- To encourage an SMEs-friendly environment
- To remove unnecessary bureaucratic processes
- To provide adequate training
- To have an access to capital and focussed support programmes
Support by Maltese Authorities
Malta’s commitment in helping SMEs and family business is shown in the joint efforts of the Ministry of Finance and Economic Services, the Employment and Training Corporation (ETC), the Institute for the Promotion of Small Enterprise (IPSE) and the Small Business Unit (SBU).
The main initiatives in creating a more user friendly environment for SMEs and family businesses were: the simplification of the trade licensing process by the SBU, the creation of training programmes that are specialised for first time entrepreneurs by the ETC and the introduction of business set-up facilities and specialised assistance programmes for start-ups by IPSE.
Furthermore, the creation of the Malta Enterprise continues to provide support services to these enterprises. The Malta Enterprise brings together the Malta Development Corporation (MDC), Malta External Trade Corporation (METCO) and the Institute for the Promotion of Small Enterprise (IPSE). The Malta Enterprise main tasks are to coordinate the initiatives of these different entities and to form successful projects which help the SMEs and family businesses to compete in an international context rather than just struggling for survival in the local market.
What is a Family Business?
Criteria describing small business are:
- In economic terms, a small firm is one that has a relatively small share of the market.
- It is managed by its owners or part-owners in a personalized way.
- It is independent in the sense that it does not form part of a larger enterprise and that the owner/managers should be free from outside control in taking their principal decisions.
A family business is a unique form of commercial activity. It involves being your own boss, being accountable for your own mistakes, and to reap the rewards of your own efforts.
A family business is characterized by a couple of virtues:
-
The element of commitment and dedication to the business. This tends to be total and uncompromising.
-
Loyalty. The owner-manager looks at his/her workers as members of the family business and worries about their welfare and future when the business goes through rough times.
When properly managed and looked after, the workers consider themselves as part of the “family business” and they tend to reciprocate in full the care and trust that is vested in them by the owner-manager
Small family businesses are rarely unionized and disputes are settled in a person-to-person manner.
Burns (2001) mentions reasons for starting up a family business. These are:
- Trust between family members
- Motivation tempered with the recognition of risk of having only one source of family income
- Support and friendship between family members
Conflict is most likely to arise in making decisions. Thus, clear role definition and a separation between work and home are important.
Nelton (1986) suggested that successful teams shared the following characteristics:
- Marriage and children came first
- The partners had enormous respect for each other
- There was close communication between partners
- Partners’ talents and attitudes were complimentary
- Partners defined their individual responsibilities carefully
- Partners competed with other companies, not each other
- Partners kept their egos in check
Advantages and Disadvantages of Family Business
Leach (1996) lists seven advantages of family firms which are: commitment, knowledge, flexibility in time, work and money, long-range planning, a stable culture, speedy decision making, as well as reliability and pride.
Van Voorhis K.R (1980) mentions some other advantages:
- Personal dedication to customer service
- Short communication channels
- Closeness in employee relationships
- Flexibility in changing directions
- Specialization in products and services
- Personal knowledge of market
- Low overhead costs
- Ease of entry and exit
- Community interest and involvement
- Profit incentive versus salary
The same author also lists some disadvantages of family firms:
- Inadequate technical or managerial capabilities
- Heavy and sometimes irrational competition
- Insufficient financing of operations
- Misuse of time and resources
- Problems with labour and suppliers
- Inability to keep abreast of environmental changes
- Confusion of personal and business relationships
- Uncertainty and insecurity regarding position
The Family Business Life Cycle
The life cycle framework was developed by Churchill and Hatten (1987) to aid the understanding of family business dynamics during the process of succession and transfer of power. The model suggests that changes in management, strategy and control can be planned and executed but are shaped by family relationships and driven by the inexorable human life-cycle. It is a four-stage model that repeats, with increasing complexity as new generations join the firm.
Stage 1 - Owner-managed business
This is the early stage, beyond start-up, when the founder is in control but a son or daughter is introduced into the business on a permanent basis.
Stage 2 – Training and Development of the new generation
This is the stage were decisions are made, although not always formally, about passing the business on to the son or daughter and a process of training and development should be taking place to groom them for their role.
