Going through a tough financial period? It could be time to get the family involved.
Family businesses are better equipped to deal with economic uncertainty than their competitors, according to new research.
A report by KPMG in conjunction with Family Business Australia has found 83% of family businesses believe their shared values, consistent strategic planning and committed workforce make them more adaptable and resilient to market conditions.
The majority of businesses also reported high levels of personal satisfaction.
Get business news first
Sign up to SmartCompany’s daily newsletter
The top-five strengths of being in a family business were: shared values and ethos; family support network; vision and strategy; having a strong brand; and good customer service.
However, a major threat to the long-term success of family businesses remains the lack of succession planning.
The report found more than a third of businesses had no explicit strategy for the future of the business and 40% of chief executives had no retirement plan.
Of businesses intending to enact succession in the next five years, a third had no plan for how ownership will be transferred and 25% had no plan for retirement or how to train a successor.
It’s a tough decision for any business, but it’s made even harder for family businesses when it’s often a case of deciding between children.
KPMG national lead partner for family business services Bill Noye told SmartCompany that without adequate planning, businesses can be left in limbo.
“Succession planning is essential. It’s not an event, it’s a process and the longer that process is in play, the better off the business will be,” he says.
“It can start when the children are very young and shape their training, courses and what they study. Whether it’s to hand the business to the next generation, or to sell the business, it’s important and this sector still doesn’t do it adequately.”
Other major challenges for people running a family business included balancing family and business issues, maintaining family control of the business, and preparing and training a successor.
“You have an emotional, unique unit in a family, it’s a wonderful opportunity, but they need to know how to manage themselves and how to separate and govern the family,” Noye says.
Noye says it’s essential to maintain some separation between business and family life, but despite this 30% of respondents said family gatherings were the most common forum to discuss contentious issues.
“Best practice shows you should also have family governance structures in place and deal with the tension-causing issues families need to discuss about the business in the form of a family council forum,” he says.
“It is also essential to have some time where the business is off limits. All too often I see families where they cannot get away from the business and this is not best practice.”
The study found family firms with formal advisory boards performed better than those without.
Reasons for going into business were ranked in order of importance, with security of the family the most important reason, followed by personal challenge and quality of work life.
Noye says one of the biggest changes for family businesses over the past five years of research has been the generation of greater awareness within the sector and government of family business as a unique category with unique challenges.
“Family businesses are not small business. There are some very large family businesses in Australia and they contribute in excess of 60% of Australia’s GDP annually,” he says.
“The Labor government had established a joint committee to investigate family business … which has been investigating issues impacting family business. So there is some government awareness that this group is there and it should be supported.”
The government report recommended an inter-departmental committee be established to identify specific policy issues facing family business.