How to safeguard your family business
A 2014 report prepared for the Institute for Family Business stated that the UK is home to around three million family businesses which generate around a quarter of the country’s GDP and employ approximately 9.4 million people – that’s 39% of private sector jobs.
So it would be fair to say that family businesses are the backbone of the UK economy.
This fact came into sharp focus as a social issue in the 1970’s and 1980’s when post-War entrepreneurs began to approach retirement age and found themselves facing questions about the future of the businesses they had worked so hard to establish and grow – questions such as:
- Shall I keep my business in family ownership or try to sell it?
- If I keep my business in family ownership, how do I reconcile the diverse interests of everyone concerned?
Not surprisingly, several generations on, these questions continue to challenge family business owners.
Family dynamics often play a powerful and positive role in businesses and can create a formidable force in the market – just look at how successful Warburtons has been. Family solidarity can give a business huge strength, particularly when the going gets tough.
So, if you want to keep your business in family ownership, what are the key things you need to be thinking about?
Based on 15 years of experience of advising family businesses and helping to run my own family business, here are SEVEN TIPS to ensure you safeguard your key family asset:
- Start planning early – The evolution of the ownership and management of a business takes a lot of planning and the process should not be rushed – ideally, allow at least 5 years to create the right strategy and to deliver an action plan. This timeframe will allow you to identify and develop the right people, decide on their roles and responsibilities and give them an opportunity to earn the respect and confidence of internal and external stakeholders.
- Be open about discussing expectations and exploring options – Discover the hopes, aspirations and capabilities of family members (inside and outside of the business) and continually revisit these throughout the planning period.
- Encourage cross generational teamwork – The success or failure of the evolution of a family business comes down the quality of relations between generations. The establishment of inter-generational team-working can be a good way to identify potential conflicts so they can be discussed and resolved.
- Develop a written plan for the evolution of the business – As a minimum you should cover your core objectives, exit plans for those who are ready to step back and development plans for those who are looking to step in or step up.
- Consult external advisers – It can be valuable to involve external financial and legal advisers in any planning process as they have the advantage of being one step removed from the business and may see options and solutions that are not immediately obvious those who are very close to the business. They are also able to help you implement agreed actions without fear or favour. Try to pick advisers who can demonstrate good experience of working with family businesses and who will hopefully understand the unique dynamics of these types of project.
- Establish a training process – Some of the family members who are keen to step in or step up may have little experience of management and so it’s important to offer a thorough programme of training and support. Be disciplined and committed to undertaking this and it will (literally) pay dividends.
- Renew the family’s values and vision – The evolution of a family business can be an unsettling experience for some, so use the opportunity to review and refresh the vision and values of the family and of the business. You may be surprised how re-invigorating this can be for everyone involved.