The phone rings. A family business owner is on the line, speaking to me frantically and all panicked up, as he/she just realised that the business does not have the necessary cashflow to finance the commitments it entered into. Before calling me he/she called their bank for financing and the bank replied that they need a cashflow forecast or a fully fledged business plan. Hence the panicked call. You realise the core issue is the lack of strategic planning.
Why did the business enter these commitments with suppliers or other stakeholders (it could be on new projects) without planning things carefully to make sure that all the financing required is obtained in good time? I had outlined the reasons for the lack of strategic planning in a Blog Article I wrote last year, which I invite you to revisit. However one of the core reasons is that many family business owners stretch themselves thin dealing with daily operational matters and do not give priority to creating first of all a system of financial and KPI reporting and then dedicate time to analyse and use this data to plan accordingly. Which is why many family businesses seem to be constantly under water, acting in a reactionary way, plodding along from one crisis to another.
This leads me to a notion which seems to be rather popular amongst various business owner and which I call a false myth. Many believe that especially in turbulent times, whereby things are changing from one day to the next, using time to engage in strategic planning and budgeting, is a waste of time, as things are changing so fast, that the drawn out plans would need to be changed the minute they are set out. Needless to say, this is just a false way of thinking, intended to find an excuse for not engaging in strategic planning. It would be like saying that a ship’s captain would better not plan his route and the course he is undertaking just because he is sailing choppy waters. The truth is that the more things are difficult and turbulent, the more time needs to be invested in making sure that all important strategic and KPI data are being reported in time and plans setup and updated accordingly, to understand where the business is heading and if any agile changes need to be implemented.
This will be one of the topics that will be discussed during the FREE online event that is scheduled on Tuesday 8th March at 6pm to discuss matters affecting Family Businesses. To register your interest please click HERE.