3SponsorforewordDoes the family or thebusiness drive success?THE North West has long been a hotbed of thriving family businesses. Onequestion to ponder is whether it’s the‘family’ or the ‘business’ that drivesthat success? The answer may simplybe that that those businesses whichreconcile the competing demands ofboth become the big winners. Certainlythe need to manage on a commercialbasis could create threats to the familydynamic. The fact there are relativesworking together could lead to ‘heartleads-head’decision making. On theother hand, loyalty and commitmentto long term shared goals can be verystrong.There are countless local success stories.Take Timpson, under the unblinkingand individual leadership of JohnTimpson CBE, which features onbusiness awards lists with metronomicregularity. Similarly, Warburtons’ salesstand comparison with any other foodand drink company in the UK market.Not bad for a family owned bakeryfrom Bolton. Other sector leadersinclude the recruitment specialistFircroft which, under the leadership ofCEO Johnathan Johnson has generatedalmost £1 billion of sales. Then thereis the Seddon group, run as a familycollective for in excess of 100 yearsand now thriving as 3 separate andindividual family businesses.While no business model is a shortcut to success, there is consensusamong business analysts, advisers andacademics that a family ownershipstructure can bring significant benefits.Central to these strengths is the agilityand flexibility in the decision makingprocess.Being fleet of thought is one thing butwith family businesses it is counterbalancedwith a perspective based‘When it is your own name on the line, and whenyou are receiving and passing the baton of yearsof hard-earned reputation, you may take thatlittle bit more care to ensure that it is not yourgeneration that drops it.’on the dynastic view that familybusinesses may take; a family business‘owner’ is often a steward for thebusiness through to the next generationrather than looking to maximise shortterm (and potentially self-interested)shareholder value. It is this quality thatin part defines theGerman equivalent– the so-called‘Mittlestand’ – whichis rightly celebrated.Family ownedbusiness are therock on which theGerman economysits.John Loeblpartner,Grant ThorntonManchesterGiving customersthe personal touchand care is something which mostbusinesses aspire to. But when it isyour own name on the line, and whenyou are receiving and passing the batonof years of hard-earned reputation,you may take that little bit more care toensure that it is not your generation thatdrops it. It is creating and preservingthat reputation which lies at the heart offamily business success.”« Previous | Back to Contents | Next »

4SponsorforewordUnique and complexchallenges must be overcomeTHE UK’s oldest family firm, butchersR J Balson, can trace its roots back to1535 when it began trading on a Dorsetmarket stall.Almost 500 years on, the familyskill is still being passed down and,25 generations later, the business isthriving.While the business world has certainlychanged over the last five centuries,some of the unique and often complexchallenges facing family firms remainthe same, and commercial and personalinterests can often overlap.Chris Rosscorporatepartner,Mills & ReeveSuccession is still akey issue for many.Is there a naturalheir and does he/she have the skillsto lead the familyfirm? Or is time tobring in new blood?If so, how do youprotect the familybusiness? Doesthe business haverobust partnership and shareholderagreements in place?Relationship can and often do breakdown, therefore it is essential that thebusiness is protected from family riftsor divorce.Also, after working hard to build up thefamily firm, what are the best ways forthe family to extract their wealth andpass it on to the next generation in themost tax efficient ways possible?Whatever the issue we have helpedclients achieve their goals. Our workincludes assisting a client in leavingcontrol of his £50m turnover businesscompany, we have worked with otheradvisers providing personal tax adviceboth pre and post sale and ensuringfamily interests are not forgotten while‘Succession is still a key issue for many. Is there anatural heir and does he/she have the skills to leadthe family firm? Or is time to bring in new blood?If so, how do you protect the family business?Does the business have robust partnership andshareholder agreements in place?’At Mills & Reeve, protecting the familyfirm and maximising value are at heartof everything we do.We understand that every familybusiness is different and our team,which is made up of some of the UK’sleading private wealth and corporatelaw specialists, combine specialistknowledge on how to structure,manage and implement the rightarrangement to suit your specific needs.to his employees while retaining anincome stream for family members.We have advised on the structure of afamily group of companies to ensureshareholders retain 100 per centbusiness property relief for inheritancetax purposes.When clients have decided the time isright to sell a controlling interest in theachieving commercial objectives .At Mills & Reeve, we take time to get toknow your family and your business toensure you get the best possible advicefrom a team of trusted advisers.« Previous | Back to Contents | Next »

