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Family Business Issues

Posted on 07/08/2013, 09:44

Research into family businesses indicates some startling facts:
We are all aware that family owned small businesses provide a vital and important contribution to the UK economy but research into family businesses indicates some startling facts…

  • 3 million family-run businesses are operating in the UK
  • 172,000 of these businesses are expected to fold over the next 12 months
  • 9.2 million jobs are provided by family-run businesses in the UK
  • 40% of total private sector employment is within family businesses
  • 25% of the UK’s output is produced by family-run businesses

All small businesses face challenges but family businesses will often have other challenges such as succession, family conflict and disputes in addition to the same day to day issues as other business structures.

At the beginning of every day all of the people of involved in the family business must leave their other roles, Father, Mother, Son, Daughter, Brother and Sister at the door. The situation can become even more complex when extended family members are involved in running or being employed in the business.

Having established a business it is not unusual for the first generation to be worried, concerned or even reluctant to let go and hand over the reins to the next generation. Sometimes this is because of a weak or poorly defined structure or even lack of confidence in the skills of younger members in the business. The result is an undefined succession and exit plan or, in many cases, these plans don’t exist.

Unfortunately the first time that a parent or founding member mentions retirement or an exit is often when they have become tired of the pressures of running a business and want to set a date in the near future to just walk away.

Another issue is that the younger generation sometimes has different ideas regarding what direction the business should take. Of course understandably the first generation founder/s is protective of their business or may sadly just be resistant to change. These differences can cause massive problems and conflict

The need for a clear vision that drives business strategy and planning is even more important in a family business as is the need for a Constitution Agreement which sets out roles and responsibilities and other rules.

Pro-actions have significant experience of resolving these issues and helping family businesses to define an agreed vision, a plan to take the business forward including a robust succession plan and Constitution Agreement. Without these in place an established family business is at risk of becoming one of the many business failures.

Written by Alan Briggs – BIS Pro-actions Essex

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