Stage 3 – Partnership
This is the stage where the son or daughter shows sufficient business acumen and expertise that the founder starts to loosen the reins of control, delegate authority and start to share responsibility with them.
Stage 4 – Power Transfer
This is the phase when strategic planning, management control and operational responsibility shifts from one generation to another. The succession power process accelerates as the founder begins to retire and reduces their active participation in the business.
The family business life-cycle
Conflict of Cultures
Whilst family culture can be a tremendous asset for the firm, it can also create the potential for conflict. The problem arises when there are differences between the family and business cultures. Families exist primarily to take care and to nurture family members, whereas firms exist to profitably generate goods and services. In contrast, business culture is unemotional, task-orientated and is based on self-interest. It is outward-looking, rewarding performance and penalizing lack of performance. Conflict between the two cultures is unlikely to start-up but, as the firm grows and time passes, the potential for conflict increases.
Human Resources & Human Relations
Introduction
Family businesses face different challenges from other business, mostly related to their human resources. The biggest challenge faced by small family owned business is succession. Planning is very scarce in these types of businesses, and because of this succession, when it is not planned, it can lead to dissolution of the firm. Owners-managers of small family business do not normally possess any formal HR skills; instead they rely on their personalities for their industrial relations.
The human capital marketplace remains highly competitive and is poised for enormous growth in the next 10 years, since companies around the world are investing heavily in their human resources infrastructure. A company should outsource all non-mission critical aspects of its business. The Placement Consultant Agencies, popularly known as the Professional Employer Organisation (PEO) has sprung up and became well-equipped to take on the entire scope of human resource activity. Most PEO clients are small to medium sized companies that sign up with a PEO obtaining better deals on the purchase of benefits as a group rather than as a single small entity. By contracting with a PEO, small firms can afford to give employees a range of benefits comparable to those offered by larger companies. This helps level the playing field for small companies who are competing with large firms hiring top candidates.
Recruitment and Retention
The correct application of recruitment and retention strategies and methodologies could save a great deal of unnecessary strife and hassle. When a company needs more people than it currently has employed, the next step is to attract qualified job applicants to fill necessary positions. Frankly speaking, the higher and more important the position is, the more elaborate your recruiting and selection process will be. Too many types of businesses have enough “walk-in” applications that come in on their own top fill vacancies and new positions as needed. Even the small business owner should check local requirements for posting open positions with the state employment agency (ETC) to be sure of compliance with the law.
Picking the best employee from several job applicants involves matching qualifications and job requirements. This stage is one of the stages where small business owners frequently make mistakes. The person making the selection decision should have a clear understanding of exactly what performance results are expected from the job holder and the qualifications that appear to predict success in accomplishing these results.
One of the techniques being used increasingly by small companies is the aptitude and personality tests (called psychometric tests). This technique helps small companies to improve selection for new employees and help to improve for self-development by owner-managers themselves.
In the interview that was conducted to Joseph Demajo by Vanessa Macdonald was stated that one of the biggest problems that M. Demajo Group faces is that, they do not have the same skills. They try to raise the lows to the highest level the employees can get, but if the employees do not make it, the Demajo Group will still consider them to be members of the family who deserve equal opportunities. Although the company is one of the oldest family companies in Malta, Joseph Demajo stated that this concept was what kept the family together. In the interview Joseph Demajo stated also that he believes that good people make good companies. This makes him a better person and he will become a better businessman. An important thing that Mr Demajo stated is that although they are a family company, it is acknowledged that they consider their employees to be their extended family.
For many small business owners the decision to get out of business one way or another is the most difficult. It should be no surprise that “letting go” can be seen as a very traumatic event by many entrepreneurs who have made a venture that they have created the focal point of their life. Health, old age, and financial problems are some of the situations that may dictate the end of an entrepreneur’s involvement with his or her business.
A large number of small businesses are family owned and managed. So it is appropriate to begin by considering the common situation of a business owner approaching retirement age who looks at his or her children’s interest and capabilities to see whether one or more can be expected to take over. If no viable candidate is available from within the family, they will promote a long term employee or hiring an outside professional manager.
Cranfield Survey
This survey was carried out in winter of 1989. It was found that 82.7% of owner managers ranked “employing key staff” as either their number 1 or number 2 business problems.
