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Move over, Dad?

It can be hard for founders to let go of their businesses. But if the family firm is going to survive they’ve got to know when the buzz is gone.

The names trip easily off the tongue: Rothschild, Rockefeller, Sainsbury—the world is awash with great business dynasties. And, with one-third of Fortune 500 companies remaining in family hands, what are the best ways of securing the family fortunes through the generations? How can families pursue successful succession strategies?

It’s not easy. It is often said that just a third of all family businesses make it to the next generation—let alone to the third or fourth. In Asia, the business world recently watched agog at the fallout from the battles raged between billionaire casino mogul Stanley Ho, two of his three surviving wives and the five children of his second marriage. All bets are currently off for the Ho dynasty making it to the next generation, although surely one of his 17 children has inherited his genius for business.

Anil AmbaniMukesh AmbaniAnd in India, billionaire Ambani brothers Mukesh and Anil have made peace now, but they were notorious for the feud that blew up in the wake of the death of their father.

Writs, wrath and rage: passing the family business on to the next generation can be fraught with difficulties. But it needn’t be – as long as business owners put a clear succession plan in place and – critically – they know when to let go.

Follow the example of Li Ka-shing, Asia’s richest man, who recently set his own succession plan in stone – anointing his eldest son Victor as the official heir.

But not everyone wants to be a part of the family business. Alessandro Benetton, a scion of the famous Italian fashion retailing family and now company chairman, has always been very clear that it was not his decision to join the family firm. “In the end, my family asked me,” he recently said.

A similar thing happened to Paul Isaacs, managing director at Ison, the British engineering solutions company based in High Wycombe. He had actively decided not to enter the family business, but one day was called in to sort out a problem with one of the computer systems. “And I ended up staying,” he says. “I had resisted the dynasty, but I was drawn into it.”

Drawing on family not only helps to continue the firm through the generations, but can also benefit the overall economy. The UK-based Forum of Private Business cites Germany’s Mittelstand companies as “proof of how investing in future generations can create a rich, innovative family legacy of benefit not just to the owners but to the country as a whole”.

The FPB offers 10 tips for aspiring dynasties, which it details under 10 categories (see below). The key factor here is surely opportunity: leveraging the skills brought in by the younger generation – which, for example, may be far more online-savvy – to boost the bottom line and take the company forward into the future. Martin Lambden, the founder of SYAT, an organisational development consultancy, agrees.

“Integrating the younger generation into the business can create as much opportunity as it can potential problems,” he says. “Family egos, issues and rivalries may need managing, accommodating and overcoming and it’s a challenge that takes time and effort to ensure a smooth transition. However, the very nature of family business means there is the opportunity to start the induction process sooner, formally and informally, and thus minimise the impact of potential issues.”

It’s all about bringing “enthusiasm, new ideas, fresh perspectives, different networks”, he continues, “and a greater appreciation of new technologies, with the potential for a new approach. Less obviously, [the younger generation] offers potential investors and stakeholders reassurance that the business has a sustainable future.”

And that is critical. As the original founder drifts to – or beyond – retirement age, shareholders will become increasingly nervous about their investment. The challenge, of course, at this point is not so much about succession planning, but about convincing the founder to step away from the business.

Retire? Me?
A recent survey conducted by the Open University, in association with the Association of Chartered Certified Accountants and Barclays Business Banking, revealed that more than a third of the 1,082 small and medium-sized business owners surveyed who were aged over 65 said they had no plans to retire yet.

On one level this is admirable. Gina Sharp, public relations director at White Label Media, sums up what many entrepreneurs believe. “Keep going until you drop is my motto,” she says.

Sir Richard Branson - Ph. Virgin GroupThe key thing is to take this determination to continue and transform it into a desire to leave a legacy, something Sharp, who has three “really supportive” sons, is aware of. It’s a question of balance, explains Huw Hilditch-Roberts, the director in charge of the Institute of Consulting in the UK. “In terms of handing over the reins, clever entrepreneurs like [Sir Richard] Branson make it easier because they surround themselves with a balance of people who reflect both their own strengths and weaknesses – people capable of growing and moving the business on,” he says. “An honest entrepreneur will know when they are stale and when walking away might be better for the business than staying and if the buzz has gone, then it is definitely time for them to go.”

There is a danger otherwise, as Charles Russam, chairman of Russam GMS, the British interim management recruitment agency, notes of entrepreneurs hanging around “long past their sell-by dates”.

