How to survive as a family-owned business
Going into business with those close to you means the potential for rows between relatives. Here's how to keep relations on track.
According to the Institute for Family Business, two in three of all private sector firms are family-owned, with the vast majority of these SMEs. Only approximately one third of family-owned businesses survive into the second generation, with just 12% remaining "viable" by the third. Disputes over profits, business goals, transparency, philanthropy, company legacy and succession can all take their toll.
As one of Britain's longest running family businesses, formed in 1793 by James Ormiston in the city of London, Ormiston Wire is still going strong under the stewardship of myself, his sixth-generation descendant. We have maintained longevity by adapting to changes in environment and always looking to take steps forward, not back. So what advice would I offer to a younger family business?
Like any other business, a family-owned company must still meet the needs of its customers. If you don't keep sight of that and just keep making what you've always made in order to preserve the traditions of the family business, there is the potential to all go wrong. Many businesses, family-owned or otherwise, often fail to evolve to meet product development opportunities within their industry. You have to keep an eye on customer trends and be prepared to diversify or change what you do. In the competitive business world, evolution is as important as innovation.
Family businesses are always potential melting pots for disputes and rows between relations, as any viewer of television dramas about family businesses from Dallas to Howard's Way will know. The important thing is to make sure the family is behind you. Our family is made up of shareholders, all of whom are supportive and are given the opportunity to raise any issues at our regular shareholders' meetings. Just as I listen to our customers, I listen to them which is one reason we've survived as a family-owned business. The key is to keep the two-way communication going so that no issues are allowed to build up without being aired.
Family-run SMEs face many tests, some of which may risk operation. The 150th anniversary of the company, which occurred during the second world war, was sadly marred by the factory being bombed. However, with such a heritage to preserve, the Ormiston family relocated and rebuilt the business. When problems threaten the business it is important for the family to get stuck in and persevere.
Isolation can occur relatively easily to family-run businesses. Good communication within the business is vital, but it is also healthy to build business networks with objective groups outside of the business. Essentially offering advice and support, these networks may help with understanding changes to legislation and new product range opportunities. Decisions must be made from within the company, but being open to outside advice may turn a good decision into a great one.
For a family business to last over six generations, you have to learn to specialise and innovate to continue to grow as a company. During my stewardship of Ormiston Wire I've seen a wide range of problems surface, but the key is to be agile, whether the problem is related to a product, an unpredictable incident or a family member.
Mark Ormiston is managing director of Ormiston Wire