The Magazine for Business Owners
FLUIDBUSINESS MAGAZINE
SPRING 17
n As seeTnVo! Sky
TACKLING SUCCESSION CHALLENGES FIND OUT MORE ON PAGE 10
HANDING OVER TO THE NEXT GENERATION
SPOTLIGHT ON SUCCESSION Let’s look at the facts
GIVE THEM TIME TO GROW
Succession planning THREE TOP TIPS
FRE E DO W
10X10 fluidbusiness.co.uk/growth-formula
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CONTENTS
04 FLUID INSIDER
A run down of what has been going on over the last quarter at Fluid Business.
05 COACH FOCUS
Our expert coaches lend their advice for your business needs.
06 WHEN DOES A BUSINESS
BECOME A FAMILY BUSINESS?
Does your family share your vision?
08 COACHING FOCUS
What happens when family members fail to step-up to the mark?
10 SPOTLIGHT ON SUCCESSION Following the release of PwC’s family business survey, we’re taking a look at the facts.
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16 GIVE THEM ROOM TO GROW
TACKLING SUCCESSION CHALLENGES
“‘Time maketh the man.” Ray Moore shares a post from The Levels Blog.
Why can it be so difficult to plan for succession? We’re taking a look at the top four challenges faced by small business owners.
18 TOP SUCCESSION PLANNING TIPS Discover our top three tips for succession planning.
NATALIE MOORE Managing Director of Fluid Business Coaching. Welcome to the Spring edition of the Fluid Business Magazine. This edition is focused on succession; the process of passing a business from one generation to the next. Succession is something we don’t necessarily have in mind when we set up a business. But, it’s something that should be given more consideration and planning to make it a success. The longevity of business as it passes through generations relies on the success of succession!
In this issue you’ll find our review of PwC’s bi-annual family business survey. So, are UK SMEs thinking about succession? And what impact will this have in the future? Read more on page 1415. You’ll also find some thoughtprovoking articles and top tips written by Ray Moore, Owner and Managing Coach at Fluid Business Coaching. Have a great quarter!
Natalie Moore FBM SPRING 2017 | 3
FLUID INSIDER!
Fluid Insider ByCHARLOTTE RICHARDSON-BECK MARKETING ASSISTANT
A look into what Fluid Business Coaching has been doing over the last quarter and a sneak peak into what to expect in the next three months.
S
ince joining Fluid Business Coaching in January, I’ve been busy getting involved with everything in the marketing world. We’ve been working on an exiting project with Property TV (Sky Channel 238) to launch a brand new eLearning course. Week by week, the course will help you learn and discover how you can make massive improvements in your business. We’ve also recently launched the 10X10 Growth Formula - a free 10-day program designed to guide
business owners to a new way of thinking andunlock the growth potential of their business. In the next quarter we’ll reach the huge 100 episode milestone on the Fluid Business Podcast. We’re planning something special for the milestone episode so be sure to subscribe and check it out! You can find the Podcast on our website: fluidbusiness.co.uk/FBP or search “Fluid Business Podcast” on iTunes, Soundcloud or Stitcher.
Have a great and successful quarter.
DON’T MISS
Charlotte
CATCH US ON SKY TV!
JOIN THE CONVERSATION
We’ve teamed up with Property TV (Sky channel 238) to deliver a series of eLearning courses for business owners and leaders.
Find us online and be part of the conversation. You can find us on Twitter, Facebook and LinkedIn.
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COACH QUESTION TIME: WHAT ARE THE BENEFITS OF HAVING A SUCCESSION PLAN?
How can we help you?
ANDY SLEET Preparing Your Business for stability and sale? Speak to Andy
HUGO HEIJ Lead and develop your team on an international scale with Hugo
ANDYSLEET@FLUIDBUSINESS.CO.UK
A:
PETER BOOLKAH Experiencing Rapid Growth? Speak to Peter
HUGOHEIJ@FLUIDBUSINESS.CO.UK
PETERBOOLKAH@FLUIDBUSINESS.CO.UK
Planning for succession will get you to think realistically about the future. That means your own future, your family’s future and the future of your business. It will help to ensure the future financial stability and security of the business. Get the whole team on board and involved in the plan to avoid surprises and conflict
A:
A:
later down the line.
coherant business and team.