➔ 5Making a successof successionFEW interesting facts place the importance of familyA businesses to Britain’s economy firmly in context. For a start,family businesses account for two-thirds of firms in Britain’sprivate sector and it’s estimated that there are around threemillion in existence today.Mainly comprising small and mediumsizedenterprises (SMEs), they provideemployment for more than nine millionworkers - which is around 40% of totalprivate sector employment.and family business and director of theCentre for Family Business at LancasterUniversity Management School,said that the statistics relating to thesuccession are “hair-raising”.With family-ownedbusinessescontributing morethan £350bn toBritain’s economyeach year, therehas never beena more importanttime to makea success ofsuccession.Family firms are also attributedwith making a £350bn value-addedcontribution to Britain’s gross domesticproduct (GDP) - which is nearly aquarter of the total.John Loeblpartner,Grant ThorntonManchesterIn short, when itcomes to the ongoingsuccess of “UK plc” ithas never been moreimportant for familybusinesses to make asuccess of succession.But ProfessorAlfredo De Massis,chair professor ofentrepreneurship“Only 30% of firms survive thetransition from the first to the secondgeneration, 12% from second to the thirdgeneration, and just 4% from third tofourth generation.“We need a better understanding ofwhat makes for a successful transitionacross generations, for the sake offirms and families, but also all the othernetworks of business linked into theseenterprises.“When they work - for example, inItaly and Germany, where familybusiness has traditionally been agenuine bedrock of the economy - thesetypes of business are sustainable andresilient in ways that publicly-ownedorganisations struggle to replicate.”John Loebl, a partner specialisingin family business at accountantsand auditors Grant Thornton, added:“What interests me is what creates asuccessful family business - is it thefamily members behind it or is it thebusiness itself?“I think that ultimately, it boils downto the decisions taken by the familymembers but this can make it difficult totake the family hat off when it comesto succession.➔« Previous | Back to Contents | Next »

‘What will work for one family business will notbe appropriate for another - and ultimately it’sabout working out what’s best for you.’was to bring onto his board a host ofprofessional advisors to assist with thebetter running of the company.“In addition, he decided to recruitsomeone else to work as managingdirector while he focused on strategy.“If someone isn’t up to the job - but isa family member - then my generalimpression is that there are a lot ofbusinesses which simply aren’t brutalenough in getting rid of them.”Prof De Massis added that his researchhas identified three basic causes ofproblems when it comes to succession.“The first of these is that all the potentialfamily successors decline the leadershipopportunity and – secondly - dominantleaders reject all the potential familysuccessors.“The third major problem when itcomes to succession is that the ownersat the helm of the business decideagainst continuing, even if there areacceptable successors, because thebusiness is not believed to be financiallyviable or rewarding.“Working beneath these situations areimportant factors around individualabilities, conflict and rivalries, financialposition, business performance andpractices.”Fiona GrahamInstitutefor FamilyBusinessFiona Graham,spokesman for theInstitute for FamilyBusiness, said thatthe single best pieceof advice is for familymembers to enterdiscussions longbefore the reins arehanded over.She explained:“Starting conversations and planningearly gives you the best chance ofmaking it a success – it’s as simple asthat.“Both generations need to work togetherto ensure the best future for thebusiness – good relationships will bedamaged if family members feel a planis being imposed upon them.“Plan early, and try to implement anytransition in steps.“Careful planning and implementationover time means both generations aregiven time to adapt to their new rolesand responsibilities.“And remember – succession providesan opportunity to look to the future ofthe business and family.“A well organised succession processprovides you with the perfectopportunity to look at how you work,where your strengths are, and whereyou will need to bring in non-familyexperts to develop a long-term futurefor the business and your employees.”Loebl agreed that succession planningneeds to take place long before itbecomes relevant – and the mostimportant thing is for there to be buy-infrom all generations.He explained: “Some businesses chooseto give family members roles on theshop floor and allow them to worktheir way through the ranks - and thisallows them to gain the respect of otheremployees and can ultimately lead to asmoother transition.