Building value in a family-run business

The corporate and commercial team at IBB Solicitors works with many family-run businesses trying to balance the challenge of looking to provide decent returns for the current owners with a desire to see their legacy continue into the next generation, writes Adam Dowdney, corporate and commercial partner.

According to KPMG, family-owned companies account for two-thirds of all businesses worldwide and generate more than 70% of annual global GPD.  So they must be doing something right.

So, what builds value in a family-run business, while maintaining the opportunity for well-structured family succession?

Invest in the long term. When there is so much political uncertainty (eg Brexit) a family’s business tendency to invest more conservatively and build robust business models is a great asset. 

Succession planning.  Occasionally, the younger generation don’t want to follow their parents into the family business. Planning succession, whether it is from within the family or from outside, should be done together, for the sake of the family and their greatest asset. Use third-party advisers to provide impartial advice and ask those difficult, challenging questions.

Work together. Working with relations can generate levels of trust and commitment not seen in other business models, but it can also lead to frustration, conflict and resentment. Keeping head and heart separate can make a family business successful, but ensure potential successors have exposure to all relevant parts of the business, so they are properly equipped when the time comes and ensure all successors have the necessary skills and commitment for the job ahead.

Innovate. Embracing the online market and simply researching, testing and developing ideas that help the next generation engage with the business will help to rejuvenate the whole organisation.

Stick to your values. Even if you are considering raising finance through external investors, banks or VCs/PE, work with your advisers to find the organisations that will help you keep your values intact.

Whether your family business is there for the next generation, or is an investment that you will one day sell to aid future generations, you need expert advisers around you. At IBB, we take pride in understanding what our clients need to get done and what they want to achieve.  If you would like impartial advice that focuses on the positives, resolving problems and finding solutions that support the whole family, we are here to help.