4 key considerations for Family Businesses

Every family business is unique, however many face similar challenges. These challenges and difficulties often arise when the second or subsequent generation enter the business. We look at the key areas to address to ensure success.
Family values and governance
Maintaining family values within a business can be difficult, and family businesses can be vulnerable to conflict between family members. In order to ensure the long term success of a family business a shared vision based on family values must be developed. Working alongside family members can be challenging. When all members and employees have a clear understanding and respect for one another, the chance of success is much higher. Family business must manage two types of governance, family and corporate.
• Does your governance framework ensure that family members are able to work together in a professional and corporate manner is essential for the success of the business?
• Clearly identified roles and duties ensure confusion and conflicts are kept to a minimum.
• Differentiate between work and family lives.
Succession planning
Succession planning can be the difference between the success and failure of a family business. All businesses need a plan for their future. The transition between generations can be difficult, especially for those within the elder generation who find it hard to pass the responsibility of the management and ownership of the business to younger generations. In some cases, where one generation has been in control for a significant amount of time, tunnel vision can become a problem. Bringing in the subsequent and younger generations can help bring in new and innovative ideas, resulting in the growth and further success of the business.
In addition to introducing other family members into the business, family businesses should consider:
• The financial aspects of succession planning, for example, funding the pensions of the elder generations.
• Exit strategies, should the business pass to other family members?
• Should the business be dissolved?
• Should a sale to non-family members be considered?
Should the Family Business be sold?
Not all generations wish to follow in their senior’s footsteps, and family management succession isn’t always the ideal option. Many owners look to sell their family business, however when is the right time to sell?
Those selling the business may have worked within the business for many years, and may have even inherited the business from other family members. The pressure to try and continue the business can be very stressful.
• When selling a family business, both emotional and financial aspects need to be considered.
• Ensuring the business is performing to its full potential will assist in a successful sale of the business. Amongst other factors, cash flow and future potential (as well as historic trading) will be considered by any potential buyer.
Appointing external advisors
Within family businesses there can be a lack of external views. Family members may not always share the same views and opinions, however their upbringings are often similar, which can result in isolated ideas and a uniform plan for the business.
• External advisors can help family business members arrive at new and creative ideas which can lead to further growth and success.
How can we help?
If you would like advice on how to overcome any problems faced by family businesses, or how to maximise the growth and success of your family businesses from advisors who understand the challenges, please do get in touch: please contact Stephen Attree or Lucy Harrison from our Family Business Team us on 0161 926 9969 or familybusiness@mlplaw.co.uk.