“And a great degree of self-awarenessneeds to be present when it comes tosuccession.“One of my clients found himself asmanaging director of a company afterhis parents placed him in charge.“He quickly realised that it wasn’t rightfor him and his way of dealing with it“What will work for one familybusiness will not be appropriate foranother - and ultimately it’s aboutworking out what’s best for you.”Loebl added that it can be worthwhilefor family-run companies to examinenew business ownership structures.But he adds that – when it comes todetermining what’s best – the devil isin the detail surrounding the size of thebusiness, the personalities of those incharge as well as its profitability.“It obviously makes considerabledifference whether the company isrun by one individual, a partnership, alimited company or a limited liabilitypartnership.“It can be worth reviewing thisstructure as part of succession planning– for example, there might be morecontrol for a patriarch or matriarch insome ownership structures more thanothers. The best advice is always to seekprofessional advice.”Iain Hasdell, chief executive of theEmployee Ownership Association,said that “employee ownership” is alsoproving an increasingly popular routefor family owned businesses that wantto secure the long term future of thebusiness beyond family ownership. ➔« Previous | Back to Contents | Next »

Iain Hasdellchief executive,EmployeeOwnershipAssociationHe explained: “Inthese contexts, theemployees often haveexcellent knowledgeof the business, arealready stronglycommitted to its longterm future and,when presentedwith the opportunity,have a strongpersonal appetite forownership.“When these businesses transitionfrom family to employee ownershipthey join a sector of the economy that isexpanding rapidly.“Employee ownership is now on ascale similar to other high value addedeconomic sectors such as the aerospaceindustry and it contributes more than£30bn to UK GDP each year. “Deborah Clark, a partner at law firmMills and Reeve who specialises inadvising family businesses, agreedthat employee ownership schemes areworthy of “full consideration”.She explained: “Employee ownershipis increasingly moving up the agendaas more and more family businesses,which have no immediate successors totake over at the helm, look to secure thefuture of their company by selling it toemployees rather than a third party.“While employee ownership is nothingnew, from April last year companyowners can now sell a controllingstake in the business to an employeeownership trust without incurring acapital gains tax charge of 10%- makingit an even more attractive option forfamily businesses looking to hand overthe reins.”Additional employee ownershipincentives confirmed in the Finance Act2014 also include that bonus paymentsmade to employees of employee ownedcompanies will be exempt from incometax up to a cap of £3,600 per employeeper annum.There will also be an increase inthe maximum value of shares thatemployees can acquire under allemployee Share Incentive Plans (SIP).Clark added: “There has been a markedshift in recent years towards employeeownership with department store chainJohn Lewis often held up as a beacon oftheir success.“However thereare a multitude ofcompanies froma diverse rangeof sectors frommanufacturing,hospitality and socialcare to financialservices, IT and evenfish processing,which are owned bytheir employees.Deborah Clarkpartner, Millsand Reeve“Aligning the interests of companies andtheir employees through an employeeownership structure can undoubtedlysecure more sustainable growth.”Case studySunkissed gives Rainbow ahealthy glow in 25th yearIN August Rainbow Cosmetics willcelebrate 25 years in the beautyindustry.The family-run company, now inits second generation is based inNorth Manchester. It was founded in1990 by husband and wife John andHeather Sharman, who spotted aniche in the market to sell discountedfragrances and cosmetics.Rainbow Cosmetics is nowrecognised as one of the UK’slargest, independent wholesalers offragrance, cosmetics and toiletries,working with and supplying some ofthe largest global and UK retail giants.In 1999 the Sharmans decided tosell their own range and ActiveCosmetics was launched, soonfollowed by Sunkissed cosmetics anda range of toiletries and gifts.In 2010, John Sharman steppedinto the role of chairman as his sonStephen rejoined the business, wherehe had worked during the summerin his student days, as managingdirector.Stephen, 34, previously worked forfast-growing discount retailer Lidl, anexperience which he says taught hima lot, and has benefited the familybusiness.