Good morning,

We hope you are well. We are delighted to welcome you to the first ezine from FBS. This month, we investigate why family businesses need help, present an in-depth case study on Turnbull's Family Butchers and present an article on the key issues that arise in relation to ownership of a family business. We hope you find these articles useful.

If there is anything we can help you with, you are welcome to contact us here or call us on 0141 222 2820. 

Very best regards,
The FBS Team

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Over time, with the involvement of succeeding generations, family businesses have a natural tendency to become more complex and more challenging to own and manage.

For example, when a number of siblings are involved at a senior level in a second generation family business, the decision making process that will work for them is likely to be quite different to the process that worked for the previous owner manager. 

However, in many cases where both generations remain involved in the business, the changes needed to the way in which decisions are made are never even discussed let alone introduced, resulting in ever increasing levels of confusion, misunderstanding and frustration.  Even when the family is aware of the problems, the perceived emotional risks associated with tackling them often appear to the family to outweigh the potential benefits to be gained - and so nothing is done.

Although a family’s lawyer or accountant may be well placed to alert the family to the issues that need to be addressed, in most cases, and particularly when relationships are under pressure, they are not best equipped to provide the practical help and support the family need.

Many do not have a deep understanding of the pressures on a business brought about by the involvement of family, or of the impact decisions made in relation to the business can have on the family and vice versa. 

To provide business families with the help and support that they need it is necessary to work with the whole family and to be, and to be seen to be, independent and impartial.  However, lawyers in particular are unable to act as an advisor to all the family members because of potential conflicts of interest, while the family accountant may struggle to be accepted by other family members because he is simply seen as “Dad’s accountant”.

A family business consultant on the other hand understands the interaction or dynamic between the family and the business, and is not subject to the same rules on conflicts of interest so can work with the whole family.  In addition, a family business consultant is unlikely to have had any previous involvement with the family or to be seeking a long term relationship with the family so can provide truly independent and impartial assistance.

Family business consulting, as a specialist service to families in business, was pioneered in the UK by FBS in the 1990s.

Ian Turnbull was a butcher. He loved the business he had started over 40 years ago. From small beginnings and through many ups and downs , it had grown to the point where it employed over 60 people and had sales of over £2.5m per annum. But  he  was worried. He was in his 70s and his solicitor, whom he had known since he started the business and who had become a friend over the years, had been pressing him again to make a will. The solicitor had first mentioned it during a meeting about a business property transaction about 5 years before when Ian happened to mention how pleased he was to be back running  again after his heart attack! And that was before the onset of angina and  suspected prostate cancer.  But easier said than done.  Apart from his house which he owned jointly with his wife, most of his wealth was tied up in the business and therein lay the problem. All four of his children had worked in the business until 15 years  before when Ian  and his  daughter , Jane, had fallen out and Jane had left to set up her own business. Although Ian had helped with some finance, their relationship had been  non existent until the heart attack had softened Jane’s attitude towards him and there had been a reconciliation of sorts. But if Ian left the business to the other three children and nothing to  Jane, he was concerned that past resentments might resurface once he was gone.

And it wasn’t as if there weren’t problems between the other three . Simon managed the central meat production facility and provided he got all the orders for the shops out on time,  then he was left to get on with it and being the youngest he was used to his ideas being ignored by his elder siblings! On the other hand, Andy and Bill were involved in the retail side of the business  and despite having once been the best of pals , now   seemed to disagree about everything and couldn’t work together. Family business meetings involving Ian and the three boys were disastrous. Andy and Bill would argue about everything and  both of them  would talk over Simon .  Ian admittedly was little better. He would  eventually have to call a halt and make a decision which increasingly had resulted in him siding with Bill.

Not surprisingly Andy became less and less inclined to attend meetings, preferring to concentrate on running the main retail branch and avoiding confrontation. The overall performance of the business was suffering , they were struggling to stay within the bank’ s overdraft limit without stretching their creditors and the term loans were coming up for renewal.

