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Soaring high in the family business? Or trapped by the family firm?

by Nick Paterno, managing partner, McBrides Chartered Accountants


When the Duke and Duchess of Sussex indicated their desire to leave the family firm and forge their own brand earlier this week, there were many in the business world who recognised the perennial problems facing those involved in a family business who want to split.


Being a part of the ‘family firm’ brings with it a unique set of challenges as a result of the structure, culture and history of that family-owned business.


For some in the family, working within a business set up by their forefathers provides everything they need and more, while for others, working within the confines of the family firm can feel stifling, lead to a feeling of a lack of freedom and ultimately a desire to break away and do things in their own inimitable style.


There are many factors that can make working within the family firm feel stifling or wrong:

- family politics can be difficult, there may be members of the family who you clash with personally but still have to work alongside,
- often a lack of contractual documentation requires things to be done in a certain way because ‘they’ve always been done that way’,
- there’s often a lack of diversity and ‘hiring’ is done from within the family pool meaning outside opinion is often sparse,
- there can be confusion over who owns what and who has developed the brand, each generation will have a differing vision – leading to potential conflict,
- there are often differing views on how much to retain within the firm, and how much to extract for personal expenditure
- there’s often no ‘exit plan’.



So what can you do if you want to change tack and set up on your own? Well, it’s often prudent to ask yourself a set of questions and to look at the answers to these in order to see if a future away from the family firm is prudent or even possible.


Firstly, you should ask


- can I leave the family firm without impacting on family relationships?
- can I transfer my skills, contacts and know-how to something else?
- what financial means do I have beyond the business?
- have I clearly worked out a plan of what I want?
- can the family firm go on without me?


If you have answered yes to the above, then there’s a good chance, that you can collaboratively find a way out of the family firm and keep your familial relationships in good order.  If, however, you have answered no to any of the above questions then you will need to work within the structure of the business to find a way to either stay and build a happier future, or make plans to make an exit that works for all.


Sometimes if you have grown up within the firm and it’s all you know, and all your forefathers know, it can be difficult to focus and separate your needs from those of your family, and it can also be hard for the family to see your needs as separate from their own. It’s important that everyone understands each others strengths and needs and the only way to gain this understanding is via communication.  You may need to bring in the help of a professional mediator in order to smooth communication, or you may have a natural mediator within the family.


Once you have identified there is a problem, it’s essential to keep communicating, to meet regularly and to set shared goals. Taking advice from professionals, from your accountant and legal team is essential. The Institute of Family Business is a good resource too. The following points will help everyone move forward successfully.


- Is there a way of changing or modifying the role within the firm – a third way if you like – which means the family keeps their family member within the business and the family member in question also gets to follow their dreams?  Perhaps, if there’s entrepreneurial spirit that needs challenging, there may be a new avenue that the business could pursue with this family member leading?
- Good succession planning will pay dividends, so make sure you know who wants to take over, when the time is right, and who wants to strike out on their own.  If you have a mother or father who wishes to pass their business on to their two children but one of the siblings doesn’t want to work for the firm while the other is more than happy to, then estate planning is a must ahead of time.


- If there is going to be a split then how this will be funded is an essential question. Who is going to fund the split, are there expenses that will continue to be covered by the business after the split?
- Leaving the door open.  It may be that the family member just needs to spread their wings and to experience new things, these in turn could be incredibly beneficial to the family business in the future, so if there’s a way of encouraging a sabbatical or a ‘research break’, then perhaps this could work for all.
- Pinpointing who does what and when within the current team and really defining everyone’s role on paper, so everyone involved knows their responsibilities and what is expected of them, will help if there are disputes in the future.



It’s not always easy working alongside your relatives and if a family member is dead-set on leaving then there are ways of smoothing the path for them and for cementing things at the family firm so that everyone gets what they want and need.  A proper exit plan is essential as is succession planning.  If you’d like to know more, please do get in touch with our team of experts at www.mcbridesllp.com