Q&A: Family businesses


Q&A: Family businessesFiona Graham of the Institute for Family Business on why it can pay to keep it in the family when starting and running a business

Roughly how many family businesses are there in the UK?

There are more than 4.8 million family businesses in the UK and the vast majority of those are small businesses - 97% of them have 1-9 employees. With their 12.2m employees they generate a 26% of UK GDP and contribute over £149 billion in tax annually. Since 2010 the contribution to the UK GDP by family businesses has risen by 25%.

Is it still common for businesses to be family owned?

Yes - very. 88% of all UK private sector firms are family owned - it's the world's most common business ownership model.

Are family businesses operating in most industry sectors?

One of the many great things about family business in the UK is just how diverse it is. It applies to all sectors, regions, types and size of business. It ranges from great British brands such as Warburtons and Yorkshire Tea to the local corner shops. Other examples of family businesses include Clarks, JCB and Dyson, but there are many others.

Is it often said that family-owned firms outperform others...

Family firms are the backbone of the UK economy. During the economic downturn they were more resilient than many others, and they are now investing for long-term sustainable growth. Their longevity demonstrates their success, hard work and commitment.

What are the advantages of running a business with your family?

They include shared goals, motivation, mutual trust, common purpose and shared values. These can all be key advantages when running a business with your family.

What are the common sources of conflict in family-run businesses?

Conflict occurs most frequently where people aren't communicating effectively. It's important to avoid confusion and conflict by building clear principles and processes. Business families need to work to create and maintain positive and healthy relationships. They need to understand how conflict arises, and work as a team to prevent and solve problems, as well as building trust. But the same could be said of all businesses, of course.

What is the key to success when running a family business?

Learning how to manage the governance of the business and the family. Good governance should be organised from the beginning, with buy-in from everyone on rules and procedures for running the business. There is no one-size-fits-all solution - it's something that needs to be worked out to suit the circumstances of individual families.

Do you recommend setting up a 'family council' to decide key issues?

Yes, but a family council should go hand in hand with establishing a family constitution, which all the family shareholders agree to. This will establish the remit of the family council and set out its rights and responsibilities.

How important is tailored tax advice when starting a family business?

In the early stages of any business, the focus is on making the business a success - and at that stage many start-ups don't know if they will remain family businesses. Specific tax advice for family firms is available further down the line, and of course should be sought to ensure tax efficiency.

How important is succession planning in family businesses?

Succession planning is a key consideration for family firms. It is a challenge, but also an opportunity to look to the future of the business and family. Plan early and try to implement any transition in steps.

What sources of advice are there for family businesses?

The Institute for Family Business is a great place to start. We have a wide network of contacts in the advisory and professional services fields, with expertise in all things family business. You can also follow us on Twitter.

Written with expert input from Fiona Graham of the Institute for Family Business.