The table below gives some demographic information on the people surveyed.
Business sector table
Leadership
“A small business will need different amounts of leadership and management at different stages in its life and when the environment around becomes more or less turbulent”
(Collin Barrow, 1993:161)
The leadership/ management matrix
High
Amount
of change
needed
Low
High Low
The complexity of the operation (due to size,
technology, geographical dispersion, the number
of products or services)
If the business grows very slowly and stays very simple doing much the same as when it started, only more so, then it will never need very much leadership or management.
Delegation
Few managers realise that paying a good salary and by working harder than anybody else may not be enough to motivate the workers to give off their very best.
Too much work and never enough hours in the day to do it, is a common complaint of the small business owner. This problem can be remedied by some effective delegation. The definition of delegation is that it is the art of getting things done through other people.
- Managers believe that nobody else can do the job
- Sometimes the routine is preferable to the difficult
When small business delegate both owners and employees can get a chance to broaden their skills. Through delegation owner managers can ease their job of managing which can result of an increase in effectiveness.
- The benefits of delegation
- Allows time to achieve more
- Allows time for managerial activities
- Provides you with back- up
- Develops employees’ skills (since employees are likely to realize that they are not learning and gaining experience, they may well leave the firm in order to find a more challenging and supportive environment)
- Increase employee involvement (proper delegation encourages employees to participate more in understanding and influencing their work)
- Benefits for the organisation
- Maximizes efficient output (provides the right environment for employees to offer new ideas that can improve the flow and operation of the work-place)
- Produces faster and more effective decisions
- Increases flexibility of operation (for example when someone is absent or when a crisis requires others to assist with functions not regularly a part of their job, several individuals will already be familiar with the assignment)
- Prepares more people for promotion or the rotation of responsibilities
We can conclude that delegation is a form of risk- taking. If you cannot deal with a few mistakes you will never be able to delegate. On the other hand, when delegation is carefully planned and well executed, it will result in freeing some of your time and also in a more efficient and profitable business.
Investment in Training
One of the problems in small businesses is that sometimes workers are viewed as another source of problem rather than a valuable resource. Owners of small business are often accused of not investing enough in training and upgrading of their workforce. This is because many small businesses face unique capacity and resource barriers to provide worker training.
- Reasons brought forward by owner managers for lack of investment in HRD:
- Training is not generally considered as an investment but as a cost that could easily be done without
- Employers fear that their workers will leave for higher paying jobs with other companies
Many firms, particularly small and medium sized firms, lack experience in using workplace training as a tool for achieving their business goals. They often lack resources and expertise to design and implement a learning plan for their organization and lack access to good information on training, training providers, and labour market conditions.
Communication
Owner managers of small businesses are generally reluctant to share or control day to day running of the business. Instead they prefer to be in the driving seat all the time despite the huge cost they have to pay in terms of personal well-being, family relations and business effectiveness. Due to this employees may feel that someone else is either is not listening to them or does not value their opinion. Today’s workers expect to know what is going on at their company, how their work fits into the whole picture and what the future holds in store.
Owner-Manager Types
Cranfield School of Management has been studying the behaviour of entrepreneurs and their relationship with key staff in some thousands of growing UK companies. Cranfield study has concluded that it is the entrepreneurs themselves who are the most likely to be the biggest stumbling block to the growth and development of their own company.
Cranfield grouped entrepreneurs into four dominant types of relationship with their staff, mainly: Heroes, Artisans, Meddlers and Strategists.
Past Cranfield studies shows that most small firms do not think very much about their future strategy. In fact, less than a third of small and medium enterprises across Europe set their objectives in terms of profit and margins. This is somewhat surprising as profit and profitability are the key measures of business success. However, as over two-thirds of owner-managed companies with a turnover of £10 million do not have a plan at all, it should come as no surprise that few entrepreneurs are strategists.
Other research has uncovered the shocking fact that 60 per cent of senior staff in small firms leave within two years of their appointment. Some of these early departures can be put down to poor recruitment.
The researchers studied two important elements of this relationship. The first element studied was how much time the owner-manager spent on routine management tasks such as marketing, selling, analysing figures, reviewing budgets or arbitrating between managers. The second one examines what level of business skills has been attained by the key staff.
