can trust you.
Think about a salesperson you’ve met whom you
really liked - someone who left you with a
positive impression, even if they did manage to
part you from your money. Chances are pretty
good that they didn’t just try to sell
you something, but spent at least the first part
of your time together getting to know you. And
when you completed the transaction you walked
away feeling you had gotten to know them as
well.
Subconsciously, what customers really want to do
is to learn something about you and to feel that
you want to learn something about them. They
want to connect on a personal level and make the
occasion one in which they’ve met a new
acquaintance, even if the ultimate result is
that they buy something from you. People don’t
want to deal with strangers and will always
prefer to purchase something from someone they
feel they know.
How can you become this special kind of person
when you’re trying to sell something? It’s not
difficult and it will be something you enjoy
doing. Here’s some tips.
Have all the answers
Remember that people come to you for knowledge
and information they don’t possess. It’s up to
you to prepare yourself for their questions by
learning all you can about your products and how
they relate to people’s needs. Anticipate what
it is that customers will want to know and be
ready with the answers. This will enable you to
be a lot more helpful and reassuring.
Create an outline of the sale
This is not as hard as it sounds. Most selling
situations go in a fairly similar, and
therefore predictable, way. They always begin
with a greeting and an introduction, then move
on to questions and answers, finally ending with
a close and hopefully a sale.
Customers are on your territory and probably
expect you to control the situation to some
degree, so even before you greet a customer,
have in mind how you want the sale to go. It
will make both of you more comfortable if
there’s a structure to your conversation.
Get to know the other person
first
Make the first part of every conversation about
them, and not about you or what you’re selling.
Make a point of finding out some personal
details, starting with their names and what sort
of work they do.
The most important thing to find out is just
what they want from you. It may well be just
advice at first, or possibly information about
your product. Before you give an answer probe
for a bit more information about their needs; if
they ask a question it’s an indication that they
are aware of a need and hope you’ll be able to
satisfy it.
Relax and let things happen
You know your products and their benefits,
you’ve prepared for this conversation, you’ve
outlined how things will go, you’ve got to know
the other person – now just relax and let the
sale take place. Take the lead but don’t push,
and be confident that you’ve got something this
customer wants. If not, you’ll both recognize it
as the discussion progresses and no harm done.
And most important of all, be yourself. Don’t
try to become someone who’s the perfect
salesperson or has "personality plus". They want
to meet someone who’s genuine and sincere –
someone who’s just like them but with more
knowledge about something they need. That’s you!
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Danger Lurks In Your Inventory
Inventory has a way of growing out of control.
The justification is usually that "if we
don’t have it we can’t sell it"’, so a
connection is made that translates as "the
bigger the inventory we have, the more sales
we’ll make". If only it were so.
Carrying an unnecessary amount of stock can be a
dangerous thing. If it’s not properly managed it
becomes the equivalent of money that’s
depreciating at an increasing rate and can
actually drop below zero value. Be aware of the
danger and don’t let this situation develop.
Some businesses manage to trade quite profitably
without much inventory at all. "Just in time (JIT)"
manufacturing processes created a whole new
outlook on parts inventories that made
maintaining huge stockpiles of components
obsolete and saved manufacturers a lot of money.
This line of thinking can be successfully
applied to just about every inventory situation.
Using JIT effectively is predicated on having
accurate sales forecasts and that’s the basis of
any inventory management strategy – knowing what
the demand for a product is most likely to be
period by period (say, monthly) into the time
ahead, usually the next 12 months or so. Orders
for components or retail items can then be
placed just far enough in advance to get them
there when you estimate they will be needed. The
need to retain huge inventories was eliminated.
The first step in inventory management is to
have your expected demand figures in place item
by item since, of course, some items turn over
more quickly than others and some will need to
be replenished more frequently.
This sort of analysis can be very revealing. For
instance, look at the age of what’s in stock as
well as how quickly each item turns over and the
search will soon find some real opportunities to
cut down on the number of items there. It’s also
possible to discover some items in the inventory
that haven’t moved for so long they’re virtually
obsolete. So it’s not just the total value of an
inventory that’s important, it’s what it
consists of bit-by-bit.
Now look at the profit margins the business
earns on each item in the inventory. Relate this
to the turnover rate for each item and some
surprising facts will emerge. Finding items that
turn over slowly and generate low profit margins
should ring a huge alarm bell that perhaps these
products can be either dropped from the range or
sourced from suppliers "on demand".
