Family businesses in Ireland and internationally have a long and fascinating history. Family businesses comprise 75% of businesses in Ireland, which makes the family business the most dominant model. So surely, by now, the model has developed a formula for success?
Unfortunately, this is not the case. Each family is unique, and each family business is unique, which means each business requires customised plans and tailor-made solutions.
The fact is that an owner-managed, intergenerational business is a very difficult model to get right. There are business issues, personal issues, emotional issues and legacy issues to contend with, which can make for a perfect storm of challenges. The statistics tell their own story: only 30% of family businesses transfer successfully to the second generation; and only 12% to the third generation. Those aren’t very attractive odds.
Reasons for failure of family businesses
In our experience, the top three reasons for failure are:
- Poor succession planning
- Unprepared/inadequately trained next generation
- Family conflict – roles/remuneration/voting rights
Why do family businesses succeed?
When a family business is well-run, with a strong vision, a clear appreciation of strengths and weakness and solid governance structures underpinning the enterprise, it can be a dynamic business model. To the advantages of great customer service, swift reactions and strong belief in the products can be added an unrivalled sense of loyalty, a deep commitment to succeed and pass on a legacy, and a huge sense of investment and satisfaction in the success of the enterprise.
Family businesses succeed when they:
- Have a clear vision of present performance and future ambitions and how to achieve them
- Have a variety of skills available among the family members
- Encourage family members to work elsewhere first, then bring their experience and knowledge to the family business
- Establish effective governance structures that ensure the business is run in a professional manner
- Promote clear, fair and effective communication at all levels
- Take the time to prepare a succession plan that is thorough and agreed through consensus
It is easy to list out the things that will deliver success, but it can be very challenging to implement them in practice. There are myriad obstacles to overcome in setting up a good structure, and at times it might seem impossible. The help of an objective, expert family business consultant is invaluable to establish the right targets and achieve them.
How we can help you?
At Baker Tilly Kirk, we have developed the Family and Owner Managed Business Programme specifically to assist owners and their families to overcome these challenging issues. We have wide experience in dealing with all types of family business issues. If you feel you could benefit from our services, contact us to arrange a free initial consultation. Once we have talked through your business and how you run it, we will be able to draw up a plan that will resolve your issues and promote growth and success.