Heroes
Probably the Heroes undertake one management function such as sales or production. The Heroes’ time is now spent on managing the business. As the level of business skill throughout their employees is still relatively low, the Heroes will take the lead in starting routine management procedures. They will introduce ideas from the courses they attend to the firm and be the only persons who really understand them. That is the reason why they will be considered as Heroes from the rest of the employees.
Unfortunately, this leads to the Heroes taking the Herculean role on their hands. In this case, allocating operations to the employees is relatively simple as the working skills in most businesses are either readily available in the local community or the people can be trained up without too much difficulty. On the other hand, passing out routine management tasks will almost always require that the owner or manager trains up his own management teams.
There are few well trained managers available to the small company because of two main reasons. Firstly, the overall pool of such people is small as training in the small business sector until recently has been almost exclusively concentrated on the Entrepreneur. Secondly, well trained managers usually seek jobs in larger firms with more opportunities for advancement and more resources to practice the "art of management" on. The Heroes have a high capacity for improving the firm performance but still have low growth prospects when compared to their market. They have no time for strategic thinking and no depth of management to handle growth effectively.
Artisans
In the Cranfield model, the Artisans are characterized by low occupation with routine management tasks. The reason is that most of their time is spent producing a product or delivering a service. The level of business skills in the company is also low as most of the Artisan's staff is employed helping in "production" or performing primary duties, such as book-keeping or selling. Artisans can include professional firms, such as architects and surveyors, manufacturers, sub-contractors or small building firms, owners of small retail chains such as chemists, video stores and proprietors of hotels and restaurants.
Little time is available either for routine management tasks such as examining performance or reassessing methods. Every hour that can be sold is sold and little time is left over to either improve the quality or profitability of today’s business or to consider strategy for tomorrow.
The Artisans have low growth prospects in relation to their market. Their training and development needs are to raise their awareness of the management significance as a business task of equal importance with daily revenue earning.
Meddlers
The Meddler increases the level of management skills either by training or recruitment but then fails to delegate routine management tasks. At this stage, according to the Cranfield model, the owner-managers probably have no operative responsibilities and have assumed the role of managing directors. Typically, they spend much time anticipating subordinates, introducing more refined, but largely unnecessary management systems. They also go on courses or read books that make them even more well-informed and sometimes better at routine management tasks than their own employees, who anyway are by now doing a perfectly satisfactory job of managing today’s business. They get in early and leave late and practice "management by walking about".
The Meddlers’ problem is that they cannot delegate routine management tasks because they feel useless. They have been used to a 70-90 hour week with only 10 days holiday each year. Once their management team is in place and trained, they are out of a job. Until they reduce their involvement with routine management tasks, they will limit the growth capacity of this firm for two reasons. Firstly, their management team will not take on more duties if the reward for taking on the last lot of responsibility was being irritated and criticised. Secondly, they are too busy checking on people to develop sound strategies for growth.
Strategists
The Strategists are the most desirable type of entrepreneurs to develop a growing business. They develop the management skills of their team to the highest appropriate level and in depth. They may introduce a staff duty to help their line managers in such areas as personnel and market research. This will free-up their key managers to think strategically too.
They will dedicate roughly a third of their time to management tasks such as monitoring performance, co-ordinating activities, resolving conflict and helping to manage today’s business. A third of their time will be spent motivating, counselling, developing management teams and helping them to manage change. This activity is aimed at improving the existing business. The final third of their time will be devoted on developing strategic thinking to form the shape of the future business. Their training needs will be to continuously update their core leadership and motivation skills and to increase their depth of knowledge on strategic issues, acquisition or divestment activity and financing sources.
Relationship between the Owner-Manager and His Key Staff in a Growing Firm
The natural path of development for the relationship between the owner-manager and his team is to pass from Artisan to Hero to Meddler and for the lucky few to become Strategists.
Why Family Businesses Die
The family business is deeply rooted in the sense of pride of the owner like most of other forms. Schein (1998) said that this is reinforced by a desire for autonomy which forms part of the five “career anchors”. This becomes possible with the combination of vision, energy and dedication.
