Family run businesses are undoubtedly an important part of the UK economy, with two thirds of businesses being family owned.
Families in Business (FiB), the independent support organisation for family firms, has recently released the facts and findings from its annual survey and it makes for interesting reading…
…not least because it has been supported by Andy Haldane, the Bank of England’s chief economist, who provides the foreword – giving family run businesses and the significant role they play in our economy the acknowledgement they deserve .
The report, ‘The Future Landscape for Family Businesses’, reveals some interesting insights into the challenges family businesses are facing and ideas on addressing them, including developing innovative solutions to increase productivity and encourage growth. Innovation and technology are ranked as one of the top five challenges family firms say they face and yet the report reveals almost a fifth (16%) of family run businesses consider innovation and development irrelevant , with 66% failing to even plan and budget for it.
Heck, the family-owned Bedale sausage makers which we’ve previously profiled here, is a fine example of what family businesses are all about – passion, integrity, commitment to their customers and a genuine long term view. But, aside from the traditional qualities associated with a family business, Heck has also focused on developing a unique identity and clear vision for the future, rather than simply going head-to-head with competitors. Family run businesses should concentrate on carving out their own niches, being innovative rather than following the crowd, fired by generating a genuine demand for their products and services, and developing a solid customer base.
Given the contribution family businesses make to our economy, productivity, innovation and growth should be the watchwords for all owners, not only for the sake of the businesses themselves but for the overall health of our economy.
Increasingly, family businesses have a more multi-generational structure than previously. The FiB’s survey revealed the majority of family firms (45%) have two generations working in the business, with 18% having three and 2% with five generations still involved in the day-to-day running of the family firm. Meanwhile, 12% of family businesses have directors over 81 years old who are still involved in the business and 33% with directors over 71 years old. The average age of a CEO of a family firm is 60, compared with 54 years old in all other businesses in the UK.
Embracing upcoming generations and the new perspective they bring to the business is all part of keeping things fresh and ensuring family businesses evolve, securing them for future generations. Those business that work through the potentially conflicting ideas and attitudes brought by multi-generational working relationships are the ones that will emerge stronger for their willingness to accept change, ready to navigate their way into the future.
As part of maintaining the business’s forward-focused approach, it’s important not to overlook succession planning. However, with statistics showing that for nearly half of all family run businesses that fail, the collapse has been precipitated by a founder’s death, it is something that many family firms don’t prepare for. The FiB’s research shows only a small minority of family firms have actually planned for what would happen in the event of the demise of a key director or family member and yet almost half (47%) admit this to be a real and potential threat for the business and one that would leave it vulnerable.
Advance planning for situations such as this, although often unpalatable, can help to ensure the smooth succession of the business to the next generation. As well as providing peace of mind and tax efficiency, effective planning can also free up time for business owners to enjoy the benefits of their success. Some well timed advice and simple documentation may be all that is required to give peace of mind.
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