VK Murti: “Family businesses can grow”
In a thought provoking session, Prof VK Murti of SP Jain Institute of Management Studies, who has dealt with family businesses for the past 40 years, critically looked at the way family businesses function and the challenges that hinder their growth.
29 Jan 2016 | 6840 Views | By Rushikesh Aravkar
Murti said that 90% of the family businesses do not grow and the reasons frequently quoted are tough market conditions, intense competition and rapidly changing technology. “But at the same time and in the same industry, there are those 10% who grow. That means these few family businesses are doing something different.”
According to Murti, every family business needs to be reviewed from four different lenses: revenue formula – the product portfolio; profit formula – assets, cost structures, margins; resources; and the processes involved. “In successful companies, these lenses are regularly reviewed and fixed if it breaks,” added Murti.
Murti stressed on the need to look at the way top management operates. The value of a business depends on who is managing it. The top management should not waste times on solving yesterday’s problem. “Solving problem doesn’t make money, exploring opportunities does,” said Murti.
Murti also spoke on the vexed issue of ‘control versus growth’ that exists in every company. “At some point or the other, when a business outgrows its resources, it’s time to go public, share ownership. Sharing ownership should not be considered as an obstacle of growth.”
Murti advised the audience to look at their business as a garden and not as one flower. “If you look at it as a garden, then you will have something reap in every season.”
According to Murti, everyone in the audience is a master of operations, however, he asked, are you a master of change? “Change is essential and change should start when the business is at the peak. For this, the owner should have the hindsight and be able to correctly gauge the market indicators.”
Concluding his talk, Murti said that every family business should have a detailed growth plan of next three years.