Moorman and Halloran (1993) stated that there are more businesses that fail than they succeed in this competitive market place.
Twenty-four from one hundred start-ups fail in the U.S., within the first two years and more than sixty within the first six years. This happens due to lack of planning and preparation which is the most common reason. The second is the lack of creativity which is important to survive. Some businesses offering the same product may succeed because they are doing something better and more innovative than competition. The “Copy Cat” approach lacks creative skills to turn its product into a unique selling proposition. This can be harmful for family businesses.
Dun and Bradstreet outlined these main reasons for failures:
- Inadequate sales
- Competitive weakness
- Receivables difficulties
- Heavy operating expenses
- Inventory difficulties
- Poor location
- Excessive fixed assets
- Other problems indicating poor judgement
The diagram shows that just as with the business success, there is also a recipe for business failure.
The ingredients for failure
Eight personal characteristics that are found in owner-managers of failed firms that are stated by Larson and Clute (1979) are:
- Exaggerated opinion of business competency based upon knowledge of some skill
- Limited formal education
- Inflexible to change and not innovative
- Use of own personal tastes and opinions as the standard to follow
- Decisions based upon intuition, emotion and non-objective factors
- Past, not future-orientation
- Limited reading in literature associated with the business
- Resistant to advice from qualified sources but, paradoxically, accepts it from less-qualified
Larson and Clute (1979) listed nine managerial defects of failed firms:
- Inability to identify target market or customers
- Inability to delineate trading area
- Inability to delegate
- Belief that advertising is an expense not an investment
- Only rudimentary knowledge of pricing strategy
- Immature understanding of distribution channels
- No planning
- Inability to motivate
- Belief that the problem is somebody else’s fault and a loan would solve everything
Goodman (2000) said that family businesses are less concerned about growth and more concerned about losing control and getting outside funding. Family businesses are more concerned with stability. Caution is an important characteristic and forms one of the pillars of the economic stability. Family businesses due to their tendency of self-reliance expose themselves less in experimenting on new products. This does not mean that they do not look for new opportunities.
Family Business in Malta
“Preparing to pass the family business on to the next generation is perhaps the toughest and most critical challenge facing the business owner.”
[Mark Camilleri, n.d.]
No one is interested in the success of a business as much as its owners. Success of the business goes beyond the present generation. Owners die but the business goes on. Family firms have some of the strongest brands in business today, like Mars, Lego and Levi. Locally, amongst these, there are Farsons, Demajo Group, and Corinthia. In Malta, the majority of businesses are family businesses, most of which are micro that is employing less than ten persons. The contribution of these firms is very important to the Maltese economy. The smallest firms make up 85.8% of the enterprises in Malta (Malcolm Aguis, 2001).
The traditional activities of a family business are farming and fishing. Moreover, the most predominant business activities have been trading and retailing. Manufacturing activities were more limited to the crafts sector. However over the past 40 years, there were rapid changes which led to the economic development. The rise and growth of tourist industry led to do business in hospitality and entertainment. Due to this there was a shift towards a service-oriented economy. Other sectors which are growing fast include business in financial services, communication and information technology. This is giving rise for family businesses being run by highly qualified professionals.
According to the case study, the latest official published data suggests that there are 23,781 small and medium-sized firms operating in Malta, of which 22,523 (94.7%) employ less than ten persons. This can be clearly shown in the table below.
Table: Micro, Small & Medium Sized firms in Malta: By Size and Economic Sub- Sector
A medium size enterprise employs fewer than 250 employees and has either an annual turnover not exceeding €50 million or a balance sheet total not exceeding €43 million. A small enterprise employs fewer than 50 employees and has either an annual turnover not exceeding €10 million or a balance sheet total not exceeding €10 million. A micro enterprise employs fewer than 10 employees and has either an annual turnover not exceeding €2 million or a balance sheet total not exceeding €2 million.
There are two extremes of this spectrum of SMEs. On one hand micro and small firms are engaged in traditional trading cultures. These got used to operate and thrive only in highly protected environments, especially from governments. While on the other hand, there are some truly entrepreneurial initiatives whose drive, vision, creativity and willingness to risk offer the right tools for successful and competitive new generation of business activities. Such enterprises are penalised by limitations of small market economy, insensitive bureaucracy and business friendly banking system.