“Going to work outside the familybusiness was something my parentsand I agreed would be best for us all.I was with Lidl for seven years and ithas been great to come back in withsome fresh ideas.“Working outside of our business hasalso helped me to be accepted as MDby some of our long--serving staff Ibelieve, as they know I have workedat a senior level elsewhere and amnot the managing director because ofwho my parents are.”Rainbow Cosmetics currentlyhas sales of £32m - the majorityof which comes from wholesaleof cosmetics and perfumes - andit is looking to grow to £40m by2020, thanks to international tradeand growth of self-tanning rangeSunkissed, which is promoted byThe Only Way is Essex TV star LucyMecklenburgh.Stephen Sharman said: “Trust, hardwork and treating others as youwish to be treated is at the core ofeverything we do and we implementthese values internally across theworkforce and externally with ourcustomers.”« Previous | Back to Contents | Next »

Adding realvalue to familybusinesses forgenerations tocomeThrough our extensive experience of working withfamily owned businesses each year, we understandthe barriers and opportunities they face whentrying to unlock growth in the current market place.Dealing with challenges such as wealth protection,succession and maximising tax incentives, familyowned businesses require expert and experiencedsupport. With a combination of understanding,award-winning technical expertise and passion, weare able to offer support – providing forward-thinkingadvice and unlocking valuable insight to help drivesustainable future growth.For more information,please contact:John LoeblTax PartnerT 0161 953 6332E john.loebl@uk.gt.comgrant-thornton.co.uk©2015 Grant Thornton UK LLP. All rights reserved. Grant Thornton UK LLP is a member firm within Grant Thornton International Ltd.Grant Thornton International Ltd and the member firms are not a worldwide partnership. Services are delivered independently by member firms. Full disclaimer available at grant-thornton.co.uk

➔ 9Family businesses:dealing with divorceTHE ramifications can be particularly profound for familybusinesses when the spectre of divorce rears its ugly head.Years of hard work – frequently by successive generations - canbe torn asunder as the ink on the final settlement dries.The potential fordivorce to ripfamily businessesapart cannotbe overlooked,as Ben Roothdiscovers.But according to the experts who dealwith the fallout from divorce on a dailybasis, it remains a topic that manyentrepreneurs find “distasteful” todiscuss before a separation occurs.And this is as likely to be the case whenit involves two partners who’ve builta business up from scratch as it iswhen someone has simply married amember of a family firm.Alison Bull, a family partner at Mills &Reeve, places the issue in context thus:“Divorce is seldoma straightforwardprocess.Alison Bullfamily partner,Mills & Reeve“The involvement of afamily business oftenmakes that processmore difficult.“A recent divorcecase hit the nationalheadlines because acouple had spent £920,000 wranglingover assets worth less than £3m.“Most of those costs arose from a bitterdispute over the value of the couple’smarket gardening business.”Bull adds that “cost-effective solutions”to divorces involving family businessestend to be found if the following factorsare kept in mind:Early disclosure of the nature andvalue of the business is a good firststep;Consider whether the couple coulddiscuss options in mediation to keepconflict to a minimumOtherwise it is sensible for bothsolicitors to discuss at an earlystage whether professionalvaluation advice is necessary and,if so, whether a single joint expertaccountant should be instructedto prepare a report. A single jointexpert is someone who’s instructedto prepare a report for the court onbehalf of the two parties;The parties and their advisers shouldkeep under review the “creativemeans” by which a settlement can beachieved;Is a valuation really necessary? Orwould a transfer of an interest inthe business achieve fairness forthe parties? If so, should there bea new class of shares created and/or a shareholders’ agreement orpartnership agreement to govern thefuture commercial relationship?Is there liquidity in the business withwhich the departing spouse couldbe paid a lump sum?➔« Previous | Back to Contents | Next »

