Family Business

When does a business become a family business?

In the early days of getting a business off the ground the last thing in the founding owners mind is that of succession and grandiose ideas of building a strong family dynasty. In reality the next generations involvement is often a knee jerk reaction to events rather than a proactive, considered decision. These events range from illness of the founding owner to the perceived unemployability of the next generation. What starts out to be a short-term fix can so often become an unexpected long term intractable problem. As way of example, take the case of a daughter who ended running the family’s engineering company. She had taken what she thought was a short-term sabbatical from her ideal career in the beauty industry to help out her overworked dad when he was taken ill. Twenty years later she was still running a business that held no interest for her! When I met her she was unhappy (understatement) and totally demotivated. She felt that she had wasted the best part of her life doing something she hated and it was no surprise that following the death of her father she sold the business to the first vaguely interested party. It is worthwhile to truly understanding why you would want your business to continue beyond your generation. At what point does the founding owner(s) of a company decide or indeed accept that family members will continue to control the business?  Perhaps it is time for you to consider why you want future generations to carry on your business and perhaps decide the rules for employing family members inside your business. So here... read more

Business owners, it’s time to stop tinkering

Over the years one of the biggest challenges I have encountered during succession in family businesses is when the outgoing owner cannot let go and usually unintentionally continues to step into day to day issues. Often feeling frustrated and perceiving they have lost status the owner unilaterally reverse decisions taken by the new team thereby stifling and undermining change before it has taken hold. It is so easy for the business owner to tinker and distract members of the team. Wanting to help and seeing mistakes being made it is so easy to just step in and solve an obvious problem. Realise the team will have split loyalties so be careful not to undermine the next generation. It is so easy for non family staff to feel confused leading to a hesitancy to change or make ongoing decisions. Remember, succession is a process not an event. Once the process is agreed, all parties must agree to stay in position and allow the succession process time to take place. Ensure the process includes the opportunity to review the progress against the plan and have an agreed feedback and communication loop to ensure the plans and priorities are fluid and flexible to safeguard the future of the business and all involved. Acknowledge the situation and follow the agreed process. Coach and mentor the next generation and offer advice when called upon. Remember, in the early days those fragile green shoots of change can be so easily squashed. Let the change take root and marvel as the new team flourishes. Resist the urge to tinker, sit on your hands, bite your tongue... read more

Family business succession: If only it was that easy!

As the founder or owner of a family business your hardest decision will be who to chose as your successor. This may not seem too hard when you’re thinking logically. You choose the best person for the job. Right! Well so often in family businesses this is not right at all. Unfortunately, the complexity of family relationships and family history can produce a toxic mix which will need the Wisdom of Solomon to see through the potential minefield of succession; even in a simple, first to second generation family business. In the early days it is great to bring in your children to work in the business with the hope that in the fullness of time you can groom them to take over the business. A lovely ideal especially when viewed through those rose-tinted glasses that show the family will pull together for the good of all. Now I am not saying that all successions from one generation to the next are doomed. I have worked with many businesses where the handover has been planned and proceeds without any drama. However, I could list out many, many more examples where retiring owners are forced to overstay their welcome because they’re concerned about the impact of their chosen heir apparent. Let’s look at a very straight forward dilemma. Consider a simple family business owned by the single founder. The children were brought to work in the business at the earliest opportunity. Over the years they gradually learn every job in the business and when the time is right they will be trained to take over the founders role. However, the... read more

The four most common succession challenges

Smooth succession allows the continued success of all businesses. So why is it that within family businesses succession can become such a major issue causing tension within families and significantly damaging the long-term prosperity of the business and its shareholders? First, let me repeat, succession is a process not an event and as such has to be planned. The handover from one generation to the next should be seamless and have no impact on the day-to-day running of the business. This sounds like simple business advice but the root cause behind most succession challenges is the lack of an agreed, considered plan. Perhaps not wanting to challenge the status quo, issues are left unsaid and open and honest communication between generations becomes stilted. Unfortunately, succession decisions in family businesses that are avoided will be forced into the fore by factors out of the control of the incumbent generation e.g. illness, market conditions or death. Here are the four most common challenges I have experienced working with family businesses that hinder discussing the succession process. Reluctance to release power and control Especially prevalent with founding generations but can equally afflict subsequent generations. The all consuming nature of setting up and growing a business can blur the boundaries between the office and home. The role of the boss within the business and that of being the head of the family merge. The founder perceives that to step aside and allow the next generation to take over the business will reduce their status within the family and business community. Fear of Retirement The habit of working long, hard hours results in the... read more

The biggest leap of faith for a business owner

A common complaint I hear from business owners is that they can’t get their staff to step up and take responsibility, they just seem not to want to be involved. If this sounds familiar then read on. As a business owner, especially if you have built the business from scratch it is so easy to become overprotective of the business you have created. You believe that you know what’s best and perhaps unwittingly you want to control every aspect of ‘your babies’ development. However, just like any overprotective parent it is so easy to restrict and smother the natural development of your child. The biggest leap of faith we have to make as business owners is the same as any parent. As parents we have to realise we have done our job and it is time to put our trust in our children- that they are ready to take responsibility and that they will be able to make right decisions. We recognise that they have grown up. In business this leap of faith is to believe that every person you employ will always do the best that they know how. In fact treat them as thinking adults who are capable of having a worthwhile opinion. Trust them, involve them in their future and they will reciprocate with their heart and soul. Just have faith in them. Delegate roles, responsibilities and tasks to them. Involve them, ask their opinion, share information to get their buy in. Help them to take ownership of their decisions and they will be happy to be held responsible for their actions and be accountable for... read more

