Tolstoy observed that happy families are all alike but that every unhappy family is unhappy in its own way.
Add running a business to the mix and it’s easy to see how family firms face particular challenges on top of the already difficult task of commercial survival.
Given that between half and three quarters of the GDP in every open economy is estimated to come from family-owned businesses, and yet on average only 12 per cent survive to the third generation, supporting them makes sense. But where do they turn?
"All businesses need support at different times and stages but family businesses have specific issues they need to address, in terms of having to both manage the business as well as the family dynamic," says Catherine Moroney, head of business banking at AIB.
Succession planning, or more frequently the lack thereof, can create obvious tensions but more subtle ones arise simply from trying to maintain the family business ethos that helped establish the business while it grows and scales into something much larger and more ‘corporate’.
Families also need support recognising when the time has come to create a family charter, or constitution, which lays out clearly the rights and obligations of family members both in relation to shareholdings and governance, as well as practical matters relating to in-laws.
The younger generation may struggle to feel heard, let alone take the reins, particularly with a founder who is reluctant to go. “Letting go can be very challenging, especially for someone who is very good at what they do,” says Moroney. “The key is to have all these conversations early, before conflict arises.”
There are resources which can help, including Dublin City University’s Centre for Family Business and the Northern Ireland Family Business Forum, at Ulster University.
These bring together academic research with practical assistance from banks, accountancy firms and law practices, and provide family businesses with an invaluable opportunity to hear from their peers.
“It can be really helpful to hear from others in the same situation,” says Moroney. “And because they are non-competing, family businesses can be really open about the challenges they face.”
Succession planning
Succession planning is a perennial concern, agrees Ian Smyth of Ulster University, who runs the NI Family Business Forum. A HR specialist, he comes from a family business background himself, so understands the issues first-hand.
“The challenge is often being able to get an effective handle on whether or not the next generation has the right skills and abilities to take over.”
It’s an issue given added texture by the fact that Generation Z, as today’s newly minted workers are termed, “place value differently”, when it comes to work, he says.
Although Northern Ireland was cushioned somewhat from the last recession, very many Gen Zers will still have seen their parents struggle to keep the family business going, and the sacrifices many made to do so. They may be reluctant to follow suit, particularly as they “have more appreciation of work-life balance”, Smyth says.
Layered on top of that is the current political situation, including, in the North, the suspension of policy making, and uncertainty around Brexit. “There is also a sense that foreign direct investment and the multinationals get all the supports, but not SMEs,” he says.
It can help therefore to know that there are commercial supports available. Energy provider Energia, for example, has a number of campaigns which can help bring down overheads, including a Cash for Kilowatts promotion that provides grant support for the installation of energy efficient solutions.
Businesses by now know what they need to do to become more energy efficient, but the capital outlay required is often simply too prohibitive, says Alan Mulcahy, Energia’s head of sales. “We know if we swap our lights for LED bulbs we’ll make savings, for example, but it costs money up front to do it.”
To help, Energia will carry out an audit of the business, find out what annual savings it would make by switching over to new lighting, design and install a solution and take your old one away, for a contract that runs over three to five years.
“You continue to pay the 100 per cent of your old bill for the term, and once the installation is paid off, the new lighting system, and the savings, are yours,” he says. “Family businesses are very often older businesses, such as butchers and bakers, so are more likely to have older lighting systems.”
It can cost €15,000 to €20,000 to kit out a shop with LED lighting, which can be hard for a small business to find. “Because of our scale, we can get finance more cheaply than a small business can, and we can use that to pass on the benefit to the family business,” Mulcahy says.
There are soft supports available too at FamilyBusiness.ie, a website and consultancy based in Cork but offering a countrywide service to family firms. The main professional services firms, such as KPMG, Deloitte, PwC, Grant Thornton and BDO all provide specialist assistance too.
On the skills development front, the SFA Skillnet Network is a particularly helpful resource that provides tailored, subsidised training.
This is invaluable because an inherent weakness in family business has always been their inability to hold on to good people. Talented and ambitious people can be put off by the fact that their voice will never carry the same sway as those whose name is over the door.
Skillnet training can be a way of ensuring managers feel invested in and developed. All of its programmes are industry-led and bespoke. The peer learning element is invaluable too, providing an opportunity to find out how other family businesses faced and overcame similar challenges.
“A lot of small family businesses wouldn’t typically have a competency in terms of training and development,” says Geraldine Lavin, SFA Skillnet Network manager. “They can now outsource that to us.”
