Family-owned businesses (FOBs) are built for resilience. However, when these businesses grow to a certain size, the financial cracks can start to show. A lack of standardised processes, integrated systems and directed growth strategies can make it difficult for FOBs to meet their potential. Thomas Sutter, Finance Centre of Excellence, Oracle NetSuite, explains how FOBs need to level up in 2023, taking control of their finances to navigate the challenging times ahead.
Family-owned businesses, or FOBs, have a well-respected and sought-after reputation in the corporate world. Thanks to their strong company cultures steeped in history, they inspire confidence, boast high retention rates and win brand loyalty, with 67% of customers trusting FOBs over all other businesses.
In a turbulent economic period, FOBs are showcasing how they are built with resilience and Business Continuity in mind. They are accustomed to cash-saving and using their resources wisely and tend to show more dedication to their employees’ well-being – especially important with staff now four times more likely to leave an organisation when they have a well-being challenge that is left unaddressed.
Family-owned businesses are therefore well-placed to handle disruption. However, when these businesses grow to a certain size, the cracks in their financial infrastructure can start to show. A lack of standardised processes, integrated systems and directed growth strategies can make it difficult for FOBs to meet their full potential. As well as these financial challenges, often adapting to growth can be a struggle, with less than half of family businesses stating that they have strong digital capabilities. FOBs need to level up in 2023, taking control of their finances to navigate the challenging times ahead.
The tipping point for progress
When businesses have been in the family for decades, it can be easy for financial processes to become stagnant. This causes issues when FOBs try to scale up operations, with a lack of robust infrastructure and processes in place to allow for growth. Gaps can start to appear, and mistakes can happen when teams do not have the right skillsets or technology in place to drive progress or adapt to meet evolving demands.
Often, it is when the second generation or new board members get involved that the tipping point for progress is met. A fresh perspective and a more objective view of company operations can help to identify skill and tech gaps, spark more innovative working methods, and help to bring fresh ideas to the table. These new ways of thinking can require new blood, with external finance talent able to fill the knowledge and skill gaps of existing teams, bringing a wealth of experience from other business models.
Recruitment is an essential step to modernise the business, yet, however strong a FOB’s culture may be, there will always be new challenges and teething pains associated with bringing new talent into positions of authority – especially when it comes to finances. Leaders must ensure that new team members are a good cultural fit and satisfy the needs of the board, as well as having the skills needed to boost progress.
Bringing the outside in
Bringing in a financial professional or external CFO can prove a crucial step in FOBs’ growth strategies. As well as looking to enhance processes, metrics, tech, and compliance, finance professionals often offer an alternative strategical perspective. They can highlight areas where money is wasted or identify revenue opportunities, as well as improve systems or processes and ensure that they are aligned with company operations.
Family-owned businesses need their external talent to handle multiple priorities consistently, tracking performance, success and areas for improvement. With a new laser focus on the finances, FOBs can bring macroeconomic indicators, such as energy costs and unemployment numbers, into the conversation. Equipped with this wider range of data, finance leaders can build a clearer picture of cash flow and revenue potential.
Bringing in a finance professional with the acumen to watch and interpret a wide variety of metrics that impact the business can provide a vital competitive advantage. Interpreting data across functions such as supply chain with inventory management and forecasting, and sales with sources of customer interaction, allows CFOs to create and track against new KPIs that drive increased performance.
Finance professionals need the best tech for the job
The benefits of bringing in new finance talent are evident – however, they cannot do their job properly if they do not have the right technology behind them. As family-owned businesses grow, move into new geographies and build new online ordering processes, they need solutions in place that can track performance and allow them to keep on top of all moving parts.
External hires usually bring IT and tech-knowhow with them from other organisations and can make recommendations on the best tech for the job, adept to using different types of software or working methods to enhance operations. For example, moving to a cloud-first strategy or bringing a managed IT services provider onboard are vital to make the work of the finance team easier and bring organisation-wide benefits. FOB leaders know that tech will help the company grow – they just need help selecting the best tools and implementing them effectively.
External hires can help leaders to level up their enterprise-level accounting system, incorporate enterprise resource planning and human capital management solutions into their arsenal and offer advice on future upgrades. For instance, an ERP system can automate accounting operations and enforce strict approval mechanisms, making transactions more secure and removing the burden of repetitive data entry from finance professionals. Effective automation can also have a big impact on a FOB’s financial performance. For example, 65% of businesses that have incorporated Artificial Intelligence (AI) into their strategy and corporate finance function report an increase in revenue.
When family-owned businesses start out, everyone pitches in across different functions of the business. However, as the company grows and finds success, FOBs must address skills gaps and look to external finance talent to fill the void, helping to navigate new challenges and bring new ways of working. With the right combination of finance professionals, technology and automation, family businesses can maintain the high levels of trust they have with their customers, while driving the revenue and growth needed to survive in 2023.