In his article, Mark Camilleri, refers to a study analyzing the challenges of succession in small Maltese family-owned businesses. The main findings of this study were that:
- There is no distinction between ownership and management
- Long term planning appears to be a very scarce resource in Maltese family enterprises
- Owners/managers are still very well ingrained in the position and they have not thought of ways in which they can gradually let go and transfer their role to their children
- Balance between the family and the business priorities is the secret formula to success
- Female members are excluded from the succession of a company simply because they are females and because traditionally, the inheritance goes to the eldest brother who might not be the most competent
A number of initiatives have been launched to aim challenges of restructuring and of business development. Institute for Promotion of Small Enterprise was established to facilitate restructuring of the Maltese enterprise. It assists local SMEs to be more competitive, as well as, stimulating and supporting them. IPSE is endeavouring to bring about a badly needed cultural change amongst local entrepreneurs. It also promotes the creation of new enterprise and the growth of existing ones.
IPSE provides various programmes that foster a stronger entrepreneurial culture. At the enterprise level, IPSE offers assistance to start-up operations through counselling and financial assistance, including an attractive Loan Guarantee Scheme that facilitates the enterprise’s access to capital. IPSE networks with professional bodies and organisations that assist the promotion of entrepreneurship through education and other means. These include among others Young Enterprise, ETC, the University, Federation of Industry, the Chamber of Commerce, the Malta Development Corporation, as well as MCAST.
The Business Incubation Centre, also set up by IPSE, provides a range of business facilities to start-up enterprises in various sectors, such as information and communication technologies, renewable energy resources, biotechnology and so on.
IPSE launched a number of sector studies including furniture, jewellery and printing. The studies revealed the following characteristics of Maltese enterprises:
- Low productivity
- Insensitive to market demand
- Poor standards of design and quality
- Product rather than client focus strategies
- Wide portfolio of products (lack of focus)
- Virtually nonexistent marketing policies
Moreover it was discovered that most micro and small firms are under capitalized, poorly managed and sometimes also resistant to change. The problem is the loss of how to manage change, due to poor planning and strategic thinking.
Acting on these sector studies, IPSE embarked on a number of strategic action plans which gave rise to effective and successful initiatives. These include:
- Setting up of trade association
- Formation of export consortia
- Creation of new programmes of assistance for start-up enterprise
-
Creation of new programmes of assistance for “proximity or village-core enterprises”
-
Publication of a “road map” offering simple guidelines on how to set up a new business
- Publication of simplified business planning handbook for start up enterprise
- Creation of specialised training courses designed to provide small entrepreneurs with basic skills in business planning and management
- Introduction of mentoring services to hand-hold new entrepreneurs through the crucial initial phase of their business
- The facilitation of access to capital through Technology Venture Fund and Loan Guarantee Scheme
SWOT Analysis
A SWOT analysis is a useful tool to account for, not only for your own business but for your competitors' activities and current industry happenings as well when conducting strategic planning for any company. It provides an insight at a point in time, providing different pictures depending upon what it is focused on. A SWOT analysis allows you to focus one view on the business as a whole; another view of one operating division; yet another view of one sales territory.
The term SWOT stands for strengths, weaknesses, opportunities, and threats. Completing a SWOT analysis helps any business in identifying ways to minimize the affect of weaknesses in your business while maximizing your strengths.
Basic SWOT Analysis
Strengths - Think about what your company does well. Some questions to help you get started are: What makes you stand out from your competitors? What advantages do you have over other businesses? It is important not to be modest; one of the strengths you take for granted might be something that your customers do value and that your competition does not have.
Weaknesses - List the areas that are a struggle for your company; things you do not have, things you cannot do, things you do not do well. Some questions to help you get started are: What do your customers complain about? What are the unmet needs of your sales force? This is time for brutal honesty - you cannot fool yourself, it is for your own sake and your business.
Opportunities - Traditionally, a SWOT looks only at the external environment for opportunities. Here one has to look externally for areas your competitors are not fully covering, then go a step further and think how to match these to your internal strengths. Think in terms of what would benefit your customer - cheaper, easier, more convenient, faster, etc. Try to uncover areas where your strengths are not being fully utilized. Are there emerging trends that fit with your company's strengths? Is there a product/service area that others have not yet covered?
