This research is not surprising when you consider two thirds of the UK’s private sector businesses are family-owned. Whether you’re just starting out or have been working with family for years, read these tips for keeping it in the family.
Thousands of people go into business with family and friends each year, yet few of them realise the toll that working so closely with loved ones can take on your relationships. It is crucial to go into the business with open eyes and to discuss how you would cope with certain situations and disagreements.
Look at your family
Are you in good shape to run a business? If there are any problems with communication or long-running arguments, running a business together is likely to aggravate rather than resolve these. It’s best to sort through any problems before you make any large financial commitments.
Play to your strengths (and weaknesses)
You should know from the outset what the individual strengths and weaknesses are. What does each member of the family unit/management team bring to the business? This should help you decide, objectively, who would be best suited to which role in the company. Plus, it should also highlight any gaps in expertise where you may potentially need to recruit or outsource.
Watch out for warning signs
Watch out for signs of conflict before it happens – including complaints about unfairness, communication gaps, and indications of poor decision-making.
Be aware of the most common causes of family conflict, such as overbearing parents, frustrated children, incompatible siblings and family factions, and head these off at the pass. Keep communication honest and open.
Get impartial advice
Don’t let the family become insular and isolated from the outside world. Get regular reality checks from genuinely independent voices, outsiders and professionals. Don’t forget to regularly ask your customers what they want also.
Make it official
Don’t trust things to instinct or assume that because you’re in business with family or friends that disagreements won’t happen. Create discipline through sensible structures and good governance practice.
It’s advisable to have clear agreements in place from the outset so that everyone involved knows what is expected of them and what they’re entitled to.
Also, be clear about your business plan. Set goals and ensure that everyone is on the same page. If it is one director’s plan to sell up in five years and the other’s plan to work in the business for the next 20 years, you could be on a crash-course for conflict.
What makes you unique?
While it’s good practice to address and swiftly deal with the issues that divide you, don’t forget to look towards the ultimate common interest that unites your family. Why did you want to go to business in the first place? There is usually a passion that unites you and this can be invaluable, especially in tough times.
Remember, your family culture is potentially a source of unique competitive advantage. Celebrate and embody your values.
Think about succession planning
The problem for many small firms in the UK is partly the lack of forward planning – who will take over when the first generation bows out? According to the latest figures, 70% of family firms don’t make it past second generation of ownership, and 90% die out before the third.
Succession planning can certainly be a useful tool to allow firms to go further, longer and be more successful through the generations.
Succession planning is a huge issue for family businesses, and one firms ideally have to get right the first time. It’s not something that should be put off either. Regardless of its size, a family business must be planning its management succession from day one.
Support for family businesses
We’ve been working with Manchester Metropolitan University and the Family Business Forum to highlight the challenges family businesses face and how the government can support the growth of family firms.
Our findings have been that taxation is often the biggest barrier, especially when it came to succession planning. Suggested measures from the families we spoke to include providing an exemption from Inheritance and Capital Gains Tax on shares passed on within families and the creation of a Family Business and Support Centre.
For more information on how the Forum can help your family business, call us on 01565 626 001
Source: BusinessesForSale.com and Institute for Family Business
Last updated 7th June 2016
Recent research has shown that the entrepreneurs who are planning to go into business in 2015 are more likely to do so with family members than ever before.