Would loan notes be a useful vehicleto deliver value if a transfer of aninterest is not a favoured option?Grant Thornton has a specialistforensic accounting team working onmatrimonial cases.Its remit covers the breadth of corporateand personal financial issues that can befundamental when spouses who ownbusinesses go their separate ways.The service includes investigatingpersonal finances, asset tracing andvaluing businesses right throughto restructuring businesses to helpfinance a clean breaksettlement.Louisa Plumbassociatedirector,Grant ThorntonManchesterLouisa Plumb, anassociate directorof the forensic teamat Grant Thorntonin Manchester, said:“One of the areas ofstrongest demandis in business andshare valuations.“In many cases,the business valueconstitutes a significant part of anyfinancial assets considered in divorceproceedings.“So it’s particularly important to obtainrobust advice from experienced valuers.“We are always looking for the papertrail and can usually find it.”Pre- and Post-nuptialagreementsProfessor Alfredo De Massis, chair ofentrepreneurship and family businessat the Centre for Family Business atLancaster University, said that researchhe’s co-authored has shown thatdivorce is a serious factor preventingsuccession.He explained: “Divorces should beconsidered at the earliest opportunityand should be considered as oneof the possible risk factors for thesustainability of the family business.“Too often we focus our attentionon risk factors pertaining to thebusiness sphere, forgetting about thosepertaining to the family sphere.“Typically the engagement of outsidethird parties can be of help to managethe difficult and delicate situationassociated with the imminence of adivorce in the family business.“It would be also advisable to set upbefore the event some rules to deal withthe implication of divorces before thesemanifest.”Fiona Graham,spokesman for theInstitute for FamilyBusiness, agreedabout the importanceof this.She said:“Establishinggood governanceprocedures meansyou can be prepared,having thought abouthow you will dealwith the unthinkablebefore it occurs.ProfessorAlfredo DeMassischair,Centre forFamilyBusiness,LancasterUniversity“This preparation means that if a divorcedoes occur, everyone is aware of howthings will be dealt with.“This can help take some of the emotionout of the process and help everyoneinvolved feel that they have been treatedfairly.”Mills & Reeve’s Bull said that the mostobvious way for entrepreneurs at thehelm of family businesses to definewhat happens in the event of divorce isthrough pre-nuptial - and post-nuptial –agreements.Bull added: “Businesses are often atthe centre of bitter and expensivedivorce battles.➔“It’s a complex area because the valuein the business may well rest withthe owners – not least because it’s notworth as much if one or both of themleave.“Increasingly, the significance lies inthe cash flow a company can generaterather than the value of its shares.‘Too often we focus our attention on risk factorspertaining to the business sphere, forgettingabout those pertaining to the family sphere.’“Stripping money out of the businessbefore or during divorce proceedings isone of the areas we might be asked toexamine.“That can happen in many formsbeyond the obvious such as highsalaries and expenses,”Plumb added that in some instances,offshore business structures are usedto obscure asset ownership and thetrue substance of transactions, makingthe job of the forensic team even morecomplex.She continued: “We have many routesto assist the client in understanding thetrue position and identifying assets andfunds which they suspect to be hidden.« Previous | Back to Contents | Next »

“For entrepreneurs, many are desperateto protect the company which theyhave invested much time and energybuilding up, whilst families are keen topreserve wealth and keep the businessin the family.Case study“Family businesses and entrepreneursmay be offered greater protection frombitter divorce battles following newrecommendations that prenuptialagreements become legally binding.“The Law Commission – which is astatutory independent body that adviseson law reform - has called for prenupsto be legally binding in divorcesettlements.“This will mean that, for the first time,individuals will be able to ring-fenceassets and effectively “opt out” of sharingthose assets in the event of divorce. “Former family businessboss launches supportnetworkMills & Reeve, has advised on numerouspre and post-nups for family businessowners, their children and spouses.Bull added that those family businessesor entrepreneurs who are thinkingof entering into a pre-nup should notethat there’s no point in drawing up anagreement which is unfair or wouldnot meet a spouse’s financial needs, as itwould likely be overruled in the event ofdivorce.She continued: “Pre-nups haveincreased in popularity in recent yearsand - if the Law Commission’s proposalsbecome law - it will provide greatercertainty for family businesses andentrepreneurs.“Prenuptial agreements have beencommon for families, particularlyamongst those that have seen thecompany pass through the generationsand are keen for it to remain in thebloodline.“There have been cases where a familymember has, for example, held areasonable sized stake in the companyand the soon to be ex-spouse has madea claim on half of that shareholding.“In extreme cases the business, whichhas been in a family for generations,has had to be sold. Frequently, itis necessary for the business to bere-structured to facilitate a divorcesettlement.