A number of challenges have tested the resolve of our local business community in recent years and for family owned business specifically, these issues have just ‘added to the list’ on top of the many commercial challenges they uniquely face.
For over 25 years, our team in the BDO Centre for Family Business has been working with local, family owned businesses and we have helped many overcome the unique challenges they face. These have included issues impacting on their succession planning and other family-related issues that can cause disruption to business growth.
Family first v business first
The added challenge of managing family relationships and the emotional issues that arise is well known. Successful family businesses have to find a balance that meets the needs of the family while also sustaining the business. While the family is the number one priority in most family businesses, it is important to note that it is the business itself that enables family members to live their chosen lifestyles. The business must stay healthy.
This is a real family business dilemma. Neither is wrong, but a family’s position between these two philosophies impacts several important decisions.
Merit v entitlement
In practice, family business successors are not necessarily chosen because of their leadership skills, but rather because of their DNA. Also, family employees are often not subject to the same performance evaluations as other employees. Both of these can lead to disgruntled non family employees, in an environment where employee retention and recruitment are increasingly difficult.
We all recognise that it isn’t wrong for family members to benefit in some way from their families’ successful businesses. However, that has to be balanced with the knowledge that unearned power and wealth can lead to the eventual demise of the business, as well as issues for the individual family members.
Fair v equal
A separate issue to identifying a successor to manage the family business is the issue of ownership. In many cases, the majority of the family wealth is embedded in the business.
However, carving up the family business equally may not actually be fair. It can result in siblings working together, who might not have otherwise chosen to work together, or result in one child running the business for the benefit of all siblings. In some cases, family members are treated exactly the same in all matters but this can cause further questions and sometimes negative sentiment in relation to spreading shares across those involved and not involved in the business. In other cases, to be truly fair, business owners may feel that they need to find ways to equalize the distribution of overall family wealth among their children.
In the dilemma of fair versus equal, the goals of the business will often challenge the values of the family.
My team of specialist advisers and I help family-owned businesses work through all of these dilemmas. We provide innovative, practical solutions to sensitive and challenging issues, including navigating the succession planning process, and have done so for many local second, third and fourth generation businesses. Being a trusted and neutral adviser, BDO helps move family businesses forward in working through these issues.
For almost three decades, we at BDO have put local family businesses at the core of ours. We can help your family business too.
Maybeth Shaw is a partner within the BDO Centre for Family Business. She can be contacted at email@example.com or on 028 9043 9009.