Our work over the years has taken us into many family-owned businesses. Despite our knowledge of this type of business even we were surprised at the statistics revealed in a recent survey which reviewed the longevity of this important group in the business community.
When a family-owned business starts it naturally is filled with ambition and passion. Who would not be passionate about working for and with your own family? Sadly, these great qualities will not see them through challenging markets and tough economic conditions. The oft heard mantra ‘the show must go on’ is admirable and this resilience is a quality that stands these businesses in good stead. The passionate belief that the business will remain under family control for the future (in the survey nearly 90% of those surveyed thought this) is also good to hear but unfortunately the facts contradict this. The survey found that:33% of family businesses survive to the 2nd Generation
12% to the 3rd
3% to the 4th
Why should this be? One of the major factors is unquestionably the lack of effective succession planning within the business. It’s all very well wanting to hand the business down to sons and daughters but what if they have little interest in the work involved and lack the ability or enthusiasm to make it work. Family businesses are also often full of phrases and beliefs with too much ‘family’ language and sentiment – for example ‘it is their birth right’, ‘my daughter will take on the MD role’ coupled with emotion and love etc. Again, admirable qualities in a family setting but in business, an unforgiving place, a potential disaster. Any business, family owned or not must fully embrace the very things that make a truly successful business in today’s challenging climate. This includes competency in job roles, making effective agreements with suppliers and customers, putting together sound business contracts and focusing on what makes money rather than what is enjoyable to do. Plus, of course, a willingness to change with the times.
There is absolutely nothing wrong with planning for a successful family future and nothing stops a family doing this but if you are running a family business or thinking of doing so make it your mission to concentrate on the things within a business that truly matter and make dure you’re your business has:
- A clear business strategy and vision is in place
- Completed an honest assessment on the niche position for the business in the chosen market
- Put together an effective sales and marketing operation with the right people on the front line
- Structured the organisation around systems and the work needs – not the people
- Acquired a good knowledge of how to recruit the right people at the right time
- Good financial planning and controls all in place
- Succession paths in place with career development programmes for employees who seek development
Finally, a few tips that may help the business run more smoothly:-
- Keep family meetings away from the Boardroom!
- Remain alert to conflicts of interest
- Resolve differences as they happen – don’t let them fester
- Make sure the family appreciate the value of money!
There are many ‘plus elements’ to be got from being part of a family business – commitment in good and bad times, the sense of pride and belonging, loyalty from staff and the real values that families possess at their heart. When you combine these positives with the business elements listed above it makes for a much brighter future and provides the potential for many generations of succession.