“Legally binding pre and post-nups willoffer greater certainty and protection forfamily businesses and entrepreneurs.”DANI Saveker launched Familiesin Business, a network of supportoffering and consultancy servicesto family firms, to help others learnfrom her own tough experiences.She was the last chief executive ofSavekers, a manufacturing businessin the Midlands which closed in2009 during the recession, ending106 years of tradition.She said the business had imploded andcaused huge strife within the family.“My mother did not come to mywedding because of a problem inthe family because of the business.People generally don’t want to sharethe honesty ofwhat goes on. Itmakes our legacylive on to tell ourstory.Dani SavekerFamilies inBusiness“Yes there werefunny moments,but it was bloodypainful, and still is.I don’t think yourealise what youhave got until it’s gone. I share whathappened in our family because Iwant people to learn from, and notmake the mistakes we did. “She added: “We had a situation in oursecond to third generation transitionwhere one the family died suddenlyleaving his 28-year-old son as MD,without any proper successionplanning. That was one of the biggestmistakes… If we look back at whatwent wrong there was no support,no succession planning, and the guydidn’t want the position anyway– something he later admittedwhen he was in his 70s. He ran thebusiness for 40 years as someonewho didn’t want to run the familybusiness, but did so out of duty.“It’s one of the complexities thatoutsiders don’t get of what than canfeel like. I talk about it as the tumourthat started off as a little blemish. Weignored it and it grew and grew andgrew”.Families in Business launched itsNorth West branch earlier this year,and has recently published researchon what the pinch-points are forfamily business leaders.The organisation believes a lack ofrelevant and professional support forfamily-owned small and mediumsizedfirms is leaving owners feeling,isolated and undervalued.« Previous | Back to Contents | Next »

➔ 12Case studySeddon’s successfulthree-way splitIN APRIL 2013 £300m turnover, familyrunconstruction and engineeringgroup Seddon was split up.Jonathan Seddon, a member of thefourth generation, who is managingdirector of Seddon Solutions whichincludes the construction, development,care and housing partnership divisionsbased in Bolton, said all three businesseshad been “energised” by the process.He explained how the deal came about,and how the guiding aim of the processwas to make sure there was no fall-out.“We made some ground rules. One setof lawyers for all three families, one setof accountants, and the golden rule wasthat no one must feel happy and that noone must feel sad. The last rule was ‘wedon’t fall out’ – which we managed todo, until we came tothe plasma TV on thewall!.”He said using anindependent adviserhad been key to asuccessful process.set of meetings with an adviser – andit’s key to take advice, don’t do it onyour own. The adviser sat us all downtogether and listened to the families’thoughts on what they wanted.“I think then, he got a clear impressionthat, yes they all love and respect eachother, but they are not going to worktogether because they are fourthgeneration, totally diverse in terms ofvision, lifestyle and ages – there is 30years between us.“We had a working party and came upwith three options at the end. One weget a chief executive in and we all take astep back and do what we do best thatwasn’t a goer, two was that we sell, andthree that we partition.“Everyone felt like they wanted to owntheir family business, and not have 13shareholders, which could soon become30.”The partition created three businessesSeddon Solutions, Novus PropertySolutions and Seddon EngineeringHoldings.Jonathan Seddon added: “We left all thetricky decisions to the 70-plus year-olds,who were never going to fall out. Thehardest conversation was me tellingmy Dad that this is what we were goingto do, when all his life he had been about‘all for one’.“Ask him now and he’ll say it’s brilliant– the three businesses have beeninvigorated.”.JonathanSeddonmanagingdirector, SeddonSolutions“We had severalconversationsover the years andnothing happened.We then had a final(L-R) Jonathan Seddon,Nicola Hodkinson, Jamie Seddonand Christopher Seddon« Previous | Back to Contents | Next »

helping youdo businessAs a business owner you need common sense advice anda joined-up approach. We know that business and personalinterests can blur, so our expert lawyers take the time toreally understand your circumstances.Whatever support you’re looking for, our specialist solicitorswill work closely with you to identify the advice you reallyneed and deliver this in a straightforward, jargon-free way.We are Mills & Reeve.A world class law firmFor more information please contact Deborah Clark on 0161 235 5432or email deborah.clark@mills-reeve.comwww.mills-reeve.com/businessowners@millsandreeveBirmingham, Cambridge, Leeds, London, Manchester, Norwich.

