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Expert opinion: Business – keeping it in the family

Written by Mike Lloyd on .

Mike LloydMike LloydThough it often goes unsaid, family businesses form part of the country’s backbone. But how resilient are they?

Family businesses are in a strong position to weather times of uncertainty.

We have evidence showing that, during economic downturns, family businesses tend to be more likely to survive and are able to retain their staff better.

Part of that is the way they fund themselves. Family businesses tend to reinvest profits back into the business. They’re cautious about making sure they have enough cash on the balance sheet – so they’re not taking on a lot of external debt. This means they’re in a financially more secure position when the going gets tough.

A long-term outlook helps family firms think beyond immediate downturns and consider what’s best for business.

Future-proofing

There’s often a perception that the next generation doesn’t want to work in the family business and they’re somehow being dragged in. That’s not our experience at all: our research shows that the next generation really appreciate the legacy of their business and feel a strong personal connection to it.

They want to be involved – and millennials in particular are interested in working in businesses that have a really strong sense of purpose, strong values, and a strong culture.

Honing Expertise

Many families understand the importance of encouraging the next generation to work outside the business for a while. Gaining outside skills – learning about how other businesses operate – hones their expertise and brings new ideas and experiences into the family business.

We’re having more and more conversations with entrepreneurs who are thinking, at an early stage, about how to build a family business and see it succeed across three generations. People see there’s a huge amount of value in the model and the benefits it brings for families, employees and the communities they operate in.

Research shows that the next generation really appreciate the legacy of their business.

UK Family Business Statistics from the Institute for Family Business – a membership association representing the UK’s family-owned business sector – show that:

  • There are 4.8 million family-run businesses in the UK, comprising 88 percent of all private sector firms.
  • In total, family businesses employ 12.2 million people.
  • Family businesses earned £1.7 trillion in revenue in 2017.
  • They also contributed £598 billion gross value added to the economy and 29.2 percent of total UK GDP in 2016.
  • Family businesses contributed £182 billion in taxes to the Exchequer (both directly and through their employment).

Mike Lloyd is managing partner at Haines Watts in Swindon, which offers a wide variety of services to owner-managed businesses, charities and UK subsidiaries across a wide range of sectors in and around the Swindon area. https://www.hwca.com/accountants-swindon/