Succession planning in family businesses is about more than leadership

The third and final article from a family business round table with Kuits Solicitors

Family business: Getting a smooth transition as the baton is passed to the next generation can be fraught with difficulty

Succession planning, and ensuring a smooth leadership handover, presents a challenge for all businesses, but family businesses add an extra layer of complexity.

It can pitch siblings or cousins up against each other, while the different generations can take very different views on the future direction and needs of the business.

On top of that, family dynamics can bring in factors unrelated to a person’s appropriateness for leadership roles.

Speaking at a roundtable held at Kuits in Manchester, Floorbrite’s marketing and brand director Nina Wyers said: “Dad had his ideas before he died about how he wanted his succession to go and that was to have one decision maker, one person managing the company. That’s because he ruled with his head.

“My mum, who is chairman, rules with her heart and she couldn’t decide between my brothers and they are both joint managing directors, which is not easy all the time, however we manage really well through open and honest communication and a little bit of give and take.”

Paul Bricknell, tax partner at Kuits, which specialises in advising family businesses on succession planning, said: “My experience of working with family businesses is you can have three identical businesses in terms of family dynamic and they can have very different views about what succession looks like.

“If you look at some of the Manchester brewing families where they have 100 shareholders, like Hydes or Robinsons, their shareholding is almost like a plc.

“Whether that works because actually the brewing families are predominantly property-owning companies as much as brewers now, and they are very different from trading businesses.”

Each generation can see the number of family members quickly grow, especially once husbands and wives are added in. This creates two main problems – the increased number of opinions on how the business should be run and the greater financial demands as the dividends are being shared more widely.

“There are only five of us in this generation and then it gets wider,” said John Sutton, chief executive of Widnes-based Suttons Transport Group.

“Our plan will be to consolidate because you can’t have 20, 30, 40 shareholders in a private business – there would be too many snouts in the trough.”

Bents Garden & Home was started 80 years ago. For third generation managing director Matthew Bent, the issue of succession – though lying well in the future – is already a consideration.

“We have got a few years yet, the eldest is 14,” he said.

“My dad is still partly involved and there are my three sisters who are involved in the business in different roles.
“The scenario is there are four of us in this generation, 14 in the next generation – plus husbands and wives – and it could be an absolute disaster.

“If it’s the right person to be in that role then we will employ them. If they are not then we will move them on.”