Outsourcing is smart strategy for growing a family business. It can be a critical step in professionalizing the management style of a family-owned business.
“Two secrets to successfully growing a family business is the professionalization of the management system and the formalization of the family’s communication system", according to leading family business expert
"Outsourcing enables a family business entrepreneur to "demand grow" the family's business. Outsourcing strategies avoid the "cash crunch" associated with internally staffing up to meet the sales, operations and administrative support required to grow a successful family business, quickly."
"Outsourcing can also be a survival and recovery strategy if your family business is impacted by hurricanes, flooding, fires, tornados, etc.)
Schwerzler has been studying and advising family business entrepreneurs for more than 40 years and he is the founder of the Atlanta-based
Family Business Institute
Professionalizing the management system of a family business means moving away from an “intuitive” or entrepreneurial management style – to a management style that depends more on information and planning to make decisions.
Investing and building the infrastructure of the business is also a critical requirement for successfully transitioning the family business from one generation to the next. In fact, we often find that managing the outsourcing strategies is an excellent responsibility to assign to the
Digital Technology tools are now available that enable family businesses to re-vision how they organize and management their business. Digital transformation by outsourcing basic business functions is more than a survival strategy for family businesses - it is a strategy that can ensure future growth in size and profits.
"Administrative services" was one of the first business functions to engage outsourcing strategies. To illustrate some of the benefits, we take a closer look at payroll processing.
"One area where family business owners often consider using outsourcing is payroll processing. Administrative overhead is tough to control – and assigning the payroll processing function to a professional service provider offers immediate tangible benefits, including compliance with tax laws, confidentiality for the family’s payroll, cost reduction and convenience," suggests Schwerzler
The IRS, Social Security Administration and Department of Labor all have special regulations for family companies. An important component of any payroll processing service is that the tax payment service guarantees that all federal, state, local, and unemployment taxes are paid accurately and on time.
The confidentiality feature of cutting-edge payroll processing systems allows the family business owner to delegate the payroll responsibilities to a non-family member without worrying, keeping the family’s personal information from becoming common knowledge amongst other managers and employees. Most family business owners know that the payroll cycle can control their schedule – the business owner has to be present when the payroll is being processed to ensure confidentiality of the family’s payroll information.
By using outside resources, outsourcing, for payroll processing, the family business can enjoy the benefits of an entire payroll department for a fraction of the cost. The processing company gives the family business owner the financial reports and information /s/he needs to manage the business in an accurate and timely fashion.
By using outside experts to do payroll processing, the family business owner the convenience and peace of mind that once the hours are reported, the payroll processing company takes care of everything else. All of the vital payroll information, reports, and checks are sent next day via UPS or email delivery. The top level payroll processing firms also provides the added convenience of integrating with other employee benefit service providers, including retirement providers, QuickBooks, POS systems, and time clock systems.
"Outsourcing payroll and other administrative programs can be a very smart strategy for family businesses," notes
, our family business security expert. "Using an outside resource will create a better 'check and balance system' against internal fraud."
When a family business entrepreneur asks for our help to support the growth strategies of their family business - and who wants to maintain healthy family relationships, the first step of our engagement is to conduct a
Family Business Assessment.
that will enable us to better understand the business and the family dynamics - and to identify those areas of the family's business that can rapidly increase the growth and profitability of the business.
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