Saving the family business

Discussion in 'Growing and Managing a Business' started by Zzzaxx, Apr 26, 2010.

  1. Zzzaxx

    Zzzaxx
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    My father started a distribution company for a specific line of furniture as a side venture about 35 years ago. It is the sole distributor for the US and is protected by the manufacturer. (a silent, part owner in the distribution company) The company has been suffering a dramatic drop in sales over the last decade. The business is still hanging on, with profits at about break-even.

    Because this was a side venture, my father gave managerial responsibility to the VP, a small percentage owner. My father never paid too much attention to the management practices because they were always making money. When the business started slipping he started paying attention. He has no formal training in management or business, neither did the VP. As such, their management has thrown the business into chaos.

    There is almost no task that everyone does the same way. Employees are overpaid, software and tech is outdated, and implementing new processes or practices meets overwhelming resistance. Strategies such as furlough days, minor software upgrades and new sales programs have been introduced with limited success. As I am finishing school, as sort of a right of passage, I have been tasked by my father with saving this portion of the family business.

    I believe that saving the business will require a complete overhaul of our software, phone system, and staff to reduce time spent on data processing and increase sales presence. Currently we are employing one staff member purely for data processing. This employee is paid far too much for even a sales position and only completes tasks that our accounting program can do such as invoicing, website order entry, statements, and UPS shipping. With sufficient software upgrades, I believe we could effectively reduce the time required to do her job to just a few minutes and reduce our payroll by 37k.

    Our other employee who makes 45k is half data entry and customer service, processing website orders that could be automated, and half sales. She is a good, personable salesperson, but is not conscientious of the fact that time is money. She will often triple check work, spending hours looking for errors that will save us pennies. I feel that if left to do exclusively sales programs, she would be a great asset to have. If she was freed from the tedious task of data entry, I feel that she could boost sales substantially.

    Our current VP and "sales manager" is a do-nothing, passes off tasks to others and about as forward thinking as a car in reverse. He shoots down any ideas that any staff comes up with and squelches creativity. He is unfortunately a part owner in the business and has secured himself as the head of our jumbled, patchwork, IT. I feel that we would be better off without him and could put his substantial salary to improving our servers and software connectivity. I face the problem though, of forcing him out.

    As I have been tasked with saving the business, I would like to make sweeping changes to the business and bring it up to speed with current technology. I think that by releasing our data entry employee and possibly our VP, we could easily afford an upgrade to our current tech that would eliminate thousands of hours of work, streamline almost all processes, and save us a boatload of cash. The problem is that I am low man on the totem pole and implementing such sweeping changes will shake up the company. It is basically a leap of faith that I think I need to take and I need some professional advice on whether or not this is the right step to take. I have spoken with my father about this and he is willing to back me on this idea, (given that I can adequately prove the numbers work) but his lack of formal training prompts me to seek others' help. I believe that his great deal of experience has helped him in some areas, but as an eye witness to his managing style, he does not know it all.

    Any advice is appreciated
    Thank you in advance,
    Zzzaxx
     
  2. Fergal

    Fergal
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    Hi Zzzaxx, welcome to Business Advice Forum, thanks for joining and posting your business questions. The situation the business faces is similar to those currently being experienced in many companies. When times were good and businesses were profitable, it was common place for poor practices to creep into the organisation and for owners / management to become a little laid back. This easy going approach was often most prominent in the area of cost control. Now that times are tougher and profits are harder to come by, these poor practices are being exposed and they require attention, if the business is to survive.

    Is your VP aware that there is a problem, of the requirement to change and the need to tighten your belts? As he is part owner of the business, it would probably be better to work with him, than against him. However, this will be extremely difficult or perhaps impossible, if he does not recognise that there is a problem and is not willing to change.

    I understand from your post that the VP also has the role of sales manager. If that is the case you should ask yourself what will happen to the sales and client relationships that you have, should the VP be forced out of the business.

    Is there a written agreement between your father and the VP? If there is, you might want to check it to see if it deals with the circumstances under which the VP can be asked to leave the business. If there is no legal agreement you would be best served, by getting some legal advice, before taking action to dismiss the VP.

    Overall I would suggest that you write a concise report to present your plans. Ensure that every action on the report is costed and that you know the financial implications of everything you are proposing. Present this report to your Dad and get his views and opinions on it. The business seems to be of a reasonable size, if it has an accountant or financial advisor you should also go through your report and proposals with him or her.

    Good luck with it and please post back with your thoughts.
     
  3. seanstevens

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    Sounds like you have a job on your hands there.

    One thing you need to try to do is look at everything with no emotion. I do some consulting and you always need to be objective. It may be a little tricky given your connection to the company, so my advice would be to write everything down, no matter how small it is. By this I mean document EVERY process from start to end (your ordering process for stock, your quote to cash process, your sales process and everything in between). Once you have done this, read through and make highlight everything that is working well and everything that is not.

    You now have a list of what needs changing, from here you can circle back to who is currently in charge of those processes and know if it is the lax process or the person that is failing.

    Get ready to deal with some tough questions. Are you selling enough? If selling on credit, are you collecting well enough? How many invoices are you processing each month etc etc. You may also want to have a think about areas that you NEED employees and those that could be better done by outsourcing, remember, if it is not a core activity then it can be outsourced so you can concentrate on the key areas until things are improving.

    Feel free to drop in any specific questions..
     
  4. dvduval

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    Going to need to decide who is in charge, and that person needs get feedback, and then move forward with decisions. Part of the reason everything is "stuck" is there are hard decisions to be made that may involve people having their salary reduced or lose their job. That does not alleviate the responsibility. If there are any "drags" on your system INCLUDING family members, you need to take care of that first.

    So, decide who is in charge, get feedback, move forward with decisions, and remove drags on the system.

    Sorry you face this, but hopefully you will feel better by addressing the issues.
     
  5. Zzzaxx

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    It seems like I am on the right track, I just need to finalize my plan and put it into action. I would much rather put a clear, detailed plan together and outshine the VP rather than attempt to dismiss him first. I believe that by proving my worth and severely diminishing his, I will have a much easier time of either A) getting him motivated, or B) dismissing him. Thank for all of your advice.
     
  6. seanstevens

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    Best of luck with it and remember every plan needs to be a living document.

    1. Don't be scared to change your mind if something else or someone else comes up with something that works.

    2. Even an employee who has no motivation is worth listening too. You want to collect all the negative as well as positive feedback.
     
  7. GekiDan

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    I just only know a little about this matter, so what I can only suggest is do a meeting with all your employees and express your thoughts on them. You can also ask them on what they think on a certain topic or problem your company/business is facing. You might hear out good responses from your coworkers.
     

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