Take part in our new Family Business Survey and have your say! Click here
Making the decision to take over a family business is always a leap of faith for the next generation. It is however a leap of faith that can be made with varying levels of assurances, especially if the team supporting you knows what you are going through.
Whether you have pressure from siblings, unrealistic expectations from parents, non-family members questioning your skills or simply worried about it going wrong. A key message to everyone thinking of taking the reins of the family business is simply communicate, a really simple thing but at times the last thing you want to do, but not talking about it doesn't mean it goes away!!
An elephant in the corner of the room question, which most people will try everything to avoid asking of their parents, but an outcome which is critical to the future success of the business.
Did you know than nearly a fifth of current generations in a family business see continued fund extraction from the business as the main source of funding their retirement? An alarming number given that this places a burden on the business and the next generation with whom this liability falls upon to provide not only for themselves but also for the previous generation. The size of the business will undoubtedly impact on the viability of this approach, but in all situations it reduces the ability for the business to innovate with a view to growth.
Money is one of the main reasons why families fall out with one another, so why risk your family dynamics by not asking what is a difficult question, but without knowing the answer it stops you moving forward. By stepping up and talking about the elephant in the room, you demonstrate a maturity, a desire to be successful and ultimately you may be surprised by the response your parents give you.
An eternal question which unless you are careful will continue to be the reason you do not make that leap of faith, the truth is most people, even those who made the leap years ago will still ask themselves this very question. In our recent survey, almost a quarter of the next generation identified this very question as the biggest issue facing them when the day comes to take control.
Whilst you may never be ready, either in your mind or the mind of others, it does not mean that you are not capable of taking the reins, it surely becomes a question of confidence and positive can do attitude, essential attributes in any business leader.
Talking to the current generation about this is usually the easiest way to overcome these fears, remember, they have most likely been through this when they took the business on. If the previous generation set up the business, perhaps their experiences will be slightly different, but making the leap of faith to set up a business comes with a lot of the same issues and emotions to those which arise from succession.
The most important thing to remember is to believe in yourself, and you will be the best you can be. Time will determine your legacy, but I would be surprised if in the years to come, you don’t look back and question what you really doubted and what made you question yourself.
Everyone has different opinions about what you need to do to prepare yourself to take over the business. Depending on the sector the business operates in you may need professional qualifications, you may need practical skills or you may simply need desire by the bucket load.
Sometimes the most successful leaders in a business come from an unexpected source, for example, the family member who never got involved in the family business and was never expected to come into it. The reason for this is usually because they look at the business in a different way, sometimes in a way nobody has before and this brings innovation.
All the skills we learn in life are important, we evolve from our mistakes and all tend to grow more quickly from the things that go wrong.If these skills are acquired in different businesses and then applied to the family business they can be dramatic, as they create change and modernization by looking at the business with a different perspective.
Therefore whatever you are doing is preparing you, albeit maybe in a different way to what is tradition.
We live in a rapidly changing world, a world which is embracing the digital era which provides constant challenges for all business owners. It is the digital era which HM Revenue & Customs have finally decided to accept and are eventually moving with the times.
Making Tax Digital (MTD) will take effect from April 2018, assuming it makes its way back in to the finance bill after the upcoming general election. MTD is designed to give the tax system a rapid modernization with the intention of making it the most advanced tax system in the world and easier for all tax-payers.
Whether it will achieve these goals, time will ultimately tell us, but it does mean that businesses and the individuals behind them will need to submit digital records to the government. I see this as a good thing because digital software has been improving the record keeping of businesses over the last few years and by almost forcing more people to keep records digitally, it also means more people can access the other benefits.
The other benefits derived from digital record keeping are almost limitless, for example, with a click of a button you can have cash-flows, monthly management information even a real time profit and loss account. To a run a successful business you need timely and reliable information on performance, digital record-keeping gives even the smallest business this data, which undoubtedly allows pro-active and timely decisions to be made. If you have not already joined the growing digital trend, now is the time, make sure the information is ready for when it is you calling the shots.
Avoiding those awkward conversations has never been the best solution in any context, by not talking about the issues it does not mean they will go away. What it does ensure is that smaller issues grow, difficult discussions get more problematic and in any family business these can impact on emotions and family relationships.
Too often I get involved with a family business after an event which is usually the culmination of a lack of communication by all parties, which eventually results in a catastrophic occurrence. The simple antidote would have been for family members to talk to each other openly, but more often than not the relationships are now beyond repair.
Family businesses tend to take an extra seat at the dining room table because they are such a big part of the family dynamic. For some people this prompts conversation and an open conversation environment, for others it creates resentment and animosity that business, almost a living organism, is 24/7 and is negatively impacting on the family.
Don’t make the easiest of mistakes and forget how to talk to family members, they are probably the easiest people to have a conversation with. If you do feel that you cannot find a way to have that awkward conversation you need to get help, someone to be impartial but to get both sides talking, as the sooner it is overcome, the sooner you can all forge ahead.
We have helped hundreds of businesses go through this situation. We have a team of approachable and experienced advisers who support and guide you to get you all the outcomes you wantLET US HELP
If you like this article and would like our FREE updates sent straight to your inbox then subscribe to our monthly newsletterSubscribe
All content © 2015 Armstrong Watson. All Rights Reserved. Website by Simon Pighills.
Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. The registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. Armstrong Watson Accountants, Business & Financial Advisers is a trading style of Armstrong Watson LLP. Armstrong Watson LLP is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities.
Armstrong Watson Audit Limited is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Registered as a limited company in England and Wales No. 8800970. Registered office: 15 Victoria Place, Carlisle, CA1 1EW
Armstrong Watson Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 542122. Registered as a limited company in England and Wales No. 7208672. Armstrong Watson Financial Planning & Wealth Management is a trading name of Armstrong Watson Financial Planning Limited. Registered Office: 15 Victoria Place, Carlisle, CA1 1EW