Innovative family businesses can weather the storm

These are very testing times for many family businesses across Ireland who currently find themselves at the coalface of the economic downturn, with all of its negative implications. Conor Woods, from Carnaross, an audit and advisory partner with Russell Brennan Keane, chartered accountants and business advisors, has a significant number of family business clients. He said: 'The current environment is undoubtedly difficult and stressful. In many cases, turnover has crashed, businesses are losing money, or running out of cash, the banks are nervous, and creditors are shouting for money.' He added: 'With many family-run businesses, you can have the situation where, literally, the whole family is employed in the business, which can exacerbate the tensions and possible fallout.' For those who feel they are running out of time, perhaps at a loss with regard to what else to do, Woods prescribed a fundamental change. 'They need to reorganise the business, get out selling, innovate, role change, play hardball and, above all, fight back.'   One of the first steps they should take, according to Woods, is to protect their existing wealth. 'They need to decide what they want to pass on to the next generation and they need to differentiate between the family business and personal wealth. What"s called for is a clear strategy. Maybe the business needs a fundamental change in direction, for example, the introduction of a completely new product line, closing down premises and moving online; take a look at improving the business"s green credentials or focus on a completely new market.'      All these options need energy and enthusiasm to drive them forward. In some cases, it may be a good time to pass the business on to the next generation and let them lead the way forward. 'There has never been a better time from a tax viewpoint to pass on the business, as asset values are low. To reduce the risk of the young guns making hasty decisions, get an external advisor on board to assist them in making key decisions,' advised Woods. He continued: 'Even if you decide not to pass on the business or to sell it, an external advisor will provide fresh thinking to help family businesses tackle the current economic environment and to battle your way through it.' For those who opt to fight back, he advises: 'Don"t get completely bogged down in cost-cutting and re-organisation, get out there and sell. Increase your focus on sales by 500 per cent and divert the eneries of key personnel into selling. 'Get your advisors in to brainstorm a fresh approach. Start by getting under the skin of your customers, understand what they want, create new products and services to satisfy the changing market. Put a plan in place, and the necessary resources and timings, and don"t be afraid to innovate.' Woods observes: 'Sitting in offices wondering where the customers have gone won"t make them come back. Instead, go out and get them, and work hard to improve your quality of service. Look after existing customers and make sure that they are 100 per cent satisfied.' With regard to cashflow, make sure debt is under control, manage tightly, ensure there is a weekly update on costs. Try to put direct debit arrangements in place, and if you have to drop your prices with customers, get payment terms approved in return. In today"s economy, cash is not just king, it is the entire royal family. Track business profitability monthly or quarterly and make any necessary changes. 'It amazes me how many businesses don"t know how much money they are making or losing. Report certain key information weekly, ensure that management and, if possible, all staff meet weekly to review the week past, and set clear objectives for the week ahead. Decisive action is called for, so don"t be slow to tighten up costs and reduce waste. But on the flip side, show the same determination in your efforts to innovate and be creative.'