Having recently attended the FoodBizNJ conference, “Setting the Table for Growth”, I would like to share some “food for thought” I took away from the conference.
New Jersey is home to many food manufacturers, distributors, retailers, restaurants, farms, and the service providers to those companies. However, the industry does face challenges that are not specific to New Jersey.
Some key concerns are:
Managing the workforce
As many food manufacturing jobs do not require a college degree, it is possible to have a career in the food industry without a college education. If necessary, advanced education can come later, however, “soft-skills” training is necessary and most likely will need to be provided by the employer.
As stated by Donna Schaffner, Associate Director: Food Safety, Quality Assurance & Training, Rutgers Food Innovation, it is expected that individuals entering the workforce today will have 22 different jobs in their lifetime. Having a strategy for training and retaining these individuals is critical. Training time and dollars must be well spent in an effort to retain those trained employees.
Understand your margins
It is critical to have a handle on your production costs and gross margin. The first step to setting prices is to understand your cost structure. This is not an exercise that is performed only once; costs change and require constant monitoring. Costs can change materially over time. Costs that are too high and prices set too low can result in disaster. If changes are not monitored and quickly acted upon, the business may experience significant losses.
Specific challenges for family food businesses
A very low percentage of family food businesses make it to the 4th generation. Many of those that do have a “family first” mantra that extends the definition of “family” to long-time employees. Many successful multi-generational family businesses get each succeeding generation involved as early as possible and strive to teach them the business from the ground up. It is perfectly acceptable if some family members choose a different career path but retain ownership interests in the business. The most successful multi-generational businesses employ family members in active roles, and each generation enthusiastically attempts to contribute to the business’s successful continuation.
What is one challenge that KRS has seen in multi-generational food businesses?
In our practice, we frequently encounter family businesses struggling with under-performing family members involved in the business. It is often a difficult subject to approach when “family first” is your mantra. A good executive training program as well as holding family members to the same standards as other employees is a good first step in avoiding the problem early on. Utilizing a performance-based evaluation and compensation program may also help alleviate any discontent within the generations.
This is one of the many challenges we have seen in multi-generational family businesses. If you are in a family food business and you have a unique challenge contact KRS CPAs as we can offer a fresh, independent evaluation of your business.