Planning will give you the opportunity to collectively discuss ideas and the future focus of your business.
Once you know where you’re going, you can plan how you’re going to get there. This will help to identify skills gaps and work out how these will be filled. With the necessary planning and handover, each individual can be developed in line with the overall goals and objectives, leading to a more
Determining who will succeed you and establishing an understanding between all parties will mean that everyone involved can work together on the future direction of the business.
RAY MOORE MANAGING COACH Expert in family business, succession planning and author of The Levels. RAYMOORE@FLUIDBUSINESS.CO.UK
A:
Take the initial planning process as an opportunity to discuss each individual’s ideas, thoughts and expectations. Once you’re all reading from the same page, so to speak, you can begin to paint the picture of how your plan can be put into action. Once you have a clear vision about where the business is headed, you can begin to plan how you will put it into action. Succession is a process and not an event. As a rule, for the transition to be successful the plan should be implemented over a minimum of five years.
By planning you will have the chance to think about how you will get from where you are now, to where you want to be. What actions need to be taken to smoothly transition from one generation to the next? Soon enough you and your team should have a clear vision about how you will move forward and what proactive actions need to take place to get there. Think about answering the “who, what, where, why and how!”
FBM SPRING 2017 | 5
FEATURE
WHEN DOES A BUSINESS BECOME A FAMILY BUSINESS? Before your business becomes a family business, it’s worthwhile thinking about why you want this. And, whether your family share the same dream.
Be clear about what you and your family want to achieve.
In the early days of getting a business off the ground the last thing in the founding owner’s mind is that of succession and grandiose ideas of building a strong family dynasty. In reality the next generations involvement is often a knee-jerk reaction to events rather than a proactive, considered decision. These events range from illness of the founding owner to the perceived unemployability of the next generation.
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What starts out to be a short-term fix can so often become an unexpected longterm intractable problem. As way of example, take the case of a daughter who ended up running the family’s engineering company. She had taken what she thought was a shortterm sabbatical from her ideal career in the beauty industry to help out her overworked dad when he was taken ill.
Twenty years later she was still running a business that held no interest for her!
It is worthwhile to truly understanding why you would want your business to continue beyond your generation. At what point does the founding owner(s)
Perhaps it is time for you to consider why you want future generations to carry on your business and perhaps decide the rules for employing family members inside your business. Here are some important areas to think about before you begin employing family members and making your business a family business...
Three questions to ask: 1. What are you trying to achieve? 2. As a family what is it that you are trying to achieve? The first two questions are about your end goal and may get the grey matter going. Importantly, are the answers to questions one and two totally aligned? Now for the BIG question!
“WHAT ARE YOU TRYING TO ACHIEVE?�
She was unhappy (and that’s an understatement) and totally demotivated. She felt that she had wasted the best part of her life doing something she hated and it was no surprise that following the death of her father she sold the business to the first vaguely interested party.
of a company decide or indeed accept that family members will continue to control the business?
3. Is it important to you and your family that the business is a multigenerational business?
The answer to question three may be a simple yes or no but here is the rub... WHY is it so important? On that point we will leave you to ponder.
FBM SPRING 2017 | 7
COACHING FOCUS
FAMILY MEMBERS PROVE TO BE THE TOUGH ISSUE What happens when family members fail to step-up to the mark? Ray Moore explains how to approach the challenge that many family business owners face.
FLUID BUSINESS COACHING www.fluisbusiness.co.uk
It is natural to want family members to join the business you started. Often it is born out of a desire to help them out. Perhaps they are not sure what they want to do or they have lost their job and have to support their own family. Whatever the motivation the normal recruitment process is circumvented and they are offered
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the job because they are family or a close family friend. In the short term this can bring family harmony and the owner can bask in the gratitude. However, what happens if that person does not work out? Often it is expected for the rest of the team to turn a blind eye and work around the individual.
