Partner Article

Better succession plans needed in family businesses

Despite contributing an estimated 70-90% to the UK GDP, family businesses are failing to make proper succession plans.

Two in three businesses are owned or run by families, and employ roughly 9.5 million people.

However, as many as 70% fail to make it to the second generation, and only 10% make it to the third.

The recent STEP Business Families Special Interest Group event in London, highlighted some of the key issues that affect succession plans.

Assessing the skills and willingness to become involved of the next generation, as well as allowing them to experience other work before entering the family business, were suggested as measures to ensure succession.

There was also emphasis on the establishment of a development programme, where family members can gain experience across different aspects of the business.

In the North East, a fifth of business owners are planning to build their company as an inheritance for family members, according to research from Santander Corporate Banking.

Mark Squires is chief executive of Benfield Motor Group, and also chairman of The Institute of Family Business for the North East.

He said: “At Benfield we have learnt how important proper planning is in ensuring the succession of the family business.

“We have worked on a constitution for the family, which takes into consideration all the skills and aspirations of the family.

“It’s really important to start thinking about this sooner, rather than later, to establish what is the right thing for the company, and for individuals.

“To be able to make a success in management, or any other area of the business, the family member must possess the right competencies, and without these, it is a mistake both for the business and the individual.”

Michael Dickson, managing director of North East pork butchers Dicksons, a family business, echoed these views.

He said: “To ensure that we maintain family control over the business in the longer term, we operate a family council, made up of Christine, myself, our sister Dorothy and my four children - all bloodline Dicksons.

“The council follows a written constitution and when Christine and I withdraw from day to day operations, the family council’s role will be to appoint and instruct the executive board on the strategic vision for the business.”

This was posted in Bdaily's Members' News section by Tom Keighley .