February 05, 2015 | No Comments
In the UK alone, there are over two million small, family run businesses which are arguably the lifeblood of our economy, predicted to contribute more than £200 billion to the UK by 2018, according to research by Barclays Bank.
Owners of family businesses face the somewhat difficult question of whether they should sell their business when they retire, or pass it on to their children and let them continue running things.
It’s a difficult choice and at Mitten Clarke, our clients often ask for our advice and opinion on selling a business, tax planning, succession and other financial matters concerning the family business.
There are many reasons why a business owner might wish to consider selling the company rather than passing it on to their children, but there are also benefits of keeping it in the family too – it could go from strength to strength.
Parents can often look at their loved ones with rose coloured spectacles, whereas the stark reality is that their children may simply not be cut out for the role ahead. And even if they are, the children might not want to want to take over the reins, but do so purely because of a sense of family duty.
For these reasons and more, only 30% of second generation family businesses actually survive, with a further fall to just 12% when passing it to the third generation.
Rather than succession being a taboo subject, we encourage our clients to discuss openly the ‘pros and cons’ of keeping the business in the family.
Does the next generation have the drive, ambition and innovative ideas to take the business forward in today’s competitive landscape?
If so, what training and support do they need to undertake the role of chairman, managing director or finance director?
Some business owners simply can’t bear the thought of giving up control of the business until they’re on their death bed! This can stifle the next generation and be just as detrimental to the business as passing it on to the wrong pair of hands.
Perhaps the most difficult task of all is how to treat children equitably, yet at the same time put the business in safe hands.
So what should you do? Should you sell your family run business, or pass it on to your children? Why not take a look at some of the more famous family businesses and family sounding brands, to see how their businesses have fared.
You’ll be surprised how many ‘family’ sounding brand names talk about their family values and local heritage, but aren’t actually family owned! They’re just a small cog in the works of a much larger multinational corporation, as the original owners decided to sell the business when the time was right for them.
Yet many of the large companies and brands we come across on a daily basis are actually still owned and run by families, some of them by descendants of those who founded the business many years ago. And, they’ve done pretty well for themselves by staying with the family business.
But, it’s not always obvious which companies are family owned, and which aren’t.
Some small family businesses like Copella Fruit Juices are now owned by large conglomerates like PepsiCo, whilst others like Aunt Bessie’s are still part of a sixth generation family business.
Take a look at the family owned quiz we’ve created to see if you know which businesses are still owned by the same family, and which sold out to become part of bigger corporations. How many can you get right? Let us know your score, and if there were any answers which surprised you!
Once you’ve taken inspiration from those businesses, just give us a call and we can help you decide and plan whether you should sell your family business, or make the appropriate plans to pass it onto your children.