Last month was Family Business Day. Something to celebrate. Here in WA we are surrounded by many very successful family businesses eg. John Hughes Group, Georgiou Group, Betts Group, MG Kailis to name a few. These are large businesses. I had the pleasure of working in one of them for 15 years. Thank you to the Walter family at JWH Group. Those rewarding 15 years with Julian Walter, Jay Walter and Alicia Kelly is why I choose to continue working with family businesses today.
Those that haven’t experienced working in a family business may think of the mum and dad owned small business. It would be a mistake to think that running a family business is easy compared to a listed corporate. Running any business is hard work. Overlay that with the personal nature of family relationships, emotions, expectations, sense of entitlement, succession, and the fact that it’s the family wealth that is on the line. These all add layers of complexity. These challenges are compensated by rewards and other benefits.
As Joanne Millard, MD of John Hughes Group and daughter of John Hughes alluded to when interviewed by Business News recently, a private business affords so much more flexibility, agility and speed of decision making due to the lack of bureaucracy compared with a listed entity.
Family Values
In my experience, family businesses have at their core, family values. This means that as an employees we are more than just a number. Compared to my experience in a global professional services firm, at JWH Group I felt like I mattered. I was treated like extended family where people took the time to get to know me, showed interest in me and my family. Others would notice if I wasn’t well or something was troubling me. People cared. That’s what kept me there for 15 years. And that’s why in many family businesses you will see amazing long service records. Loyalty is valuable and is valued.
Chartered Accountants Australia and New Zealand magazine recently published a series of family business articles. Below I share my takeaways and links to the full articles.
The joys and pitfalls of employing family members
“The governance piece breaks down when a role is provided to a family member simply because they’re a family member, rather than them being best suited for the role…”
I’d put it a bit more bluntly than that. Just because your surname is X, doesn’t automatically equip you to be a leader of the business. Where I’ve seen things work best is where the family can have brutally honest conversations. Where the next generation have the courage to say either they don’t want to be part of it, or they want to be involved in some capacity, but not as a leader or to express their aspirations of leadership. If it’s the latter, an acknowledgement by all of the family that the leadership role has to be earned and is not an automatic entitlement.
What do we mean by succession?
“The Grant Thornton Family Business Survey 2023 reveals just 38% of family businesses are already implementing a plan (for succession) while 72% say succession is a key priority for their business in the next 24 months.”
ingIn my view, if the family business is only starting to think about this 24 months away from a succession event; they have left themselves a lot of work to do. Succession can be thought of as a one time event, but a better way to think about it is to apply succession thinking to the family business from the outset.
“But it also means there are systems in place so the business can run without you, and there are key people in the business apart from you – the person looking to exit or sell – who have the training and knowledge to keep the business running.”
And this is the crux of succession thinking; creating value in the business that is independent of the owner. There are processes in place for the succession of ownership, of leadership, of knowledge and know how.
“The first element to develop is a clear picture of what the owner wants the outcome to look like.” What is your vision of where you’re going and who is involved in that vision?” This is the most important and the hardest piece of work for the owner.
As chartered accountants we have a reputation for being a safe pair of hands to help you navigate the sale of your business. We put in place the right structures to effect changes of ownership, all in the most tax effective way. But, not all accountants have the experience and expertise to support you to articulate your vision. This is the staring point to building succession thinking into your business. You may need an adviser or coach to work alongside you and your accountant. And that’s the work I love doing at adapt.
What does the Owner want?
“There are any number of eventualities that family business owners can and should prepare for. This is why purpose – or “hopes and dreams” – is vital to establish upfront.”
I would prefer to use the phrase Owners Vision, but we’re talking about the same thing. It’s what the owners want out of the business for themselves and for all stakeholders (besides the financial returns). In a family business it’s essential to consider the intentions of bringing the next generation into the business, and how roles and ownership will be handed over. Or, it may be that the next generation have no desire to work in the family business.
“Most family businesses are not built to just disappear; they’re built to serve a purpose. Knowing that purpose assists greatly in getting the structure right.”
When I was at JWH Group, as the next generation entered the business one of the hardest things for the founder was to share his thoughts with his children. Up until that point, it was all in his head. It was quite a challenge to build new habits of consulting with them on business decisions when he’d been used to making all the decisions. We started a formal strategic process for the family to share their aspirations to ensure all were on the same page.
The point of this article is that setting up a family business structure should not be a tick box exercise. The structure needs to meet your needs; your purpose; your vision. So, if you’re thinking about setting up a family business, my recommendation is to ensure you work with an accountant who takes the time to explore the bigger picture. They need to gain a full understanding of your aspirations, before diving into the paperwork. And if your accountant isn’t good at this stuff, I can support you to get that aspiration out of your head and onto a bit of paper. You can get in touch here.
