How To Improve Profit In A Family Business
Whether your family business has been passed down to you, or you have set up a family business with a sibling, parent, or partner, running a family business can have its own set of struggles (in addition to the challenges of any other business).
Family businesses often have to provide financially for more than one person, (ie more than just one business owner) which means that they need to be extra tight on profitability and margins.
A family business can also have a unique type of family politics which also happens, which means that you don’t always have complete free-reign on things like, who to employ (ie you might have to have your sisters child as the admin person even though they are not as effective as someone else might be)
Perhaps your family business was making the same profit when the previous generation ran it and they were happy, but you are not happy with that level of profit and you feel guilty for that.
Perhaps you are not making the profit of the previous generations and you feel like you have done something wrong to put the business in this predicament.
Whatever the reason, it’s all ok, and there is no judgement on it.
But let’s get your family business more profitable.
What Are Money Leaks?
A money leak is cash that is being spent in the business that is neither:
100% necessary to keep the proverbial lights on, or
Delivering a positive return in terms of money or time
These leaks are literally draining profits from your company, and the sooner they get resolved, the more satisfying your take home will be.
In the video below I explain how to identify and eradicate money leaks
Once you have identified and eradicated the money leaks in your business, the next step is to get a cash management strategy in place.
Improve Profit in a Family Business with Profit First
A financially healthy business needs both a transaction management system and a cash management system.
Most businesses have transaction management systems in place with efficient bookkeeping and software like Xero or Quickbooks.
But many don’t have any cash management system in place. That is where a system called Profit First comes in.
Profit First is a book by Mike Michalowicz and it teaches cash management for business. It’s a step-by-step process that minimises wasteful spending in a business to maximise profits and ultimately therefore the take-home of the business's owners.
Profit First changed my business so much that we have been Profit First Certified since 2017.
Below is a video by Mike explaining all about Profit First.
With your money leaks sorted and Profit First in place, you will notice a vast improvement in your family business profitability.
If you'd like a PDF of the core chapters of the Profit First book then click here