Family Business and Generation Next!

Family BusinessI recently read an article concerning UK family businesses highlighting that many are now falling out of family ownership. Statistics indicate that approximately 30% pass to the second generation of the family, with only 12% making it to the third generation.  My initial reaction to this research was to be saddened. However, as I gave the matter further thought, I concluded that optimism should be the overriding emotion.

We live in period of continual change affecting all aspects of the way we live. People have a much greater choice in many areas and this includes the choice of whether to pursue a particular career or develop certain skills. The opportunities that are available mean that working in the family business with a view to future ownership is low on the list of alternatives for many people. Therefore the number of businesses remaining under control of the same family or families is diminishing. Whilst this may not have been the initial intention, it does provide opportunities for individuals who are not part of the family.

There are a large number of highly capable and skilled individuals who would not historically have had the opportunity to manage and own a business for the sole reason that they were not members of the controlling family. There is now an overriding reason for families to seriously consider how to embrace non-family employees as the new leaders and owners of their businesses. This does not have to be at the expense of family values and the culture that is the very fabric of many of these companies, but it does allow them to develop with the input of new ideas and alternative ways of thinking.

PM+M advise many family businesses and, being members of The International Centre for Families In Business (ICFIB), we are able to utilise our experience and expertise to discuss succession issues and help find practical solutions that work for both the family and the business.

The potential for family businesses to develop and flourish under ‘outside’ control should be embraced. Assuming that family leadership and ownership is the only way forward for a family business can quite simply be a recipe for disaster.

Tim Mills – Corporate Finance Partner