Theft in a Family Business

There is a great article in today's Financial Review ( Oct 17th ) written by Mark Fenton-Jones.
It relates to theft by a family member in a family business. I have seen this first hand in my own business and it caused the company to fold and the two remaining partners lost many thousands of dollars. One of our partners, who was also our internal and external accountant, suddenly went missing and was found overseas and eventually died. The money was never recovered.

When a family owned enterprises is faced with this situation it can ruin the business or it can take months to recover. The fraud usually occurrs where there is lot of cash involved or where someone has control over the accounting system.

My experince in another family business is a lesson for everyone. I asked the owner of this business if he really trusted his bookkeeper. Trust her with my life was the answer. I had been called in to develop a business plan going forward. All the signs were there to cause me concern. However the owner of this family business got very angry with me when I questioned the honesty of the lady concerned. He would not accept my warning and I was given the short shift. Later he found that she had taken well over $400,000. No wonder his business had cash flow problems and he had to finance his debtors.

Family business must implement strong systems and processes and never assume that everyone will do the right thing. No matter your size, use external people to audit your accounts on a regular basis.

Finally, if a private business has a lot of cash sales and the owners are seen to be taking cash out that's an invitation for staff to do the same.

Bill Winter

Farms and families

I spent the weekend in North East Victoria and the issue of farms and succession was raised in realtion to the next generation and, obviously, the drought and the longer term prospects for family farms.

I am starting to see an increasing theme of the older generation selling off sections of the property to fund their retiremnt and thereby reducing the inability of the next generation to work a sustainable holding for future income and wealth creation. In one example, 800 acres where sold to a blue gum tree investor. Now I can see that any other offer for more land to plant trees will very tempting. As this happens the overall carrying capacity is diminished and the son who is managemnt the farm will also have to consider his future.

The other issue is the tobacco farming community in the King Valley. The industry is closing down, much of the land is not suitable for other food crops due to chemicals used in the past and the economic loss is said to be $90 million to local area. What will happen to the next generation of the families who have been growing tobacco ?

The current drought will only compound the emotional and financial issues faced by many in rural areas.

Some will find an alternative and many other will give up in dispare. There are no easy answers and I feel the frustration when talking to farmers and even more so because I don't have any construction solutions to share.

And, remember that most rural businesses are family businesses.

Bill Winter

New Book on Insights for families In Business

Only last week I finished final latest draft of my next title in my 33 Essential Insight pocket book series.

33 Essential Insights for Families in Business is a snapshot for business owners and the next generations to force dialogue within the family on where to take the business. I know that some founders will be reluctant to acknowledge the facts or be unwilling to accept change. Only the clever ones and those with foresight will take any notice of our insights.

In my youth I was the third in line of five children who were brought up living and working in a family business from the moment we could walk and talk. Our parents owned a hotel in country Victoria, a farm along the Murray river and finally a food and beverage manufacturing compnay in Geelong.

Business and family life were merged together and totally consumed our lives. Unfortunately the business no longer exists even though we have since all been involved in our own businesses in other market segments. Our father was an innovator and could read future trends like no one else I knew, however he could not bring himself to trust any of us and died with his boots on as they say at work.

If he had put just a few of the insights into practice that I have written about in the book, the business would have been able to continue on to great success after he died.

The key contents of this publication were reinforced recently when I attended the Family Business Australia Conference in Queensland and through my work with many successful family businesses in recent times.

Bill Winter

A common frustration for the next generation

Talking to the son of a family business founder last week highlighted a problem I come across too often. It is also an issue that I do not have an easy answer for.
And, its a problem I faced in the late 1960's and early 1970's when working for my own father in his food maufacturing company.

What is the solution for the sons and daughters of family business owners who are what can simply be described as "Do it my way, or the highway " parents. I also believe that these older business owners are guilty of being past masters of winning the emotional blackmail game.

The tragedy to me is that the sons and daughters who work in this environment have sometimes left it too late to move elsewhere and are locked into an emotionally draining work experience.

Their health suffers, their marriage suffers and their children suffer.

In my experince the only way out is to leave. "This is easier said than done" is the response.

A good topic for my next posting