Family business debate: Relatively speaking
Family businesses are the backbone of Lancashire’s economy. Together with JMW Solicitors we brought our panel of experts to the table to discuss the challenges, strengths and opportunities they offer. Michelin-starred Northcote at Langho was the setting for the meeting.
How should families plan for the protection of their business?
Tasnim Khalid: Considering succession is extremely important. Having the right structure from day one is also important. Do you set up as a sole trader, as a partnership or a limited liability company?
Elspeth Kinder: Issues arise when the structure and planning has not been thought through properly from the outset. It is about the core basics such as shareholders’ agreements. Has that been thought through?
Trusts are a fantastic way to protect the family business. Family investment companies are another structure that businesses can look at in terms of protection.
Putting that protection in place should be part of your original business plan. It is about identifying as early as possible that you have something valuable and important to your family and thinking about the professional advice you need, not just lawyers. Get the right people around you who are going to join up their thinking.
- Richard Slater - Lancashire Business View (chair)
- Elspeth Kinder - JMW Solicitors
- Tasnim Khalid - JMW Solicitors
- Dr Allan Discua Cruz - Lancaster University Centre for Family Business
- Summer Jenkins - Lingwood Security Management
- Jack Bannister - Rapid IT
- Tracey Simpson - Raymond James
- Michael Smallbone - Smallbone Cars
- Jayne Sanderson-Brown - Summit HR
Michael Smallbone: The need to protect what you’ve got is automatic; you have to protect the family silver. It is always in the back of my mind that this is for us and we have to look after it and maintain the brand and our reputation.
Jack Bannister: It is something I am looking at now. Our company is evolving, directors are changing. We have family and we have friends involved. I have a mentor who has come in and is looking at the structure. The business is going to change quite fast and it is a question of thinking about that and planning.
Summer Jenkins: We’re going through quite a big change. My dad who founded the business almost 25 years ago has just retired and handed over to my brother who has become managing director. So we are in the process of a new growth plan and putting in place changes to achieve that growth. We’re also working with a business coach.
Dr Allan Discua Cruz: As well as being a lecturer on family business and entrepreneurship I’m from a fourth-generation family business, we have 111 years of trading.
It is impossible for families to separate their relationships from their business.
Every family is different and will look at planning in a different way. One of the things we have learned over the years is that every family will have to get into this learning curve.
The more family members that get involved the more tensions can increase.
Even though we might trust each other because we are family members, at some point in time we are going to have different views and that is where the planning really comes into place. Family dynamics are going to change over time.
Tracey Simpson: We work with clients on family business constitution plans. It’s a non-legally binding conversation that you have with the directors. The other thing is to have an exit strategy for the business.
Jack Bannister: A lot of business owners set up with a really good idea in mind and are passionate about it. Not enough thought goes into, ‘What happens if this is successful and in ten years I’ve got something of value? Is it right to bring my family members in?’
Where I see a lot of my clients failing is the assumption that their family members will want to take it on and I very rarely see that same passion in second and third generations.
Are there other people in the business that might want to be involved in a management buyout and are you supporting, developing and training them to become the leaders in 10 or 15 years when there’s a huge shock that the children don’t want to take it over?
We are looking at succession planning from inside the business and working on leadership programmes and with managers of the future.