IS YOURS 1 OF THE 30 000 BUSINESSES AT RISK OF DISAPPEARING?

As small business owners, we are bound to face our fair share of pressure. What many of you may not realise however is that 75% of UK privately owned businesses are in fact family run. When you work together as a family, the pressure of running your business is compounded because on the one hand you are required to function as a professional and dynamic team if your business is to thrive but then again, you can’t simply ignore the fact that you are also members of a complex social unit that requires “time out” from work in order to thrive.

Having to constantly reconcile the different demands posed to you by the roles you play at home and at work, can at times prove extremely challenging. Having said that, family businesses remain the backbone of the UK’s private sector and a main stakeholder in our economy

Some Facts and figures:

• Family businesses account for 75% of the 4.6 million private sector enterprises in the UK.
• Family businesses employ 9.4 million people in the UK accounting for two in five jobs in the UK private sector.
• Family businesses account for a quarter of the overall UK GDP.
• Family businesses contribute with ￡73 billion of UK total tax revenues.
• Family businesses generate ￡81.7 billion per annum of UK tax receipts.
• In the UK there are 1,000 family companies which employ more than 250 staff.
• Family businesses make up nearly half of all mid-sized businesses in the UK (￡20m-￡500m)

 However...

• Approximately 60% of family businesses fail to plan formally for succession.
• 30,000 family businesses are at risk of disappearing due to inadequate succession planning.
• Only 30% of family businesses make it to second generation family ownership.
• Less than 10% make it to the third in the same family ownership.

 WHY IS THIS HAPPENING?

 Quite simply because the professional and personal crossing point present in a family business often generates complex problems. Issues such as:

• Differences in personal ambitions and vision for the business
• Unclear family duties and business commitments
• Breakdown of personal relationships between family members
• Lack of communication between different generations.
• Feelings of entitlement
• Unclear management structure
• Sharing ownership
• Lack of succession planning and implementation
• Sibling rivalry
• Conflict between working and non working family members

Now, tackling and resolving a conflict in a family business is a much bigger challenge than doing so in a conventional business due to there being three levels of interests at play: family interests, business interests and ownership interests; which result in disputes that occur in one area often quickly cascading into the other two.

But just like every family is unique, so too is every family business. However If you find that each working day feels like the “war of the roses” perhaps it is time to bring in some independent support

Based on our extensive experience of working with family run businesses, here’s a quick list of a few of the key pitfalls to avoid. 

1. Not clarifying roles and responsibilities of each family member

We've seen it over and over again! A family business where everyone seems to do a bit of everything. This is one of the main causes of conflict often resulting in waste of people resources and work duplications, not to mention discrepant business decisions which in turn lead to further disputes.

 How to avoid:

1. Ensure that everyone’s role and responsibilities are defined and crystal clear.
2. Establish each person's job title, job description, and remuneration.
3. Ensure you have performance reviews for family and non-family employees alike.
4. Think carefully when offering a contract to a supplier who is a relative. Award contracts based on merit.

Never put family members on the payroll if they're not working in the company or can't make a real contribution to the business.

 2. Creating two classes of staff – family and non family

 Be watchful not to give family members special treatment as this will not only set a bad example but will also de-motivate non family staff member

3. Abusing family relationships

Be careful not to abuse family relationships. In other words, neither reward nor reprimand someone because they are a relative with whom you have personal history. The company’s code of conduct, must be clear and any violations leading to discipline action followed through whether the staff member is family or not. In the same way always reward and praise exceptional work.

How to avoid:

1. Have a clear code of conduct for the whole company to follow

If someone does a great job recognise it, regardless of them being family or not.

4. Not communicating honestly and openly with employees

It goes without saying that having effective and indeed transparent communications with ALL member of staff is essential for the smooth running of any business. Trying to hide the fact that you have relatives or friends working for you is never a good idea and will make you look deceitful once it comes out.

5. Fulfilling family needs with business resources

For any business to succeed it needs to be professional. Doing things like letting family members borrow company vehicles for personal use or allowing them to ask the company's IT person to set up their home computers is not advisable. It's also a bad idea to pass off personal expenses, as business expenditures. I remember a recent business who was putting their annual family holiday through as a “team building retreat”. These sort of things keep the business small and could actually land you in troubled waters with HRMC, so you don't want to do that. Keep the running of your business 100% professional. If in doubt ask yourself what you would do if the person was not a family member. For example, do all employees have access to the company car for personal use upon request? 

6. Not setting boundaries between family and business

Similar to 5 but this especially applies to husband-and-wife teams. I can tell you from experience that running a business together with your partner is a balancing act. Because you work and live together, if you are not careful you find yourself working 24/7. It is important to tend to your relationship outside of the business, otherwise you could end up without a relationship.

 How to avoid:

Draw out and stick to some rules. For example we don’t talk about work at home, on the weekends, or during family holidays. We also have distinct roles in the business which allow us to work apart for most of the day.

Also in general, it should be a rule not work with other family members off the clock and outside of the office. Of course it's perfectly fine to get a quick update on a project or client if you didn’t get the chance to talk about it in the office. However, in general this should be a five minute conversation. If it turns into a management meeting then you will start to infringe on what should be yours and you family’s personal time.

 7. Not defining a common strategy and backing common goals

 We have seen it often, family members who may share the same values but not the same vision. For example a brother may want to grow the business and keep it privately owned while another wants to sell it or take it public; a son who wants the company to grow and embrace technology and a father who feels traditional values never failed to deliver.

Conflicts like these often translate into mixed messages to staff members and result in the stagnation of the business.

 How to avoid:

 You may want to bring in independent help to help mediate and negotiate everyone’s ideas before establishing three sets of plans:

• The individual’s plan - What are the professional goals of each family member and how to achieve them.
• The family plan – What are the overall goals of the family and the resources needed to achieve them
• The business plan –A written document that describes in detail how your business is going to achieve its goals taking into account marketing, financial and operational viewpoints.

Overall, owning and running a family business has many rewards providing you ensure you run your business in a way that it's fair, transparent and it doesn't hurt company morale.

 Are you experiencing conflicts in your family business?

Walking Among Giants can help!

We all have heard the saying: Business is Business! However when a family is involved, business can become personal and therefore hard to talk about with an outsider, after all many of us were brought up with the motto of “What happens in the family stays in the family”, right?

Having gained 10 years of experience helping family businesses to succeed and over 20 years of experience running our own family business, we understand the unique challenges that many of you will be encountering . Our family business programme tackles these challenges in an effective, confidential, and ethical way.

As always each programme is bespoke to the business needs and begins with a free no obligation consultation.

Our aim is to help you identify and clarify any issues facing the business, the family and any individual family members while exploring family, business and individual goals.

At the end of the programme you will be left with the tools and skills you need to manage the dual pressures of family and business so that your business will thrive and your personal relationships will be a source of satisfaction and support.

If you would like to find out more please call us for an informal discussion on 0757 809 56 91 or [email protected]

Walking Among Giantsprovides bespoke training, consultancy and coaching packages to businesses throughout the West Midlands and the Iberian Peninsula.

Operating within the context of leadership and management, their areas of specialism are: Business Strategy, Marketing & Sales, Strategic finance and Business Operations.