WE OFTEN hear it said that family businesses are the backbone of the UK economy and the figures speak for themselves.
According to the Institute of Family Business, two thirds of UK businesses are family owned – 4.7 million in total, of which more than 17,000 are medium and large businesses.
Family firms remain a vital part of the UK economy, offering stability and jobs, a commitment for the long term, and responsibility to their communities and employees.
Crucially, some 100,000 family businesses transfer ownership between generations. However, PwC’s recent Family Business Survey finds that only a quarter of the businesses surveyed over the duration of the past eight surveys have survived more than three generations.
And that is a caution for families to ensure that they have strategies to bridge the gap between the entrepreneurial vision that created the original business and long-term sustainability under succeeding generations.
Our survey also finds that family businesses believe they have some advantages over non-family businesses. Eight in ten believe they have a stronger culture and values while seven in ten feel they are more streamlined, have a quicker decision-making process and take a longer-term approach to decision-making than non-family businesses.
However, there are two unique challenges facing family businesses that are not experienced by other non family-owned companies; transitioning the business from one generation to the next and developing family members to undertake leadership roles.
Failure to tackle these challenges can ultimately result in a business failing.
Disappointingly, only 13% of family businesses in the UK admit to having a robust, documented and communicated succession plan in place and there are no indications this has changed in the findings of previous Family Business Surveys.
A third of family businesses in the UK plan to pass the business ownership (but not the management) to the next generation, 38% will pass the management on to the next generation while 22% plan to sell or float the business.
A robust, documented and well-communicated succession plan will stand the best chance of success. The next generation are the future. They bring continuity of family and business, new ideas, energy and enthusiasm.
Engage them at the right time, support and nurture them and most importantly talk to them about the shared value and purpose in the role they play.
There is no room for complacency and those that survive from generation to generation focus on robust strategic planning, taking them from where they are to where they need to be in the long term.
The family firm has to tackle issues around the family itself. Here the issues are more personal, more complex, and the risks if it goes wrong are potentially terminal – “Family firms fail for family reasons”.
Family businesses are certainly up for a challenge and those that we speak to feel confident and excited about the future and the opportunity that it poses.
In fact, those who can communicate the aspirations and growth planning for their business from the outset – Jan Flawn, founder and chair of Milton Keynes-based specialist neurological care provider PJ Care is a great example – reap the benefits of successfully transitioning the leadership of their businesses to their family members.
- Ruby Parmar is senior office partner for PwC in Milton Keynes and advises on family business and succession planning.
