Edition 152 – Out of the Gate

Welcome to 2019 and what promises to be an exciting year in family business.

In October last year, I presented to a group of bankers my thoughts around the challenges I see family business will face in 2019. I’m taking the opportunity to share those thoughts with you today so that you may be forewarned and forearmed for the year ahead.

1. Obtaining business finance is going to become increasingly difficult. The Royal Commission into the Banking Industry is yet to release its finding. However, you’re already seeing a significant tightening in the home lending market as the banks scramble to de-risk themselves. Business lending is next!
2. Smarter family businesses are going to pool their lending in 2019. They are going to source finance from different banks, rather than remain loyal to a single bank. Similarly, family businesses will source finance brokers to lock in pre-approved finance limits for equipment and vehicles with providers outside their traditional lender. It’s called hedging your risk and it’s a smart move.
3. Trades based labour will continue to tighten. There is already a significant shortage brought about by, in my opinion, the push to have each student finish Year 12 and head for a University Degree. We’ve lost the stream of candidates that used to flow into Trades based apprenticeships when they bailed out of school in Year 10. It’s not going to improve. You need to think long and wide for how to find good talent – not just the usual means of advertising for recruitment.
4. Increasingly, if you’re struggling to attract or hold good candidates, you’ll need to turn to non-financial benefits to keep the good employees on tap, and attract the right candidates to your business. This means allowing extended periods of leave for good staff so they can live their life and work for you too. For others, it’s about incentive based remuneration over and above their base pay.
5. 2019 will be all about evolution, not revolution. Minor tweaks in products, services and the way they are delivered will be undertaken by the smarter family businesses. Those family businesses that go for revolution may find the turbulence is too great for clients, staff and suppliers.
6. Succession in family business will increasingly become an issue on two fronts – firstly, whether or not the next generation actually wants it and secondly, if they do, how they can fund it in a tighter lending world. Earlier conversations and longer lead times mean there is a higher chance of success with succession. By longer lead times, we’re talking years, not months.
7. Political uncertainty brought about by the shenanigans in Canberra is going to continue in 2019. There’s going to be a Federal Election before mid-year. Elections always involve people keeping their hands in their pocket. That means if you are a retail based business, the first six months of 2019 are going to be bumpy.
8. Family businesses that succeed and are profitable will be those ones that are defining, implementing, reviewing and refining their business strategy. It’s not just about what you do – it’s also about what you don’t do that will help to determine the success of your business in 2019. Don’t take on business that isn’t in your wheelhouse.
9. Family business owners that take the time to put their feet up, switch off their phone and emails, and consider what their business could be like, are the ones that will create forward momentum in their business. The day to day in business is like driving in peak hour traffic. You need to find the business equivalent of an early Sunday morning where you take your favourite car out for a spin before anyone else awakes from their slumber.

This Weeks Tip

In summary, it’s about finance, strategy, skills and the business environment – all of which are “eyes-forward” focussed, not looking through the rear vision mirror.