Family business planning over summer

The summer holidays offer a good opportunity to get together and discuss plans for your family business. But there are some rules you should follow to make sure it’s only the barbeque that gets heated!

Dinner discussions: Why they're important

Working in any family business – where two or more family members work in a business owned by the family – has its challenges, and its rewards.

Around 75% of New Zealand businesses are family businesses, and they employ a good chunk of the work force. Most farms, vineyards, and horticulture businesses are family-owned.

Philip Pryor is founder and CEO of Family Business Central, a consultancy that offers support and advice to family-owned and family-run businesses.

He says in his experience, family businesses tend to take care of their staff better, take a long-term view of the business, and they perform better.

But they face unique challenges.

“Juggling family relationships with business can be difficult. Family conflict can distract a business and lead to poor decision-making that negatively affects the business,” he says.

“Unclear expectations, lack of transparency and unfair decisions will tear a family - and their business - apart.”

Successful succession: The next generation

While family-owned businesses last longer than private businesses, making sure a business survives for future generations is tricky. Only 30% of family businesses make it through to the second generation and only 12% make it through to the third generation.

As baby boomers retire this is likely to become a bigger issue for many family businesses. Stats NZ figures suggest up to a quarter of business owners could look to leave their businesses in the next 10 years.

That’s why conversations about the future of a family business are so important – even when the future seems a long way off.

Key talking points

Philip Pryor says there’s an important ground rule that should be set before discussing business in the summer down-time.

“Don’t break the Christmas Dinner Rule,” he says. “Make sure all fights, arguments, and disagreements are managed so you can all sit around the table for Christmas dinner.”

There are four key things every family business should be thinking and talking about.

  1. If families don’t already have a clear plan for the development of the next generation as well as clear transition plans for the current generation, Pryor strongly suggests this be a point of discussion. Establishing what role the founder will take in the future, and how this could work with a new generation at the helm is important.

    “One rule I say must be followed with all family business is ‘no surprises,’” he says. “Talk to the next generation. Tell them what you want. Find out what they want and have the conversations you need to have well before you’re forced to have those conversations.”

  2. Talk about family governance – about the strategic issues, rather than the day-to-day running of the business. Talk about family charters, shareholder agreements, wills and succession plans, and make sure they match and support the business governance too.

    If business governance isn’t sorted yet, that needs to be done too.

  3. Keep things fair. Fairness is critical in family business, and it needs to be discussed and negotiated between family members—don’t underestimate how much people are monitoring this.

    Have clear agreements and expectations on who leads the business and how family members get to work in the business. Remember one family member can have as many as four different roles simultaneously, eg parent, shareholder, director and CEO.

  4. Transparency is critical. If people feel that things are hidden, or decisions are made without their input, it can lead to disagreements that could affect the running of the business.

"Remember, while some members of your family may irritate the heck out of you—you probably do the same to them,” says Philip Pryor. “This is family—you know each other better than anyone else so be patient, be forgiving and be kind, especially at Christmas.”

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