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Businesses should be run for benefit of business, not family

Ray Isaac

Ray Isaac

What does it take to run a business? To many business owners and leaders, this question may be akin to asking: How do you make chicken soup? While there are certainly basic ingredients to both, every businessman—as with every chef—has their own approach, and none of them are wrong.

Similarly, while the ingredients for both can be found in a college degree or in a cook book, what truly makes any business or chicken soup successful, unique, or delicious, are the special touches learned outside of the classroom or cookbook.

While grandma or Emeril may have given many of those special chicken soup ingredients, my special business ingredients came from many sources. Most notably, my father Jim, and the numerous books and speeches I have been exposed to. Being raised in a family business, it would have been very easy to get caught up in the trappings that most multigenerational businesses suffer. For me, my father kept my brothers and me from the hazards that can stall, interrupt, hinder or downright destroy a business.

During the growth phase of a business maturation cycle, the No. 1 risk to every business is the availability of cash. In his book “Good to Great,” Jim Collins talks about the syndrome of more companies dying from the indigestion of too much opportunity, than starving from the lack of it. Growth eats cash for breakfast, and without adequate amounts of it to support the growth, a business may not make it to lunch.

Cash, of course, is closely tied to good financial management and making sure the business owner knows his or her financial statement and balance sheet inside and out. I have seen way too many businesses rely on their accountant to give them a financial picture once a year, usually at the year end. A lot can happen in a year, and because of that, I prefer interim financials and financial reports weekly with financial reports by profit center, and consolidated, monthly. Additionally, I always include a 12-month trailing statement with every report. There are a host of other useful reports that I review, and these may be different from business to business, but the point is that you need to know where you have been, where you are now, and where you are going.

I believe that the second-most important lesson I have learned is the importance of culture in an organization. Peter Drucker said that “Culture eats strategy for breakfast,” meaning that the best-laid plans in the world can be laid to waste when implemented in a poor, weak, or dysfunctional culture. Culture, by definition, is everything you see, hear, feel and experience in an organization. It’s the predominant discussions, emotions and actions that happen all around you. Most small businesses (and some larger ones) will exhibit traits of one of two primary cultures—an Equity Business or a Lifestyle Business.

By definition, an Equity Business is one where the ownership exists first and foremost for the benefit of the business. We run Isaac like a true Equity Business and treat it like it’s General Electric. Business and personal are kept completely separate. Lifestyle Businesses, on the other hand, are ones where the business exists first and foremost for the benefit of the ownership, and virtually everything is “run through the business.” Additionally, Lifestyle Businesses are adorned with things like private parking spots by the front door with Cadillacs, BMWs, Mercedes, etc. in them for the owners; family members all having a VP after their name; plenty of toys stored on the premises; and everything run through the company financials. I believe that the word “write off” was invented by a Lifestyle Business, and I believe the greatest risk to a small business, especially family-owned entities, is to be a Lifestyle Business, especially if growth and scalability are goals. We have always held sacred a few philosophies at Isaac, which are:

  • “You get paid for what you do, not for who you are.”
  • “Your last name is a responsibility, not a privilege.”
  • “If you love what you do, you’ll never work a day in your life.”
  • Ownership and employment are very different; one does not necessarily entitle the other.

Additionally, I have been guided in business by what I call the 6 Es, and they sum up our approach to business. The first four are what we provide as a company. We:

  • Engage
  • Educate
  • Empower, and
  • Enable

I then ask our team members to provide the last two:

  • Execute, and
  • Enjoy

There is also an “Evil 7th E,” that I believe will be, and has been, the ruin of many companies, both private and public, big and small, and family or not. That E is Entitlement. Once an individual or organization feels that the only reason for a reward is entitlement, the organization is on a steep hill without any brakes.

So we’ve covered cash, financial reporting, culture, the 6 Es and the Evil 7th E, but there are obviously a ton of other ingredients in your business soup that matter. Making your organization the employer of choice, putting your employees first—even before the client, creating and maintaining scalability and a host of other items all matter immensely.

Business, like cooking is not easy, but with the right ingredients it can be fun, enjoyable, fulfilling and something that you can always share with others.

Ray Isaac is president of Isaac Heating & Air Conditioning and president of the Small Business Council of Rochester.

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