Family business entrepreneurship is alive and well in the Midlands

http://www.ifb.org.uk/ This year’s Midlands Family Business Awards, are helping put the spotlight on family business entrepreneurship, and the huge importance of British business families in the drive to grow the private sector as we rebuild our way out of the recession.

The awards, organised by third generation family business the Wilson Organisation, include a New Family Business category which I am judging alongside James Timpson (Timpsons) and Annabel Prow (Wilson Organisation). Meeting the shortlisted candidates for the award it was clear that we had a group of highly committed and passionate family business entrepreneurs. Each of the founders shared a strong sense of enthusiasm and the drive to succeed; above all everyone was passionate about serving their customers. Although making a profit is critical to secure the next stage of growth for the business, the path to success is through delivering excellent customer service. A common thread was the need to have clarity of vision and to stay focused, but also to have the flexibility to adapt to the customer’s needs.

Another common thread running through each business was the huge amount of personal effort and financial sacrifice made. The level of hard work that goes into getting early stage ventures going can put pressure on family life - sacrifices are made to ensure the new business gets the required effort. Some also cited the advantage of bringing family members into the business who can offer a wide range of skills; but it was equally important to be honest about individual strengths and weaknesses. Another factor that was cited as key was having excellent communications at all levels; something that becomes even more vital when the pressure is on. Communication will also be the subject at the IFB Regional Roundtable meetings this autumn in Yorkshire and the North-West.

The winner will be announced at a black tie evening reception at the family-owned Thrumpton Hall, just south of Nottingham on Thursday, 11 November.

Family ownership and the life cycle of firms

http://www.ifb.org.uk/ Why are there significantly more large family-owned businesses, as a percentage of all companies in Continental Europe, compared to the UK? A study by Professor Julian Franks, of London Business School, has come up with some fascinating findings.

Professor Franks’ analysis of the top 1000 firms in France, Germany, Italy and the UK showed that 12% of large British firms are family owned compared with 40-45% in the major European economies. Analysing the life cycle of family firms from 1996-2006 showed that only 50% of firms in the UK that were in family ownership at the beginning of the period remained so a decade later, whereas in Germany the figure is 75%.

Image via WikipediaFranks explains that the cause of the UK exception is an ‘outsider’ system where the private benefits of family ownership are smaller, the opportunities for risk diversification are greater, raising equity is more expensive and the market for corporate control is more active. The study also observed that in the UK family ownership was likely to be concentrated in industries with less need for external capital.

The study implies that in the UK owners of large family businesses lean towards the shareholder value model, whereas on the Continent the family business stewardship remains more entrenched and is more favourably dealt with by the markets. The study concludes that family business does bring diversity to a modern economy, and providing owners generally are prevented from abusing their position for private benefit that we should promote a debate in the UK on how to encourage more owners of large family firms to retain control.

I believe that if we are to see lower attrition rates for large family firms we may need new approaches to policy, for example in relation to the protection of minority shareholders. But our culture may also be a significant factor and there needs to be more understanding of the real benefits of the family business stewardship model to the UK economy. This is the topic of new work being conducted at the IFB and a key theme of our national conference next year..watch this space.