Threats - As with opportunities, threats in a traditional SWOT analysis are considered an external force. By looking both inside and outside of your company for things that could damage your business, however, you may be better able to see the big picture. Some questions to get you started: Are your competitors becoming stronger? Are there emerging trends that amplify one of your weaknesses? Do you see other external threats to your company's success? Internally, do you have financial, development, or other problems?
Strengths of family business
Individuals set up their own business for the simple reason to make more money. This is because when working within a firm the only return you will get is the pay at the end of the week or month, but when working for your own business the return you will get back depends on how well you are doing in your business. Therefore the owners of businesses tend to work much harder for the simple reason that success will be at their own benefit, i.e. a higher return.
Since the business is your own and you are the boss you will manage the business your way; the way you like and you will be more committed on the place of work since you will have a personal interest in the business since it is your business.
One can mention as well the fact that you will be your own boss. Since it is a family business you will be the boss and you will receive orders from nobody, therefore no one will be making pressure on you on how to manage the business.
Another point one can mention in family business and which is a strength to the business is the fact that one will choose an area which satisfy him and therefore he or she will be working in an area he or she enjoys doing. Therefore this helps the business to be more successful since the area chosen is of his or her interest (i.e. the owner).
Strength of a small family business which can be an advantage to the country as well is the fact that such business is going to generate jobs for that country where the business is set up. Therefore these businesses increase the workforce of a certain country and reduce unemployment.
Since the business is run by the family, decisions are carried out quickly since in a small business one does not find organizational charts and there would not be so many people involved when they come to decision making.
Weaknesses of Family Businesses
It is hard for such business to set up because of the capital required to set-up such business. Sometimes these people may find problems when they come to deal a bank loan, because banks’ attitude regarding small businesses considers it to be too risky.
Another weakness small business can face is the lack of cash. This can be due to the late payments by your debtors, where at times they take long to pay you, and you will spend time and money chasing them before receiving the money, and you will end up making a loss instead of the profit you thought you would do when selling them your products.
Another issue one has to consider is the fact that one cannot keep family issues out of the business, and this can be a serious threat to such business. Family issues have to be left outside the company and should be kept within the family in order to leave the least effect on the business.
Opportunities of Family Business
The external environment may reveal new opportunities. These opportunities may include an unfulfilled customer need, the arrival of new technologies, loosening of regulations, and the removal of some international trade barriers. However, it is up to the business owner to be able to take full advantage of these opportunities. You should be able to discover what the customer really wants, and be able to satisfy him. Exploit any loosening of government regulations, take advantage of any mergers, partnerships, joint ventures, etc. These can lead to more profits, due to better management, better marketing, etc.
Threats of Family Business
Here one have to mention that family businesses at times are not appreciated amongst the authorities and the general public of the country where they are situated. One has to say that small businesses help both the country and even the general public. They help in creating new job opportunities, thus improving the situation in the job market and solving a number of serious social problems. Another threat could be that people would not demand local products, but might prefer to buy foreign products; therefore these businesses can end up with low demands.
Conclusion
A firm or business, whatever its size, being a large multinational company or just a small family business, needs to adjust to changes in its respective industry or market. If a company does not adjust then it would be risking to loose track and fall. If a competitor decides to move for something else within the market and takes your customers, then you should follow your competitor’s tracks and try to provide something which could better attract customers. Never lay back, it could result in serious problems - problems which could lead to closing down your doors.
You need to be good at recognizing phases of growth and managing your way through these phases. This could only be done by getting a hand at achieving up to date and accurate information about every aspect of business from marketing to human resource management. The creation of a more enterprise-friendly environment through the removal of excessive bureaucracy and a better use of resources would help to better make your way through. Becoming a better thinker and planner, be able to give an ear to others’ experiences, and be able to reflect on your clients’ needs, are necessary issues to become the entrepreneur you really need to be.
Reference
Agius, M. (2001) An analysis of the perceived causes of small business failure in Malta. Unpublished B. Acc. (Honours) dissertation, UOM.
Burns, P. (2001) Entrepreneurship and Small Business. New York: Palgrave.
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