Trouble at mill: the perils of running a family business


Family business is big business in the UK. It is estimated that the UK is home to 3m family businesses, generating more than £1.1 trillion in annual revenue and employing 9.2 million people. It’s big with ambitions to get bigger. According to the 2014 Family Business Survey, 73% of family businesses report growth in the last twelve months, with 82% expected to continue growth over the next five years.

And yet, despite all the good work, bad news is looming on the horizon with the threat that two-thirds of British family businesses could be sold off because there’s are no appropriate successors to take over once the owners depart. So what, I hear you say? Well as a nation of shopkeepers, we are steeped in the traditions of independence and self-reliance, creativity and willing. What are the chances that many of these family businesses will end up in the hands of major corporations and big overseas conglomerates if they were to be sold – therein ending the stoic values of the once proud shopkeeper. This is a serious issue for UK business.

The Family Business Survey 2014 reported that 65% of respondents are considering selling the family business, with 55% naming lack of succession planning as the contributing factor. Either the children lack the aptitude or interest to run the business or, as 30% have complained, there is a generational disagreement regarding business strategy. Younger family members are accused of being too innovative, wanting to take too many risks and adopting new technologies that will revolutionise operations. Whereas the older generation is seen as stolid and conservative, unwilling to change for fear of jeopardising the status quo. Of course, these disagreements create tensions in the family which stall progress.

Other obstacles include disagreement over finances (10%) and sibling rivalry (8%).

Thinking and confronting succession planning is difficult when families are directly involved. There is a lot of emotional attachment and issues of pride that the family must work through if it is to reach an agreement of the future of the business. Unfortunately too many family businesses don’t want discord between family members and therefore ignore the issue, to the point of selling the business.

Rather than live in foreboding and voluntary ignorance, family businesses may be better served appointing non-family members to the board of directors as a means of providing independent advice. This will help balance out the emotional ties with business objectives, producing more clarity around decisions and development. When introducing this 3rd party into a family business, it is strongly recommended that contracts are designed that ensure shared decision making around issues such as succession planning and strategy, with the intention of keeping rogue family members tempered.