The backbone of the UK economy is primarily made up of family-owned businesses. More than 88 percent of UK private companies are in fact family businesses and are recognised around the world for their innovation and vision.
However, just because it is a family-owned business does not mean that they don’t have the same concerns as public companies.
As well as the main concerns such as strategic planning, navigating the business through the financial red tape, tax compliance, competition, and growth; family businesses must also include within the business model the unique needs of the family. Succession, financial planning, tax structuring and legal matters all add to the complicated business model and strategy for family businesses.
Balancing the different needs of your family business
A family business model is unique in that the family and interests of the business are so closely linked to one another. When growing a family business, it can be difficult to bring together both the business and family interests in order to avoid fall outs or stagnation due to differences of opinions.
Whether you’re thinking about starting a family business or want to improve your current family business model, read on to find out what makes a family business successful.
1. Do not mix your family and business life
One of the biggest challenges will be setting boundaries of when and where to talk about the family business. Bringing your work life into your personal family life can lead to confrontations and outbursts, which no matter hard you try to avoid, will inevitably spill over into your personal family life.
You can try and avoid or limit the amount of work talk in your personal and family life by drawing up a moratorium and allowing family members to hold one another accountable.
2. Set clear workplace boundaries
In the same way that you should try not to bring your work life into your home, you should also keep your family life out of the workplace, especially if there are non-family employees.
Set clear workplace boundaries by making sure each family member understands their role and responsibilities in the business as well as those of other employees in the business. This will help to push the idea that no one person, not even a family member, is beyond being held accountable for their actions.
3. Balancing the interest of the family with its shareholders
A family business model should be aimed towards serving the clients and not the family. The family will as a result of this gain from running the business this way and it is, therefore, important to ensure good-governance through the functioning of both the well-being of all shareholders and the family.
With clear guidelines and rules for the business and family such as a clear definition of the dividend policy and separating ownership from the management, the family business can go on to pursue its growth plans.
4. Maintain a clear and open dialogue with shareholders
Once you’ve set up the rules and guidelines for your family business and business model, it’s important that you constantly engage with your shareholders. There should be constant and open dialogue to make sure that they are happy with the way the business is being run and its returns.
In all businesses, communication is key not only to satisfy all those involved but also to its success. This is even more central to the success of a family business where the owners aside from being family members, also need to demonstrate knowledge of the company and aid its development to please the shareholders.
5. A strategic plan for the family business
Separating the functions of the family and business through good governance helps achieve the shared goal of growth and safeguarding the future of the family business. One of the most successful family business growth strategies used is the Parallel Planning Process.
To succeed at achieving growth the Parallel Planning tool aligns both the thinking and planning of the family with that of the business. This, in turn, is built into the core foundations of the family business model, improving the family business performance by ensuring the support of family interests and its growth potential.
Building a successful family business presents a number of challenges that require a unique business model and way of thinking in order to grow and reach its full potential. Whether you’re struggling with formalising the decision-making process, experiencing shareholder disagreements or having succession dilemmas; Alexander & Co’s family business accountants can help you meet and overcome the challenges of family businesses.