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Family Business Case Study

Author: Larry Chester

A family business can be a great source of pride for everyone involved. However, working with loved ones can present its own challenges. So, whether you’re a small- or medium-sized business, maintaining a strong cash flow and ensuring the business’ profitability can go a long way when legacy and transition issues arise.

Bringing Value through CFO Insights

This case study tells the story of a family-run company and provides recommendations from the desk of a seasoned chief financial officer. A lot of family members worked here, and the owner was concerned about what would happen to his entire family if the business wasn’t successful. Having started in his garage, this retail powerhouse had grown without any significant internal structure. It was time to put the pieces of the puzzle in place.

  • Business – E-commerce retailer
  • Location – Suburban Chicago
  • Sales – $11,500,000 annually
  • Ownership – Single owner (many family members as employees)

Initial contact –

The business owner was concerned about cash flow and profitability. He was thinking about turning the business over to his two sons. His fear, however, was that if the company failed, his entire family would become unemployed.

Significant Findings and Recommendations:

Cash Flow

The company was short on cash and had used up most of its operating line of credit. The company had an inadequate cash flow forecast. It was maintained out of house, making it difficult to manage.


  • Bring the model in house and simplify it to make it more understandable and usable.
  • Clamp down on immediate purchases, until cash became more readily available.


The company has many items available in low quantity. More than 29 percent of the inventory had not been sold in the last 90 days, and 16 percent hadn’t been sold in about two years. More than 1,000 items had a quantity of one, which took up space and resources, but contributed nothing to sales.


  • Get rid of all the items in the warehouse that have only a quantity of one. Donate or dispose of them.


The company had no dedicated purchasing function. His sons had no strategic purchasing plan or control of economic order quantity, safety stock, etc.


  • Assign one person to the purchasing of all inventory items.
  • Determine if items are restocking, or one-time specials.
  • Decide which channel is best for the sale of individual products.
  • Establish cycle counts to keep more accurate inventory.

Sales Channels

The company sells primarily on eBay, Amazon, and Overstock plus other outlets. They are held hostage by the operating requirements of each channel and have not developed a consistent strategy to support each of the channels individually.


  • Evaluate what their business model is and direct the resources in that area. Do they sell specialty products? Close-out sales? Outdoor products? Focus on one segment rather than being scattershot.
  • Determine which channels are more ideally suited to their product lines and specifically identify the needs and requirements so that they focus on “favored vendor status.”
  • Understand what the actual cost is of operating within each of those channels so that they understand the expected profitability and set KPIs to track their performance.

Decisions, Decisions, Decisions

All businesses face issues in operations and finance. They can be even more pronounced if it’s a family-run business. With an experienced CFO, these issues can be identified and resolved on a regular basis saving the CEO time, money, and headaches.

We hope this case study is helpful to you and your business operations and have one question to ask: Who is making these finance and operational recommendations in your organization?


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