14RoundtableHow yourfamily firm cansurvive and thriveTHIS is according to a group of North West family businessleaders and expert advisers, who gathered to debate the issuein south Manchester.Other key learnings at the session,sponsored by business advisers GrantThornton and law firm Mills & Reeve,included: keeping the shareholderstructure simple; engaging independentadvisers and impartial non-executivesto help with generational change and tomanage conflict quickly.There was much discussion too,about preserving and observing thevalues of the family business, whichcan be no small achievement when abusiness has grown significantly andhas hundreds of employees and manylocations.While family businesses can bedynamic and successful enterprises,they can also be dysfunctional and insome cases destructive.Mike Roberts, fourth generation deputychairman of Frank Roberts & Sons, the128 year-old Cheshire-based bakerycompany with 850 employees, saidkeeping a simple shareholder base andmoving with the times had helped hisbusiness survive and thrive.“You want to have happy familymembers and happy shareholders. Iguess the shareholding issue can bequite complicated in older companies,often there can be a fairly wide spreaddepending on how those shares havebeen distributed over the years.“Most family companies will havemore issues as they grow anddevelop, depending on the number ofshareholders they have – somethinglike 10% don’t get beyond generationthree.“There are some companies withmany hundreds of shareholders in thefourth generations and that makes itextremely difficult because the onlyway they are going to get any incomeis to sell the company. Unless it ishuge, it’s going to be hard to pay thoseshareholders any sort of reward, it’s anissue.Honesty, goodcommunication,creating ameritocracy andabove all stayingrelevant to themarket placeare the essentialingredients of asustained andsuccessful familybusiness.“It’s also important to be in the rightproduct area too. It’s the product, it’sthe competition, it’s the lifecycle of theproduct and the shareholding as well.”Roberts said maintaining a dialoguewith shareholders is important too – allare sent monthly accounts.This was true also for John Falder,managing director of Manchester-➔« Previous | Back to Contents | Next »

TheAttendeesNick Bianchi,director,Arighi BianchiJohn Falder,managing director,HMG PaintsMatthewKimpton-Smith,chief executive,Cygnet GroupJacqui Jackson,head of familybusiness engagement,Centre for FamilyBusinesses, LancasterUniversityDeborah Clark,partner,Mills & ReeveMike Roberts,deputy chairman,Frank Roberts & SonsJonathan Dobkin,director/co-owner,ConnectionsRecruitmentbased paint manufacturer HMG Paints,who said transparency along withevolution of product and managementwere his key pointers for success.“We are members of the Institute ofFamily Businesses, which is a havenof best practice and we have adoptedthings from them, for example I doa bi-monthly news sheet to all theshareholders in our business, and itshows them the good, the bad and theindifferent. I always get feedback onit – and the whole family is involved inwhat’s going on.“In family businesses, where itgoes wrong, basically it’s people notcommunicating properly, and peoplesticking to a point of principle, ratherthan taking a more pragmatic approach,and saying ‘we agree to differ’.“The point of principle then can becomesomething legal, which can then drive awedge, and create divisions. I would likethe law to be more conciliatory and lessdivisive.”Chris Ross, corporate partner atMills & Reeve said in his experiencematters legal are secondary to givingadvice to help save businesses whenshareholders are at war.He said: “One of the cases we dealt withlast year involved a family business,and because of the nature of theshareholding structure and the lack ofany shareholders agreement or familyconstitution there was a constant threatthat one of the parties would wind upthe business which would have been adisaster. Matters like the employmentterms of family members that wouldnot normally derail a deal in thiscase nearly brought negotiations to adeadlock. This is the kind of issue that isunique in family businesses.“Dani Saveker agreed, “Disputes can be sodifficult, there is no win or lose, right orwrong in family businesses, becauseit’s family.”➔Dani Saveker,founder,Families in BusinessJohn Loebl,tax partner,Grant ThorntonJonathan Seddon,managing director,Seddon SolutionsChris Ross,partner,Mills & Reeve« Previous | Back to Contents | Next »

