The advantages of having a family brand behind a business
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The second part of our high-level panel discussion focussed on the issues surrounding family business and the need to prepare for potential problems and pitfalls.
The panel included business leaders, advisors and specialists who work with firms of all shapes and sizes.
The event at Manchester Hall in Bridge Street and our special focus week has been sponsored by Hall Brown, family law specialist, Pannone Corporate and the Business Growth Hub.
The panellists included:
Jane Shaw, a director of the private client and family business at Pannone Corporate and works as part of the firm’s dispute resolution team. Jane specialises in complex trust advice and estate and tax planning.
James Brown the co-founder of Hall Brown along with Sam has expertise in all aspects of family law but specialises in divorce involving complex financial issues. He has acted for and advised a wide range of clients from teachers, doctors and lawyers through to celebrities.
Fiona Graham is director of external affairs and policy at the Institute For Family Business. The organisation represents family businesses across the UK. Founded in 2001 by a group of family businesses the IFB is a not for profit organisation.
Rachel Clacher, co-founder of Moneypenny, set the business up with her brother Ed Reeves in 2000. Today Moneypenny is the world’s leading provider of telephone answering and outsourced switchboard services, with offices in the US as well as the UK. Rachel set up the charity WeMindTheGap which gives new opportunities in life and work to unemployed under-served young women.
One of the things we talk to people about is being prepared. A lot of families have a constitution or charter where you can lay out as many rules as you can about how the business is going to work.
It should be a living breathing document so as new issues arise, they can be taken into account.
A constitution can include things such as employment policies, it can deal with what happens in the case of divorce. Putting that down in writing as a process that everyone is involved in is so important.
Things can get very personal and if you can lay down the rules ahead of time then it can really help in the long term.
I have been involved in drafting constitutions for some very big businesses. It is much more helpful setting it out in the beginning when times are good rather than waiting for a situation to arise.
In smaller business what can be very useful is drawing up a road map. This is particularly the case when you have one person in charge of running a business who has all the information inside their head.
A roadmap full of practical information can help protect the business not just in terms of conflict but how you would run a business if someone was no longer there.
A practical document is key where you have got one person in control and isn’t the best of sharing information.
If you are a founder and it is your business then it can be very difficult to let go, people can get frustrated if the founder is clinging on and not prepared to move over and let his children take control.
It can be useful to think about how you are going to use the founder’s knowledge. The advantage of a family business is that you have that longevity of tenure.
Trying to utilise knowledge as senior counsel is quite a useful in helping people to phase their exit. It means that they still have a role and a purpose, and they can still give something back.
Ed and I were always clear that the business was our project. We have five girls between us, and they all want to go and plow their own furrow and do their own thing.
Our approach to their own career development would have been quite different had we had the expectation they would join the business. In the early days we were just trying to get to tomorrow.
The fact that Ed is my brother has allowed me to step back from the business knowing it is in very safe and capable hands.
There is something in the fact that family relationships allow you to make different kind of decisions.
Family businesses have such strong values and that can seep through into the way they are perceived.
We often find when family businesses are sold, they are sold to other family businesses.
We did research that showed consumers tend to trust family businesses more. If you use your branding to reflect that it can be very successful depending on what sector you are operating in.
For heritage brands or consumer goods such as Warburtons, the family aspect of a business can be very useful. Trust is an important part of that.
Family businesses also tend to have a long-term outlook that other businesses don’t necessarily have. Looking not just backwards but also forward because of that stability of ownership.
One of the key risks for a family business is wasting money on lawyers. So, you have to identify the key risks. Divorce is obviously a key risk and investment can often be a trigger for dispute.
In longstanding family businesses you often see the founder as seeing themselves in a stewardship role. That means they are often keen on family constitutions.
It is vital to carry out succession planning to ensure the future of the business. Planning is critical and will save money in the future.
Choosing in advance who is the best person to move the business forward onto the next stage is absolutely critical.
Planning in advance can be the difference between a business thriving or ceasing to exist.
We have run the business on simple principles and we have shared value sets, that makes Moneypenny feel like a family.
We won’t do anything unless we have cash in the bank to pay for it. We saw the business in simple terms and we wanted to keep a simple structure.
The amount of advice that is out there can be quite overwhelming but we always just saw things in simple terms.
It has got more complex because the business has grown and been successful. Over the years we have had lots of people knocking on our doors saying we need advice but we have been too busy to actually take that.
When we set up Moneypenny we were so desperate for it to work we worked extraordinarily hard, but Ed and I have always kept our shared values.
We always treat people as we would want to be treated, you get the small things right and the big things will be righter. We inadvertently created quite a special culture at Moneypenny.
Last people we had 4,000 people applying who wanted to work for us without us spending a penny on advertising.
That is a real demonstration of how family values within a business can yield a real commercial return.
Our shared values as a family has allowed Moneypenny to become the business it is today.
There is research that shows that using the fact that your business is a family business really does help with recruitment. People do want to work with a family business. They want to work with a business that is all about building something good and sustainable.
That ideas and values really resonates with millennials. People tend to think they will be more respected and valued as individuals if they go to work for a family business.
What we have found is that the next generation have a strong connection to their family’s business. They understand the connection and the heritage.
My personal rule for a family business is to get the next generation to get experience outside the business even if they want to join immediately. It is so important to go out and do something else instead.
A lot of people tell us that they didn’t want to join the family business and at around 30 they suddenly think, actually I have such a strong connection and I get to work with my family.
One of the biggest challenges in a family business is when you have some children who want to work in the business and some who don’t.
That can create friction in a family, particularly when people want to take income from the business but don’t want to work in it.
Dispute can also arise where you have got more than one family.
Since I qualified in 2004 the number of female business owners has dramatically increased. I find with some of my male entrepreneurs there is still and old-fashioned view that I still have a responsibility to my wife at home.
With some of my female entrepreneurs there is a different kind of mentality. Bottom line is the courts don’t care either way.
I would say open and honest conversations are the key and just as importantly is having the conversation before anything hits the fan.
Conversations should always be about what is the worse that can happen here and let’s prepare for that.
It is so important to remember that you are family and it is important to have time away from the business to have fun and proper relationships. It is so easy when you are running a business to get bogged down in the day to day.
It is also important to look at the best-case scenario and not bury your head in the sand. Business people will be aware of problems within the business but don’t take into account other things.
They don’t stop to think what will happen if I don’t come into work tomorrow or if my kids fall out with one another.
It’s a lot easier to deal with family issues in advance rather than waiting for it to happen.