Watch for signs of business decline

By Sheon Karol

A family business is subject to the same fluctuations as any other business. Today, especially, the pressures are intense because change happens faster. But an additional element is found in many family businesses: A single dominant figure often exercises effective control. Other family members, even if they have an economic stake, often lack visibility into the family business and feel powerless to do anything but worry.

Fortunately, you can prevent the decline of the family business even if you do not control it. Your ability to sway the controlling family member improves considerably if you understand the dangers facing the business. To do this, you must watch for hints of business decline. These hints occur well before business distress. If the company acts quickly, you can avoid a loss of value.

Among these earlier hints are financial warning signs:
• Appearance of new competitors
• Shift in buying or sale trends
• Increased importance of payment timing
• Deferral of capital expenditures
• Lack of innovation in products or methodologies
• Overreliance on an officer, supplier, customer, channel or trend

There are also non-financial hints that you can discern, such as:
• No new blood in management
• Family or health demands prevent the controlling family member from focusing on the business
• No enthusiasm for finding new deals or strategies
• Lack of desire or resources to take the company to the next level

If the family business responds soon enough, there are a myriad of solutions in today’s economy. The options include:
• Addition or substitution of fresh management
• Introduction of new technology
• Adoption of a new pricing model
• Divestiture of a division
• Sale of the company
• Acquisition of a competitor
• Entry into new markets
• Vertical integration
• Modification of debt structure

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