Inventory on its own doesn’t sell itself.
Certainly a business wants to be able to provide
its customers with fast moving, high margin
items with the least possible delay, and that’s
where the focus should be. In most SMEs the
"80/20" law applies to the products they sell –
80% of the turnover comes from 20% of the
products. It makes sense to have those 20% of
products dominate your inventory and find
alternative ways to handle the less important
80%.
If an organization’s inventory is made up mostly
of those "80%" products it’s time to do some
housecleaning. All they’re doing is depreciating
from year to year and that capital could be
better employed in selling more of the 20%
products. Liquidate them and free up the capital
for more productive uses. They can always be
repurchased when and if required.
The desire to hold a lot of stock so as to
maximize sales opportunities is a real trap. It
even has a name – the "chasing the last sale"
fallacy. If you usually sell 100 pieces of Item
x per month and you are stocking 120, just to
capture the last sale, then you have added 20%
to the amount invested in inventory. Factor in
the annual carrying cost of the extra inventory
(often as high as 20% to 30%, depending
primarily on the obsolescence risk), and that
last sale is not nearly as profitable as you
might think.
Always keep in mind that an inventory represents
cash you can’t use. It’s not cash in the bank;
it’s cash that’s been invested and which needs
to generate a return as quickly as possible.
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The Trade Show And How To Use It
Trade shows are a part of every industry. They
can sometimes seem to be no more than expensive
gabfests or very high cost networking
opportunities with no hard core business
purpose. They also take business owners and team
members away from the office and diminish their
productive hours.
But used correctly trade shows can be valuable
relationship builders. Some are definitely going
to be better at providing real business value
than others. How can you make the most of the
opportunities they represent?
As seasoned exhibitors know, trade shows are
almost never going to be a lucrative short term
investment in time and resources. They’re about
contacts rather than contracts. Many B2B trade
shows actually prohibit selling on the show
floor.
But even if it’s impossible to close a deal
while so much is going on around you, a trade
show can set the stage for gaining work later
on. A lot depends on the way the show is
organized and the professionalism of the
organizers.
Rob Clifton-Steele of the Jai Yen Investment
Group had this to say: “I have found the most
productive trade shows to be those where
appointments are made in advance with interested
buyers for 15 minute information sessions …By
the end of the day one has spoken to 30 or so
qualified contacts and has handed out materials
to any passers by who show interest. Such shows
are exhausting but produce good results.”
Doing some research about the show can pay big
dividends. A show that’s targeting a mixed
audience of trade and consumers is probably not
going to cater for the serious businessperson.
It’s also advisable to choose a show that’s
established itself over a period of at least
three or four years.
Trade shows offer a number of opportunities to
raise your firm’s profile if you’re willing to
spend some money. Displays are the heart of most
trade shows and a good display will attract the
right kind of prospects.
One Canadian consulting firm found the best
results came from having a display that didn’t
give everything away on the outside – delegates
to the show had to come up and ask about the
firm’s services, which they did because of the
way the display was constructed.
Another proven display technique is to have a
monitor or other visually attractive object set
up at the back of the display to draw passers-by
into the area where the selling content becomes
visible.
Keep your display relevant to the theme of the
show. If you’re exhibiting in the hopes of
adding new automobile dealerships to your client
list find a way to prominently incorporate the
word ‘Dealers’ and an automotive graphic in the
display.
The golden rule for exhibiting is to never set
up a display that looks cheap. The appearance of
your display is how delegates to an exhibition
will remember you. It’s better to not exhibit
than it is to try and do it on a shoestring.
Many trade shows incorporate workshops –
breakout groups that focus on specific areas.
You can sponsor or even take part in conducting
a workshop if there’s a relevant place for you
in it.
There are other little things every trade show
participant should do. Always have a handout
with your name and contact details on it. Make
it something that the delegate will keep after
the show. Make sure your display is staffed at
all times by your most enthusiastic team
members, and get the details of all contacts
made at the show for follow up later.
Finally, if you do decide to take part in a
trade show don’t forget to tell all your clients
about it. If possible send them complimentary
admission passes, often available to exhibitors
at reduced or no cost. You never know who’ll
show up!
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