How to Fall Back in Love with Your Business

Over the last ten years working with and advising successful business owners I have found that a common feeling is that so many have just fallen out of love with their business. The buzz and excitement of the early days of building and then growing the business is replaced by the day to day grind of …well just doing. It becomes humdrum and repetitive. The income is good, the trappings (the house, car and occasional holiday) have become the norm but where has the buzz gone? What has happened to the energy and drive? I have found that people start their own businesses for many reasons but all can be distilled down to the need for security. To secure their lifestyle, their future and the future of their family. But once that has been achieved then what? Again there are many answers to this question and I have no intention of going into the meaning of life. Still trying to work out that one myself! However, what I have learnt is that what most business owners want is freedom. Freedom of choice, freedom of actions, freedom of how to spend their time, freedom to persue their life dreams, freedom to just go off and play golf when they want without feeling guilty! (the last one is a real life example from a recent business coaching session). So what is it that stops so many business owners from achieving their freedom. What I see over and over again is that their business has grown over the years and has become stuck between two levels. The four key drivers of the... read more

How to avoid succession challenges in family businesses.

Smooth succession allows the continued success of all businesses. So why is it that within family businesses succession can become such a major issue causing tension within families and significantly damaging the long term prosperity of the business and its shareholders? First, let me repeat, succession is a process not an event and as such has to be planned. The handover from one generation to the next should be seamless and have no impact on the day to day running of the business. This sounds so simple but the root cause behind most succession challenges is the lack of an agreed, considered plan. Perhaps, not wanting to challenge the status quo issues are left unsaid and open and honest communication between generations becomes stilted. Unfortunately, succession decisions in family businesses that are avoided will be forced into the fore by factors out of the control of the incumbent generation e.g. illness, market conditions or death. Here are the four most common challenges I have experienced working with family businesses that hinder discussing the succession process. Reluctance to release power and control. Especially prevalent with founding generations but can equally afflict subsequent generations. The all consuming nature of setting up and growing a business can blur the boundaries between the office and home. The role of the boss within the business and that of being the head of the family merge. The founder perceives that to step aside and allow the next generation to take over the business will reduce their status within the family and business community. Fear of Retirement The habit of working long, hard hours results in... read more

Succession planning: when is the time right?

One of the most difficult challenges facing a successful owner of a growing business is that of succession planning. In a family business when is the right time for the owner to step aside and hand over to the next generation? Naturally, the fear of the unknown can cause the owner to delay this decision. So why is it that so many family businesses build succession planning into such a torturous event, a real minefield. Let me say right up front, succession should be considered a process not an event. It should to be planned well in advance to ensure each generation can finish the business before handing over to the next generation. Related Blog. When will your business be finished? So, here are four critical areas that should be considered 1. Have a clear common family vision for the business Decide as a family whether the business is going to be multigenerational. Understand why it is important to the family for it to remain a family business. Without a clear family understanding the incumbent owner manager can wrongly assume that the next generation of the family will want to continue in that role. Do not allow misplaced family loyalty to place undue pressure on the next generation to take on an unwanted role. 2. Choose the right successor Discuss the roles and responsibilities openly. Agree the experience, education, skills and abilities required. Make it clear that it has to be a mutual decision and not a forced marriage. Agree the rules of selection in advance and stick to them. Choose the best person for the job based on... read more

Why family businesses should set succession rules.

Normally, the relationships within the first generation of a business are relatively simple. The main focus of the founder(s) of a growing business is initially survival, followed by growth and then to build wealth. So often, the rules for the ongoing ownership and management succession for the business are not considered by this founding generation and are left to chance or abdicated to future generations to sort out. However, as a business passes through future generations, family relationships become more complex and the legacy may be put at risk or indeed lost. Over the generations the structure of a family will grow and change through marriage, children, death, divorce etc and create more and more complex and diverse relationships. If the boundary between family and business is blurred then as the number of stakeholder increases emotional and personality issues will have a greater and greater influence on what should be commercial decisions. With no guidelines, rules and boundaries in place the perceived wishes and principals of the founding generations can become misinterpreted. Indeed, as the value of the business increases, this misinterpretation may even become intentional causing family rifts and poor communication. This can undermine the future success of the business and may even spill over to impact the wider family wealth. It is understandable when the main focus of family members is involved in the day to day management of the business it is easy to ignore the importance of the future structure and constitution of a family business. Related Blog: How to keep family business relationships healthy Please don’t be tempted to ignore it or leave it... read more

How to keep family business relationships healthy

There are many fine strengths of successful family businesses. However, as in any business when too much emphasis is placed on a strength, that strength can become a weakness! Undoubtedly, the close ties and common language within a family business fosters a strong culture underpinned by a shared history. However, the boundary between office and home can easily become blurred with discussions around the dinner table or at family events a common occurrence. In the early growth period of a business this informal communication is a huge strength and can result in speedy decision making and actions. As the business and family grows and matures this blurring of boundaries can become a major weakness which spills over into pressure on relationships and resentment between family members. With those involved in the day to day operations feeling they can’t escape the pressure and those not involved in the day to day operation of the business feeling excluded. Communication becomes strained and as those resentments build they spill over into business relationships. So how can we keep those relationships healthy? Well, the first step is to become aware that there is an issue. It is so easy for it to become a habit, the norm. The solution is simple yet so often thought to be unnecessary in a family. As with team meetings set some rules and stick to them. Related Blog. Here’s how to set the rules of a team meeting. Let’s have a look at a simple example that highlights the use of rules. Now, this one is close to my heart. I started my current business with my... read more