The SME (small to medium enterprises) and farming sectors are dominated by family owned enterprises and/or husband and wife firms. By its very nature combining family and business can be a tricky tightrope to walk. As well as the normal business principles that we all grapple to master, we have the added complexity of family relationships in the mix. These are often more difficult to manage than the business principles. Specific problems here can become spectacularly clear when the pressures of running a business collide with household issues, those associated with bringing up kids and perennial problems like marital conflict and sibling rivalry. A family’s values can mean the difference between having a genuine competitive business advantage or a dysfunctional business. These same values tend to also be reflected in the state of family relationships.

Business Value

While, generally speaking, businesses have values built around integrity, quality and their customers, family businesses tend to have distinctive values that set them apart. They tend to have stronger people values than non-family businesses and can often put customers and employees ahead of profits. This emphasis can be a double edged sword! It gives them stability, with a loyal customer and employee base. Equally it can also mean that they don’t generate the same profit margins to build business value or to reinvest in the business. They are also inclined to be more insular and resistant to change. In a rapidly changing business environment, and also when dealing with succession, this can be a disadvantage. Confronting difficult issues can be a real problem, to the extent that they are simply avoided for as long as possible. This is often driven out of concern for avoiding family conflict, but results in poor communication and deteriorating relationships.

Family Business

Where a business has been in the family for more than one generation and has been successful, it can become part of the family’s identity. This represents pride, privilege and opportunity for both the current owners and the next generation. Most parents in this situation will say that they don’t want to place an obligation on their children to join the business. It has to be their choice! What is underestimated here however is the unspoken word. There can be a weight of expectation that the next generation feels to carry on the family tradition. Alternatively this same generation can carry an attitude of expectation and “right of passage”, which can sometimes be quite destructive both personally and financially.

Succession

What then can be done to ensure the success goes beyond one generation? The families that I see handling this situation successfully have a culture of clear and open communication. They sometimes also adopt a board structure for the governance of their business, often with an independent chairman. They set the rules for being in business together from the start. This might be something like a family constitution. They recognise different strengths and abilities, and strive to maintain a healthy work-life balance. Sounds easy if you say it quickly!

Should you require advice or assistance with regards to your family business, please do not hesitate to contact our office.

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