Family Business Values – Protecting Your Future With A Family Charter


on 06 December 2016

A blog from David Emanuel, Head of Family Business at Veale Wasbrough Vizards.

What could be better than working in business with the people you love and trust most – your family?

Well……

Two thirds of SME businesses in the UK are family owned, so it’s clearly a popular business model.

But…. only 30% will successfully pass to the second generation (and only 12% to the third and 3% to the fourth). “It is only but three generations from shirtsleeves to shirtsleeves” is an old American saying that describes this phenomenon.

There will sometimes be good reasons why selling up or getting out suits everyone involved. But more often family businesses fail to make it through the generations (or sell successfully at the right moment) because of misunderstandings and poor communications. This often stems end from incorrect assumptions about each other’s aspirations and expectations.

The same can happen in any business with a number of stakeholders, but it can be especially painful in a family situation, where personal relationships that really matter can be damaged sometimes beyond repair.

So, what can you do to avert future potential conflict in your family business? These usually arise over succession issues. Remember, there is a 70% chance it won’t be passed on to the second generation, an 88% chance the third generation will be looking elsewhere for a living, and the fourth can virtually forget it!

Working with your family to create a Family Charter (sometimes called a Family Constitution), is a way of deciding amongst you what it means to be part of the Family Business. It can also clarify what each person and the family as a whole want to get out of it and are prepared to put into it.

The process is often as important as the end result, especially if it allows family members to express what might have previously remained unsaid. Guidance from a third party can ensure it is said in a constructive way that builds trust along with a sense of common purpose and understanding.

What your Family Charter could look like is a matter for you, but the good ones we have seen and helped to create have been about “values”. Simple statements of core beliefs that underpin and define the culture of your family business, as well as expectations about what it means to be involved in it.

You may end up selling your business anyway, or closing it down as you retire if there is nobody to take it over from you. A Family Charter will help to make clear and align personal, family and business interests (or at least show how you can get back into alignment). Research confirms you are likely to be more successful in business terms, but you will also most probably be a great deal happier along the way – and still be invited for Christmas!

Getting started on the process of developing a Family Charter can be a challenge. In my experience clients often wait until there is already some tension within the family, usually related to succession.

In another blog I will give some thoughts on how you could begin, and some of the topics you might want to discuss as you develop your  Family Charter.

In the meantime my best wishes for a Merry Christmas and a Happy New Year, and my thanks to the Ovation team for posting this blog.

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