Ask Bill: The Consultant is In

Bill McCurry

Why do hard good suppliers make it so hard to buy from them? It’s either overall minimums (I want to try something new, but not $1,500 worth) or I have to buy five cases when I only want one.
Signed: Frustrated

Dear Frustrated: There are two sides to each transaction. A supplier would ask, “Why can’t retailers understand the cost of doing business? Retailers want high margins, which mean lower prices from their supplier, but order small quantities that are expensive to handle and ship. Can’t retailers understand suppliers can give them margin only on orders large enough to be economically handled?”

When it comes to order sizes, there are few win-win relationships. Working with a buying group can help, but just being part of the group won’t solve the higher costs involved in small shipments. Perhaps you can partner with a nearby retailer. Place one order together and share savings in product and freight costs.

I’m in the third generation of six cousins. The four in the business are paid the same salary, although we have different education, skills and responsibilities. Only I have a degree, but I’m the lowest paid among my college classmates. My uncle says it’s “only fair” that the two cousins employed elsewhere should inherit the same percentage of the business as those of us who “have been living off the business.” What do I do?
Signed: Feeling Disrespected

Dear FD: Equality is great public policy that breeds frustration and decline in businesses. Did you or any of your cousins ever work outside the family influence? The marketplace is a great place to learn your true economic potential. The McCurry Family Maxim is: Family members can’t work full-time in the family business until they’ve worked for three years someplace else that’s beyond the influence of the family. On their own, they’ll prove their work ethic and worth.

Families should pay a realistic wage to family and non-family alike. If the older generation wants to gift cash to the younger set, make it a gift. A family company paying wages that are really gifts teaches their younger generation the wrong message.

Do your parents understand your frustrations? Most parents consider their offspring’s happiness a measure of their own success. When work becomes nothing but resentment and frustration, something has to change—quickly. The old saying, “Three generations dust to dust” reminds us most family businesses don’t survive the challenges of succession. It’s not easy. Everyone must agree on solutions that appear to reward some family members. Every decision made must be the best for the business. Not every family member has the skills for higher-paying jobs; it doesn’t mean they can’t be good employees or can’t contribute.

Shareholders should receive a return on their capital from profits. Employees should receive a return on their labor as it benefits the company. Family members wear two hats and should get two payments accordingly. Trouble starts when family is paid on a non-business-related basis. The IRS seems to reward bad compensation decisions by making payroll tax deductible while double-taxing dividends. Over time, paying family in a tax-advantaged manner distorts the pay structure and leads to frustrations like yours.

The issues are too complex to understand and resolve within the pages of Green Profit. Your family needs to calmly discuss these issues together. It’s hard for family members to do the best for the business when it affects their personal financial conditions. Most families rely on an outside moderator or family business counselor. Your best solution may be to leave the family business for a time. Go where you can shine and earn the respect your talents deserve. GP

Bill would love to hear from you with questions, comments or ideas for future columns. Please contact him at wmccurry@mccurryassoc.com or (609) 688-1169.