A recent study by Grant Thornton showed that family run businesses make up two-thirds of all businesses around the world and account for over 70% of global GDP each year. In Northern Ireland, the picture is similar, with a higher ratio of family run businesses than any other region of the UK.
The broad mix of Northern Irish family run businesses which export both skills and goods globally is a testament to the quality of the skilled labour and resources that we have here.
Recent statistics from the UK based Institute for Family Business however, showed that only 10% of family run organisations are currently in the ownership of the third generation and only 8% are in the ownership of the fourth generation or more.
Choosing the right person to take the reins is perhaps the most important strategic decision a family run business can make. Leadership talent within the family should be identified and nurtured from an early age. When the timing is right for the handover, it should be orderly and co-ordinated in a way to ensure the institutional memory of the former leader(s) does not leave the business immediately.
The worst case scenario involves forcing or expecting the next generation to take control if they don’t want to, or if they lack the appropriate skills and experience to take the business forward. As you might expect, this approach does not tend to produce positive results.
In addition to succession planning, a lack of formal structure and poor corporate governance procedures are an unfortunate common weakness among family run businesses. All too often, the lines between family, business ownership and the management of the business are blurred.
Although often challenging to introduce due to the presence of a strong patriarchal/ matriarchal figure, a clear written structure can be very useful to define and regulate the relationship between family members and the business, and seek to limit potential areas of conflict.
Like all businesses large and small, robust financial planning and analysis is essential. Without this, the ability to effectively manage cash flow, review key performance indicators and ensure profitability can be challenging.
Thankfully, however, in recent years there have been significant technological improvements for SMEs in this area, which can provide the perfect cost-effective solution to good quality financial information. This new technology is often 'cloud' based and available on any mobile device, meaning that the information is accessible to all and can be easily reviewed and analysed.
Family run businesses will remain key to the growth of Northern Irish economy and with consideration of the challenges faced above, it is hoped that they can survive and flourish long into the future.