The 4 biggest challenges faced by family businesses

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The 4 biggest challenges faced by family businesses

“The backbone of the economy, the bedrock of communities.”

That’s how the UK’s family businesses have been described by the IFB (Institute for Family Business).

They’re not wrong. Even against the backdrop of huge and growing multinationals, family-owned companies remain vital to the success of the country, and the livelihoods of many of its citizens.

Don’t believe us? Just look at the numbers:

  • Two-thirds of UK businesses are family owned.
  • They generate over a quarter of UK GDP.
  • In 2016, they paid £149 billion in tax (21% of UK government revenues).
  • They employ 12.2 million people (47% of private sector employment).

Yet, family businesses still encounter significant challenges. And many of these challenges are unique to the family business setup. Let’s take a look at 4 of the biggest and most common.

Family Business Challenges

1. Work / (Family) Life Balance

Perhaps the biggest issue faced by family-owned businesses is balancing work and personal feelings.

Lives are so intertwined in this particular business dynamic that key professional decisions can be affected by differences in personality and opinion. And often, these differences have nothing to do with the task at hand.

What’s more, professional disagreements can spill into family time, making for awkward mealtimes and a memorable-for-the-wrong-reasons Christmas Day!

It’s important that family businesses only discuss work during business hours.

2. The Generation Game

Most family businesses are passed on through the generations, and at any given time it can comprise of several different generations working together. Naturally, this can lead to a difference in opinion about how things should be done.

Older generations may be reluctant to move with the times, while younger family members can often be in a hurry to change too much, too quickly.

For the business to continue to grow and evolve, there needs to be compromise. A stalemate won’t do anyone any favours; the strengths and skills of the respective generations need to be recognised and utilised to allow the business to flourish.

3. Loyalty vs Ambition

For many young people, joining the family business offers their first taste of a long and fulfilling career. Whether it’s a cafe or restaurant, local shop, mechanics, or accountancy firm, catching an early glimpse of what’s required to run a business can stand them in good stead for the rest of their professional lives.

For some, however, joining the family business can feel like a prison sentence. There’s an expectation that they’ll learn the ropes and eventually take over, rather than take flight and pursue their own experiences.

Older generations should be fully aware of the pull between loyalty and ambition. Putting pressure on children to stay and take up the reins could potentially backfire and cause a rift. It’s crucial that the business owner has a plan in place to cover all sorts of succession scenarios. And this leads us nicely to challenge number four…

4. Succession Planning

Despite the fact that family-owned businesses are so prevalent in the UK, competition is as fierce as ever. Major supermarkets, multinational chains, and of course Amazon, all cast a long shadow. This can be particularly off-putting for younger generations, who may be unwilling to step up and compete knowing their family’s legacy is at stake.

That’s why there needs to be a solid succession plan in place – ideally long before it’s required. If there’s one outstanding candidate, ready and willing to take over, then the whole process should be relatively straightforward. However, if more than one family member is vying for control (or there’s no-one willing to take over), things can become very complicated.

And if a business owner were to die before such a plan is put into writing, it could lead to all sorts of legal issues – and a family fall out. It’s therefore vital that family-owned business owners take the necessary steps to plan for their succession in order to safeguard the future of their business.

Plan for Success with Stubbs Parkin

Like any other business, growing a family business takes hard work and dedication. And the last thing you want is for it all to have been in vain when retirement comes calling.

Whether you plan to leave your company to your children or a relative, or if you wish to sell up and move on, having a succession plan in place can ease those worries.

We can help you identify the appropriate steps, put a plan down in writing, and make the entire transition as smooth as possible.

Contact us today to speak with one of our friendly team members.

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