He says: “If entrepreneurs ... refuse to retire they will likely frustrate those within the business looking to take it to the next level. But the quandary for the entrepreneur is both finding the right people to take up the reins and getting the right price for their business, particularly in the current climate. These days, entrepreneurs can’t achieve desired sale prices, banks aren’t lending buyers money readily so there are fewer buyers and the low interest rates means those who sell are unlikely to get much return on the proceeds. Consequently, many are choosing not to sell right now and others are hiring specialists to help them groom the business and prepare for exit in a few years when market conditions might be more favourable.”

Current economic uncertainty will indeed force many a family business to look internally for solutions – rather than to the market. Indeed, the irony is that while certainly many family firms will go under because of the recession, many might actually survive simply because they cannot find a buyer in this current climate.

Ceding control of parts of the business may offer its own solution. In 2009, for the first time since 1854, Bishop’s Move, the UK-based removal company, appointed a non- family member as managing director. “His job is to pull all the sectors of our business together and report to the shareholders who happen to be family members on the board. He’s got a tough job,” explains Grant Bishop, international director, with more than a hint of understatement. But, as Bishop adds: “Not many family businesses make it to the sixth generation”.

The trick to a successful succession is finding a balance between retaining control of the business and encouraging the younger generation to find their own feet – and voice – within it.

Michael Oliver, chairman and founder of British company Oliver Valves, which makes valves for the oil and gas industry, puts it very succinctly.

“I’ll never retire and I’ll never sell,” he says. “I’ve told my family and employees that the business will go on beyond me. Having built it up from my garage 30 years ago to where it is today preserving its legacy is hugely important to me. So too is the security of my family and I’m very fortunate to have a highly capable son who will one day inherit my business. We have offers to buy our company practically every month, but my legacy and my dynasty means an enormous amount to me, having invested so much of myself in making the business a success.”

Having set up the business yourself and seen the company grow, just how difficult is it to let go? I set up Touchline Video, a video- conferencing company, on my own in 1965 and it has been my baby all this time. I created it according to my own vision and moulded it into exactly what I wanted it to be so it’s extremely difficult to let go. I’m also not someone who enjoys just sitting around so giving up the business would be a double blow for me. I’d be so bored not having work to focus on so retirement is definitely not something I’m thinking about yet. I think it’s important to keep your brain active as you get older and work is a really natural way for me to do that. I don’t want to give up work and find my mind has turned to jelly a few months down the line.
Do you have plans to retire? Have you thought about succession? I have been planning this for years, and that’s why some of my family members have been working alongside me for the last 15 years and will carry on the business after I have gone. My daughters have been working with me for a long time now so it is a real family business and they will be more than capable of taking over the reins. Their experience means that they know how the business works, how I would want things done and how I would make important decisions. They have lived and breathed the business for a decade and a half and I am confident they can look after my baby.
Do you trust the next generation to do as well, or better, than you have? I see no reason why they can’t carry on improving on what I have built up. Obviously the degree of success will depend on how the market goes; it’s difficult to comment as you would need to foresee what the market will do. My daughters have gained enough practical experience to be able to run it the way I have taught them, and make decisions that are good for the business. I hope they will eventually be better at it than me – so that they can keep themselves in the manner that they’ve become accustomed to!

1 – Aspire You must develop a mindset and attitude of creating opportunity for future generations. Many large successful family businesses talk about stewardship and looking after wealth for the next generation. Start by wanting to hand something of value on.

2 – Strategy You need to ensure you have a business strategy for the operations, medium-term strategy for the overall family operations and a long-term strategy for the future generations.

3 – Stability Stability of people and business creates a long-term operation to pass on to future generations.

4 – Opportunity Look inwards at the family and the skill sets they have.

5 – Family office structure Develop a “holding company” structure with your family business as the umbrella that invests in its subsidiaries.

6 – Governance Good governance is about developing and managing the people both family and non-family to be successful leaders and engaged shareholders.

7 – Entrepreneurs You must develop an entrepreneurial culture.

8 – Educate Make sure you educate your family properly from an early age and encourage them to continually develop in their chosen area or skill.

9 – Talk The most successful family firms place a high value on family unity and have regular family gatherings.

10 – Professionalism Having professional structures not only improves chances of success but allows efficient delegation as your business expands.

The tips were developed by the Forum of Private Business. For more comprehensive details visit 

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