Family-owned businesses account for one fifth of the total number of UK businesses so it is no surprise that the family owned sector continues to be a significant contributor to the UK economy. But what makes family businesses unique in comparison to other businesses and what are some of the challenges being faced by these businesses right now? Most recently the challenge of COVID-19 will have tested relationships and decision-making, and whilst many have adapted, the underlying values and principles will have remained the same. Below we look at some of the challenges family businesses face and what they can do to begin thinking about addressing the issues they may be encountering.
For some there is already a generation working in the business ready to take on more responsibility and eventually a piece of the company. Part of having a family-owned business is passing on wealth to from one generation to the next and so forth until such time there are no more names on the payroll to make it a family business. Whilst exit planning is something that a family business will only consider once in each generation, getting it right in terms of structure and timing is difficult. Making this part of the board’s agenda will ensure that it is considered regularly and that there is sufficient time to plan for an exit. Passing over the reins and taking that next step is difficult, so using advisers outside the family tree as sounding boards can often provide a necessary separation from sentiment or emotion.
Right skillset, wrong surname
The purpose of a family-owned business is that it is all in the name, in more ways than one. But for some businesses that perhaps need fresh ideas or a change of direction, employing an ’outsider’ is a difficult decision. There may be doubts around whether or not they buy in to the family heritage or they fit the mould of the family business and its culture.
These stigmas should be put to one side in order to make the right decision for the business. More often than not, having fresh ideas keeps the business moving and a non-family member can take the emotion out of making difficult decisions. For those businesses who do not have a natural successor, employing those skillsets could also lead to a natural succession by way of a management buyout (MBO).
COVID-19 has changed the way in which we communicate and for family businesses this challenge will be no different to others. The term ’blood is thicker than water’ would suggest that a strong family bond naturally leads to constant communication, but this is not always the case. With the continued complexities of Brexit and COVID-19 on businesses, decisions have to be made quickly to ensure the business reacts to any changes it faces. The method of communication and involvement of family members should be a consideration, specifically thinking about the following questions:
- Do all family members need to be present?
- Can there be an overriding agreement if one family member cannot make a meeting?
- Should decisions be in writing or can they be agreed verbally?
There is then the follow up of how these decisions are communicated to staff and non-family members. At present communicating decisions over a Teams meeting might not be practical, but an email might not get the attention it deserves, so a balance needs to be sourced.
There is no right or wrong answer as no two families are ever the same. Whilst they may face similar challenges, many will react and adapt differently to the same scenario. The important thing is doing what is right for the business, and making sure to involve your advisers early enough so that any decisions you might be making can be structured in the most efficient manner.