Business Families and Family Businesses:

The STEP handbook for advisers

Ian Macdonald and Jonathan Sutton

2009 Globe Law and Business

ISBN: 978-1-905783-25-0

By Rebecca Harding

An investor once said to me, “I am always careful about putting money into family businesses or businesses set up by a husband and wife team.  You can never be sure that they will survive as family politics can get in the way of the business plan.”  Clearly, the investor had not read this book because it would have dispelled any anxieties she may have had.

This is an edited collection of articles from some of the leading family business advisers in the world.  As such, it is a tour de force of the family business area ranging based on the rich experience of people who have supported some of the most successful family businesses from the earliest start-up stages right the way through to succession planning, wealth management and, of course, conflict management.  It clearly demonstrates that if a family is properly guided through the process of building their company, both the family and the business can thrive in a unique way that adds not just wealth but also value to the total business stock.

The book is careful to address the common misconception that family businesses are just “small or medium sized, owner-managed, badly run and unlikely to endure.” Chapter after chapter in the book provides guidance on how to manage and advise a family business and its overall key message is that the value in these businesses rests in the family itself.  After all, any family business, or equally business family, has its own wealth and well-being tied up in the performance of the businesses.  It stands to reason therefore that the management will, “take a longer term view, [be] a breeding ground for entrepreneurial activity and provide employment and stability in many communities.”

This is not to suggest that family businesses are without challenges and the book is careful to provide advisers with the toolkit to be aware of any problems that might arise.  The complexity of family businesses arises because of the very fact that the ownership and the management of the business are an integral part of the family.  As a result, this can create issues of domestic power-relations, team building, succession planning and roles and responsibilities within the business itself.  Similarly, a business family may have members that do not want engagement with the business itself at any one point in time, but who nevertheless benefit from the wealth it generates potentially creating divisions within the family itself.

There are case studies and helpful tips to advisers but this is an interesting read even if you are not directly involved with a family business.  It pulls together many themes of setting up, running and managing and generating wealth from a family business and arguably plugs a much-needed gap in the research in this whole area.  Despite family businesses being a vital part of the business landscape, there is relatively little known about their idiosyncracies and characteristics.  Each is different and this book, with its comprehensive coverage of all the issues, helps to provide a greater understanding of the difficulties that families face in setting up their companies and, therefore, the best way to advise them through the process.

I doubt whether my investor colleague would still hold the view that a family business is not an attractive proposition if she read this book.  Rather, what she might say instead is, “Despite their quirks, family businesses bring more than just wealth to the market and working with them to realise that value is probably the most rewarding thing an adviser or investor can do.”  The more people that start to say this about family businesses, the sooner we will begin to provide the right support to this vital component of the overall global entrepreneurial landscape.