Family business

Family businesses play a surprisingly important part in the UK economy as a whole, yet the particular challenges they bring are little understood

There’s a story that during the cold war, a reporter visiting Prague asked one of the locals whether his compatriots regarded the Russians as friends or brothers.

“Oh, brothers, no question of it” was the reply.

And why was that?

“You choose your friends”.

Many owner managed businesses are started by someone with ideas, talent and commitment. The business soon becomes their obsession – and for any enterprise to succeed it requires the level of involvement that only obsession can bring.

As the years pass the question of succession arises – ‘after me, what?’ and many founders want to bring in members of their family – usually their spouse and children – so that they can contribute and later, perhaps, take over. And so a family business is born.

Let’s try to define this term. There are so many patterns of ownership and influence within business that to tie down the requirements in terms of shares controlled or percentage ownership of a partnership would be difficult. So perhaps the best we can do is to say that a family business is one where a family strongly influences its management.

On this definition it has been estimated that more than three quarters of British enterprises are family businesses, and that they employ more than half of all workers in the country.

The scale of these numbers is such that it would be difficult to overestimate the importance of family businesses, yet a quick scan of the shelves in the business section of your local bookshop will reveal that the joys and frustrations of them have been little studied.

The most fierce disputes that we have encountered within businesses have involved family issues. Mixing the emotional traumas of marriage disputes, sibling rivalries and ‘cousin’ resentment into the stresses of any business can become very destructive.

On the other hand, family businesses can bring a strong sense of commitment and a common purpose to all of the employees (family members or not) and the resulting stability and sense of direction can bring great long-term benefits.

In this series, we will consider some of the specific issues that can lead to problems and look at some of the ways they can be managed to produce a positive outcome for all concerned.

Download Part 1 of our family business series “Characteristics”, ┬áby clicking the icon

Download Part 2 of our family business series “Managing conflict”, ┬áby clicking the icon

Download Part 3 of our family business series “Planning for success”, ┬áby clicking the icon

Download Part 4 of our family business series “Succession planning”, ┬áby clicking the icon

Riley Chartered Accountants
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