So what was Ian to do? If he left his shares equally between the three sons working in the business, how would decisions be made and how would that affect their relationship? Andy would always disagree with Bill and either nothing would be decided or Simon would have to side with one of his brothers against the other. Perhaps if he left a few more shares to Bill, the others would accept him as having more power as the biggest individual shareholder and  with it  the right to lead and make decisions despite the fact that the other two  together could outvote him if they were so inclined. It all seemed so risky and he seemed to have no one to turn to for help. When he had gone to see his Lawyer and tried to explain his difficulty, the lawyer spent most of the meeting telling Ian about how he had experienced similar problems since  his own sons had joined his firm. It was all very interesting and although it was comforting for Ian to know that he wasn’t the only one with these problems, the lawyer hadn’t volunteered any solutions to Ian’s  “personal family issues” . His parting shot was “When you’ve made up your mind what to do, give me an instruction” .

By luck , not long after the less than helpful meeting with his lawyer,  Ian happened to be at a Trade Association meeting where the speaker was a family business consultant. Even after a short discussion with him during the coffee break, it became clear to Ian that this was someone that not only understood what he was going through and why there were problems arising from the family issues, but had the depth of knowledge and the skills needed to help him and the family work out some solutions.

Read the full article here

FBS was established in 1996 by two of the world’s leading practitioners in the field of family business consulting.

FBS has developed a consulting service that is unique to FBS and that enables FBS to provide help to families in a consistent and cost effective way. It is tried and tested, and more importantly, provides a safe framework within which families can discuss and resolve the issues they face.

George Stevenson

George has 30 years’ first-hand experience of family issues and their impact on business performance as managing director and son-in-law within a complex 3rd/4th/5th generation family business. With the help of FBS in the late 90’s, he navigated the business and the family through many changes, including family members joining and leaving the business, professionalising the board, creating a family council and bringing in outside directors and investors.

Having had to deal with these issues himself he was keen to ensure that other business families had access to advice and guidance to help them deal with the issues that they will inevitably face. In 2005 he founded the Scottish Family Business Association ( www.sfba.co.uk ) and he is currently Chairman of SFBA, and in 2007 he joined FBS as a consultant.

Susan Hoyle

Susan qualified as a lawyer in 1986, and is a member of The Chartered Institute of Taxation.

Prior to joining FBS in 2008 she was head of tax at Dundas & Wilson LLP, where she advised businesses and business owners on a wide variety of tax issues.

While nobody wants to pay more tax than they have to, Susan was keen to work with business families to ensure that the decisions they make about the future ownership and management of the business are not overly influenced by tax but are nonetheless implemented as tax efficiently as possible.

While Susan can help business families with issues that they may face at any stage, her background is particularly helpful when working with businesses which are transitioning between the generations where succession planning is key.

Liam Entwistle

Liam hails from a Dispute Resolution background - in the past he would have been called a "Litigator", but realised that there were better ways to resolve conflict than slogging things out in a Court, where only legal advisers benefit.

Adept at resolving disputes efficiently and cost effectively, he is a qualified workplace mediator, a Member of the Chartered Institute of Arbitrators, and became attracted to the area of Family Business Consulting after studying the nature and effect of conflicts in a family business.

Realising that conflict in a family business will almost invariably lead to the fracturing of the business, and possibly also the family, he became convinced that Consulting using the FBS model was the best way to ensure harmony and success down the generations, and he is now a passionate advocate of the benefits of a well governed and regulated family business.

Meet the FBS team here

Successful family enterprises are different in many ways, but they have at least one thing in common – they are well organised. Their success is achieved through thoughtful planning, and part of this planning involves dealing with some key issues in relation to the ownership of their business.

• Are we custodians or value-out owners?
• Should ownership be restricted to bloodline or can spouses own shares?
• Should ownership be restricted to those working in the business, or can family members who don’t work in the business own shares?
• Should ownership be consolidated in family branches or trusts to reduce the risks associated with dilution and fragmentation as the family grows?
• What is the family’s policy for paying dividends?
• If not all family members work in the business, are there “big” decisions that the family owners want to have power to make?

The answers to the questions will have an enormous effect on the way the family business is organised and run, which ultimately has to be to achieve the objectives of the owners.

Download the PDF here

Contact FBS here or call us on 0141 222 2820 to arrange a meeting to discuss your requirements.