BBC Radio 2: Jeremy Vine Talks Family Business
Last week, during Jeremy Vine’s show on BBC 2, the hot topic on the business queries agenda heard Vine and business expert Nick Brown discussing the trials and tribulations that UK family business owners face when they are no longer a part of the company. The key question: do you have an exit strategy in place?
The first and perhaps most common family business exit strategy Jeremy brought to the table was the placement of immediate family as the future successor of the business. Often this is a son, daughter or sibling already working within the business so when the time comes, there is a smooth and efficient transition. During the debate, Vine raised the issue of whether it is important for business owners to keep their name and ethos running through the company on departure and commented that the ‘obvious solution is to hand the firm over to a family member’. In many cases the grooming of a successor would be expected of a business owner, primarily to ensure the family name can live on for generations. A recent poll by Family Business United asked ‘is succession the biggest concern for family businesses?’ and 71% voted yes.
Who to select as a successor is one of the biggest dilemmas a business owner will face – whether there is an obvious beneficiary in mind or not. ‘Business Guru’, Nick Brown, highlighted that the second generation may typically help the business become a success whereas the third generation may be where the problems start to arise. He stated that third generations often fail at maintaining the success of the business as they tend not to have the same drive as the first and second and do not understand the business as intricately as their predecessors. Brown went onto describe how he had a 10-year plan in place for the growth of his business which he decided to sell instead of passing to a successor. He explained that selfishly, it was a very good decision having witnessed the failure within some family businesses.
However not all cases have failed. The Balsons have been butchers since 1515 and deal in the sale of high quality meats. Having recently celebrated their 500th year anniversary and currently in their 26th generation, RJ Balson & Son is a prime example that passing the baton to a family member can be successful. Many argue that family-run businesses are fundamentally more successful than public companies, simply because the man behind the till has a genuine interest in passing down a legacy rather than making a quick buck. In an interview with The Telegraph, Richard Balson, current owner of RJ Balson and Son, said, “I think it does matter there is a Balson behind the counter but it doesn’t matter if it skips a generation or goes to my brother’s son.”
Mark Hastings, the director of the Institute for Family Businesses, commented: “They are not bound by the terror of quarterly or yearly results. It is in their DNA to pass something better to the next generation. They look not just to their sons and daughters, but to the generation beyond.”
To instil the drive and ensure that future generations understand the business at every level, family owners will often place their potential successor in a low position in the company, ensuring they learn from the very bottom. Alternatively, the same process can take place outside of the business. Often successors will join a neutral business, perhaps in an entirely different sector, to learn about business structures in the hope that this will eventually provide a foundation from which a successor is able to develop the drive and acumen to potentially run the family business as an owner. However, what happens if a successor does not develop the skills, knowledge and drive to take over?
It is not uncommon that a future successor, whom an owner has always had in mind, will just never come to take the helm. This could happen for several reasons: they fail in the role due to minimal knowledge and experience, in some instances the successor will go on to sell the business for financial gain or they simply do not have the desire or drive.
To listen back to the Jeremy Vine show, click here: http://www.bbc.co.uk/programmes/b06hhnhq
Whether you are looking for an exit strategy or to grow, Benchmark International can help you drive your business into the future. With representation through the Americas, Europe, Africa and Asia, Benchmark International can connect you with the right opportunity. To find out more, visit: http://www.benchmarkcorporate.com.