We found that many family businesses experienced a significant decline in business. With reduced income during the pandemic, family companies need to explore ways to manage company finances.
In maintaining a family business, most use the Family Business Diamond Model to overcome the various challenges faced, especially during the pandemic. One of the crucial aspects contained in the model is financial management.
There are three ways for a family company to manage its finances. First, improve financial conditions by managing cashflow. Second, find new sources of income. Third, managing wealth. Let’s discuss them one by one.
How to Manage Family Company Finances
Improving the financial condition of the family company. The first step that can be taken in improving the company’s financial condition during a pandemic is to regulate cash flow or income and expenses. Companies can do this in the following steps:
Cost Efficiency
Cost efficiency can be achieved by streamlining variable costs in several ways, such as reducing the number of employees (contract/permanent), transportation costs, utility costs, and so on so that there is no shortage of funds. Companies must reduce corporate expenses that have become irrelevant since the pandemic.
Loan Restructuring
With decreased income, loan repayments can become a problem that can be overcome by applying for credit relaxation at the bank.
Liquidation
The company can evaluate the company’s assets and investments. For example selling assets or stopping investments.
With the liquidity of assets owned and managing capital investments, companies can ease loan payments or business operational expenses during a pandemic.
Finding new sources of income
The next step is to find income solutions in terms of business models, target market segmentation and marketing development.
Family companies must act actively and agile in seeking business opportunities as a new source of income in the industry controlled by the company.
This can be done by conducting an assessment or assessment of the capability and capacity both in terms of operational and corporate strategy.
From the results of this analysis, the company can take the opportunity to develop or update the business model.
Then, family companies must also see if there is a possibility to target new market segments with existing products or services.
For example, masks. Previously, medical masks were only used by medical people, but now they can target the general public at all ages.
Meanwhile, from the marketing side, the company currently has to explore new marketing channels to reach customers.
The marketing program must be made in such a way targeting the target customers during the pandemic. For example, using Social Media, Influencer Endorsements, Agents, and so on.
Manage the wealth of the family company
Another step that companies can take is managing family finances or wealth management. Companies must have a family office as a place to manage their finances.
First, all portfolio assets and investments owned by families during the pandemic must be analyzed, managed and developed.
After that, families can carry out financial planning by mapping the need for continued financial management for both the business and also for each family member.
