The challenges SMEs and family owned businesses face

It won’t come as a surprise to anyone when we say we’re living in exceptional times where the world is changing at an ever faster pace. Because of trends such as the globalization of one’s competition or the rate at which our lives are becoming digital, many SMEs are finding themselves in turbulent waters. The global competition and the speed at which things change could make the truth of today outdated by tomorrow.

We spoke with Guy Jans, advisor to SMEs and family owned businesses, about the most important challenges facing these companies today. Guy speaks from his experiences as the ex-CEO of a family owned business that eventually got sold to a big multi-national.

When asked which are the most important challenges SMEs and family owned businesses are faced with today, Guy picks the changing economy without any hesitation. These changes can cause problems for companies that look at things through their own history, making them suffer from a certain form of business blindness. As the saying goes, “standing still is going backwards”, leading to inertia.

There is an obvious solution to this problem according to Guy: SMEs and family owned businesses would benefit from obtaining external advice at regular intervals. This can happen by appointing a “truly independent” Board of Directors, Board of Advisors or Board of Counselors. However, when the problems are specific and operationally measurable, one should appoint an external specialist.

These limited investments only make sense when the leadership of the SME or family owned business is open to such “meddling”. To test this, Guy uses the 3M method he developed; installing a Board made up of independent outsiders or seeking external advice will only succeed if leadership is (1) Mentally open to such advice, (2) sufficiently Motivated and (3) has adequately Matured. From personal experience, Guy finds that Mental preparedness is the biggest stumbling block.

A second recurring challenge that confronts SMEs and family owned businesses is not the recognition of a difficulty, but finding a path towards a solution. Most business leaders know when things are not going so well in their business, but often don’t reach the point where they come up with a solution and implement it. Guy Jans states: “business leaders work incredibly hard in their business but often don’t find enough time to work at their business”. The solution to a crisis is too often “work harder” instead of “work differently”. Even in these cases external advice is not used enough; Guy sees the fear of exposure and leaving one’s comfort zone as the main causes.

A third challenge is emphasizing the critical success factors of an organization and as such placing enough emphasize on the specialization (or “unique selling proposition”). Belgians are recognized internationally for being flexible, but this flexibility can become a trap if one loses focus because of it. Guy proves this with an example from his own experience. When he was the head of his family owned construction material business, at some point it was decided to expand the company’s offerings with “do-it-yourself” products. At first this brought more revenue to the stores, but soon the original, professional customers, also the more profitable ones, were no longer happy with the service and got frustrated by the longer waiting times. The decision was made pretty fast to start focusing on the “core” business again and to only serve these professional customers.

Guy recognizes another important factor when it comes to a family owned business’ success. A family owned business can’t be successful if the family is not ”happy”. Because family problems often have a negative impact on the business, it is important to practice ”family governance”. This can be done through the creation of a family charter which holds items such as: the entry requirements for family members to the business and at what wage, what about family-in-law, what about making use of company assets for private purposes, etc. Here also the golden adage keeps hold: it’s better to prevent than to cure. Such a charter must be established long before there is talk of crisis or unhappiness.