Dealing with strife at work – and alsoat home is a major pitfall, but it can beovercome, if problems are identified atan early stage, and if family memberstry to take feelings and personality outof business decision making.John Falder said on occasion he feelshe’s in a “love-hate” relationship with thebusiness.“You have to remember, at the end of theday it’s a business it’s means to an end,rather than an end in itself. There areperiods of time when you think ‘whythe hell am I doing this’ ?an insensitive comment about her nothaving any more children.“In a corporate environment you’dbe in a tribunal, but because he wasmy cousin and I love him, I slappedhim around the face a bit and told himwhere to go.”Jacqui Jackson, agreed: “Most of the mostsuccessful family business are thosethat are have embraced this emotionalrelationship and developed the skillsthey need to take it forward. I supposeit’s because they have learned fromothers, taken an wider view and reallywant to be the best in class and a greatbusiness. It can be done.”Matthew Kimpton-Smith of CygnetGroup concurred: “ Because you are afamily you are stick with it, you workthrough the dysfunction to get an endresult, because there is not the choiceabout leaving.“I think there is a definite decision to bemade as to whether you have a familyownedbusiness, or a family-runbusiness.”He said he had decided with his parentsto bring in a skilled professionalexecutive team to help the businessgrow and achieve its potential. It wasagreed too, that non-family memberswould make up the board.“In our instance, we decided that eventhough I was the MD, we would be afamily owned business not a familyrunbusiness – you have to be the bestperson for the job. So you do not get tobe a decision-maker, or be on the boardunless you are good enough.“We as a family made that decision – Iwas talking with my parents aboutwhether they should be on the boardor not, and they were questioningtheir value, which was very brave andhonest of them,“We decided that they would not beon the executive board, and it wasa very clear statement to everyonein the business that this is not aboutyour name – we are going to be aprofessionally-run business and we’llalways look for the right person for theright job.”“I think it is useful to try and take someof the emotion out of the thing, andtry and objectify and turn it back tobusiness.”Nick Bianchi, director of Cheshirefurniture retailer Arighi Bianchiconcurred: “I agree, but it’s sometimeseasier said than done – your family canget to you in ways other people can’t.”‘I think it is useful to try and take some of theemotion out of the thing, and try and objectify andturn it back to business.’Jacqui Jackson from University ofLancaster said family businesses are bytheir nature “emotional” organisations,but good business disciplines can belearned .She said: “Family business areemotional, families are emotional.Like anything you can learn to ride abike well, and learn to run a businesswell by stripping out some of theemotions, and there are lots of tools,tips and techniques out there on howto communicate with each other, andfeedback to each other, as you wouldin an employer-employee, manageremployeerelationship.“In family firms we speak to each otherreally quite badly, much worse than ina normal corporate environment.”Dani Saveker agreed, revealing thatwhen she was at the helm of her familyfirm, one of her cousins made« Previous | Back to Contents | Next »

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