No matter what business you're in, developing an international market "isn't just more of the same," says Peter Cherry. As chairman and president of The Cherry Corp., an international supplier of electrical switches, keyboards, displays and semiconductors doing business from Asia to Eastern Europe, Cherry should know. And for a family business in particular, going global may pose additional concerns:
Worry #1:How will increased capital demands affect the family shareholders' needs for liquidity?
It's expensive to do business abroad, says François de Visscher, a family business consultant in Greenwich, Connecticut, who specializes in liquidity and capital issues. "But because some family businesses are jeopardized by international corporations making incursions into their markets, they have little choice but to expand into international markets," says de Visscher.
"The classic family business struggle--capital for growth vs. the liquidity needs of shareholders--is further accentuated when you internationalize," de Visscher says. "So if management sees a need to market abroad, it must develop a thorough business plan to present to family [and other] shareholders highlighting the strengths, weaknesses, opportunities and trends of the markets abroad. That will point out the need to broaden markets."
Family members need to unite behind global expansion so that if they have to give up short-term liquidity, there won't be altercations among them. "Good communication using the business plan as a starting point is essential," says de Visscher.
And start small, counsels Ernesto J. Poza, a consultant in Chagrin Falls, Ohio, who specializes in helping family businesses forge alliances abroad. "Create growth opportunities one country at a time," he says.
Worry #2:How can family businesses compete with large corporations that are expanding internationally?
- Capitalize on the resources most businesspeople in other countries pay a lot of attention to in business relationships: trust and stability. "A lot of people in foreign countries worry about having to deal with `heavy-handed American corporations,' " says Cherry. "But when I walk through the offices of one of our foreign divisions, people know who I am--a Cherry and the son of the founder--and they know I can speak for the company. They realize that there's a family commitment and that this isn't just a moneymaking game."
"Our alliances with foreign businesses are based on trusting relationships," says Michael Levinson, president of The Weekend Exercise Co., a San Diego-based sportswear firm founded 14 years ago by his father, Arthur. "It takes time to develop an international market, but our foreign distributors know we'll be around for a long time. For example, we were able to nurse our distributor in England through some difficult times before that market turned around.
"Not only that, but I think we, as family businesses, take a little more pride in our products and the way we do business. We can't point the finger when someone makes a mistake. We're `them.' "
- Search out family businesses in other countries. "Two family businesses that understand and respect each other's cultures can forge wonderful alliances," says Poza, who has seen these relationships bloom into fast friendships that transcend business deals.
"A commonality of interests and mentalities exists between family businesses of different countries," agrees de Visscher. "They certainly feel more comfortable dealing with each other than having to deal with a [giant corporation] where it's harder to establish a trusted relationship."
- Insist on win-win agreements with partners in foreign countries."It's easy to get greedy and try to squeeze out the last nickel in any business agreement abroad," says Poza. "But down the line, the foreign partner will resent it and find some way to take revenge." And since you're not nearby to monitor the situation, it's important to implicitly trust foreign partners, distributors, directors and employees. Poza urges family businesses to craft an agreement that's profitable to both parties and gives the overseas partner an incentive as the business grows.
Worry #3:How can we get family members used to the idea of globalization?
Develop an appreciation and understanding of a particular culture and language. Some family businesses look to their roots as a place to start learning more about a particular market. Others go where family members have spent time or have a particular interest. Poza tells of one family business that developed a business interest in Chile as a result of a daughter's experience doing social work there.
Taking the longer view, Poza suggests members of the family business's younger generation should be expected to become global citizens and be required to develop expertise in a number of languages and cultures. Sending potential successors overseas for travel and study might be one of the best investments a family business can make.
"Family businesses should also pay attention to upgrading financial and information systems," says Poza, who points out that lower technology costs now make that easy to do. "Having information formalized increases the level of trust when a family business does enter the international market."
Patricia Schiff Estess publishes the newsletter Working Families and is the author of two new books, Managing Alternative work arrangements (Crisp Publications) and Money Advice for Your Successful Remarriage (Betterway Press).