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Family and owner- managed businesses

Keeping you informed on the key issues impacting the success and growth of your business.
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Coaching the next generation

Clogs to clogs in three generations

Johnathan Dudley, Partner, Business Advisory, Head of Manufacturing

There’s an old saying that family businesses go from ‘clogs to clogs in three generations’; one generation to found a business, the next to build it, and the third to spend it.

While it may sound like cliché and doesn’t affect every family and owner-managed business, many of us will know a story of a third generation where the business has failed.

So, who’s fault is it and how do you avoid it happening to you?

Entrepreneurship isn’t something that can be taught - it’s in the genes. So a family business ought to have an advantage shouldn’t they?

Well maybe. Entrepreneurs have both good and bad business traits. Talk to any successful business owner and they will always know that. They learn from their mistakes and take steps to deal with any weaknesses. Nobody is good at everything. The trick is to know it, realise it and deal with it.

In a family business situation this is something that is often overlooked. The older generation should be looked up to by younger generations. This support mechanism is often overlooked or underestimated. Then, when it’s the child or grandchild’s turn to take over and emulate their success and build on it; that support is absent and that’s when failure can happen.

Coupled with the above, there may also be resentment at being mentored for a role which they may not feel equipped for or, in some cases, motivated to take on. In this instance you can see why generational failure in the business is perhaps more understandable.

Of course, there are training courses, degrees and even MBA’s that an heir apparent can be sent on. Yes, they have their place. But their focus is on the generic challenges of a business; theory not practice. They have limited value when challenged with some of the unique issues linked to working in a family and owner-managed business environment. For example, you are faced with some employees working on the assumption that you’re only there because of your surname. A tricky position for everyone to handle. Throw into the mix some judgemental pressure from the family and a sprinkling of sibling rivalries and it’s easy to see how things can go wrong and there is a reluctance to stay within the family business.

What the next generation leader needs

It may seem obvious, but the key is having an honest confidant. This should be someone you can trust and take constructive and independent challenge from. A person to bounce ideas off and learn best practice from in dealing effectively with people and family issues. Most importantly this should be in an environment that is independent from family and confidential. As much as possible; this support needs to be 24/7!

Too much to ask?

At Crowe, our coaching service offers a bespoke blend of face to face and virtual support. It is backed by a comprehensive interactive technology platform that has a range of courses and problem solving tools that constantly refresh. It offers access for the family to get the help, training and support they need whenever they need it. It’s the kind of stuff that they don’t teach you at university but is essential for the day to day running of a successful business.

The platform goes beyond coaching. The personal side is the most important factor. Our team undergo robust and ongoing training. They have specific experience of advising family and owner-managed businesses for many years.

Many of us grew up experiencing the stresses from our own family businesses and therefore have empathy as well, sometimes, as sympathy!  As with everything we do; we aim to help people make smart decisions that create lasting value.

Interested?

The cost of a personal Crowe Coach could be less than you think and may even be the smartest decision you will make in your family business and create lasting value, for generations to come.

For more information on the issues addressed in this article or to discuss your individual circumstances, get in touch with Johnathan Dudley or your usual Crowe contact.

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We expect to see more tax compliance activity from HMRC, particularly in the areas of VAT and Customs Duty.
The agility and resilience of family business owners means many are in a better position to exit now than they were pre-pandemic.
Pros and cons mean Trusts are often under‑used by family businesses, but the benefit of asset protection means they are worth considering.
Without considering some fundamental business issues, an untimely event such as the death of a businessowner can leave a familybusiness unstuck.
Many companies benefitted from government incentives during the pandemic, but now many businesses are facing cashflow pressures.
We look at how innovation was key during the pandemic, but some of the biggest changes have been to mindset and priorities for the future.
Focussing on a natural extension to the importance of business structure and succession planning can be a family investment company.
The COVID-19 pandemic has had huge impact on family businesses, we discuss how have they adapted to survive and their change of mindset.
Simon Warne shares some useful tips on pension planning opportunities for family businesses.
This week we explore passing on the responsibility of leadership to the next generation and some considerations to make the the transition a success.
Employee Ownership Trusts are they the right choice for a Family Business?
Corporate Finance Partner Matteo Timpani explains why it's never too early to start preparing when selling your family business.
We highlight in couple of scenarios considering the advantages of a group structure as part of both business and family wealth planning.
Looking at running costs and tax savings for a petrol versus diesel company cars.
Business funding: key information for funding your business
Why splitting income can be an easy tax win.
How can family dynamics challenge family businesses for second, third and fourth generations?
Creating a Trust has tax implications but can be advantageous if used in the right way. How Trusts can be used to gift shares of a family business.
In this article we have outlined some practical tips for family businesses to help manage any conflicts they may have, both now and in the future.
Of all the uncertainties caused by the COVID-19 pandemic, it seems inevitable that at some point in the near future, taxes are going to have to rise.
Family businesses may find reserves built up over time could be at risk, we discuss how reorganising can reduce the level of reserves at risk.
Future tax rises are inevitable to support the economy post-COVID, how could these potential tax rises affect family businesses and its owners?
Following the announcement that MTD will be extended to Income Tax from 6 April 2023, what do family businesses need to do to be ready for it?
The CJRS and CBILS schemes ending in September 2020, what support is available to family businesses to help see them through these uncertain times?
Tax issues to raise with your advisor ensuring the family business thrives in the generations to come.
The tax consequences of passing the business on to your successors.

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Our national private clients team provides specialist tax advice to some of the most successful individuals and families in the UK. We understand that absolute discretion is essential and take pride in building long-term relationships with our clients. Get in touch with us today.
Rebecca Durrant
Rebecca Durrant
National Head of Private Clients, Manchester