So let’s take it to another level. What happens if the natural successor does not work out? Let’s look at a case where the eldest sibling proves lacking but all the family, employees and suppliers have been lead to believe that person is going to take over. The right, capable people, both family and non family, are being held back. Future business growth is restricted and the long term security of everyone involved, employees, suppliers, customers and family is being put in jeapody. What then? If they were not family the decision would be easy, right? But, family is a different subject, that’s a tough call. So what would you do? The most common response I see is that the individual is given another chance. There is a belief that when the time is right they will step up but so often that will never happen, there will be no change. I see this type of situation or cases very similar all the time. When it gets to an advanced stage the family will come first and the business ultimately suffers. The alternative is to set clear guidelines about the recruitment policy at the earliest point in the businesses history. When you take that first step in employing family and friends take time to think what could be the ramifications in the future.
RAY MOORE Fluid Business Coach
Have the rules clearly set out and understood by all concerned. Here are a few to get started:1. Always look to employ the best person for the role. 2. Avoid creating roles to fit the person. 3. When recruiting, treat family and friends the same as you would any other employee. Apply the rules fairly and consistently and you will reap all the benefits of having the support of the family. Breach them once and you may as well rip them up and you will have to live with the consequences in the future.
FBM SPRING 2017 | 9
FEATURE
TACKLING SUCCESSION CHALLENGES
10 | FBM SPRING 2017
FBM SPRING 2017 | 11
TACKLING SUCCESSION CHALLENGES Why can it be so difficult to plan for succession? We’re taking a look at the top four challenges family businesses experience.
Smooth succession allows the continued success of all businesses. So why is it that within family businesses succession can become such a major issue causing tension within families and significantly damaging the long-term prosperity of the business and its shareholders? Firstly, succession is a process not an event and as such has to be planned. The handover from one generation to the next should be seamless and have no impact on the day-to-day running of the business. This sounds like simple business advice but the root cause behind most succession challenges is the lack of an agreed, considered plan. Perhaps not wanting to challenge the status quo, issues are left unsaid and open and honest communication between generations becomes stilted. Unfortunately, succession decisions in family businesses that are avoided will be forced
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into the fore by factors out of the control of the incumbent generation e.g. illness, market conditions or death. All these issues can be overcome, but first they have to be recognised and openly discussed with all parties. Awareness that there is the need to change is the first step in this journey, but then there must be some positive action to bring about that change. Here are the four most common challenges that hinder discussing the succession process that we have experienced working with family businesses.
Turn to page 18 to read our top three succession planning tips!
Reluctance to release power  and control This is especially prevalent with founding generations but can equally afflict subsequent generations. The all-consuming nature of setting up and growing a business can blur the boundaries between the office and home. The role of the boss within the business and that of being the head of the family merge. The founder perceives that to step aside and allow the next generation to take over the business will reduce their status within the family and business community.
Fear of retirement
The habit of working long, hard hours results in the owners life revolving around work. The thought of filling those hours on retirement can horrify the owner so it is better to ignore the issue and continue working. This fear is often dressed up as the desire 'to work until their drop' or 'they will have to carry me out in a box'. This is amplified when there are inadequate pension arrangements.
Inadequate pension arrangements
Choosing between successors
The owner has not been able to build an adequate pension pot to maintain their lifestyle. Often, the business is seen as the pension scheme to provide the same level of income in retirement without working. This can put a huge strain on the longterm viability of the business.
Within many family businesses succession is assumed. However, when push comes to shove, the question of choosing between potential successors, possibly siblings, becomes impossible.
The realisation that their future income will then be dependent on someone else, albeit family, raises huge trust issues. Better to maintain control for a few more years to build that pension pot.
The fear of the possible fallout within the family making it easier for the incumbent to remain at the helm to keep the peace. Ducking the issue will always come back to haunt the family at a later date.
FBM SPRING 2017 | 13
SPOTLIGHT ON SUCCESSION Let’s take a look at the facts ... Following the release of PwC’s bi-annual Family Business survey, we’ve taken a look at the results so that we can share some of the highlights and areas to think about. What challenges are family businesses facing and what is stopping 75% of family businesses reaching further than the third generation? There are two main areas to highlight following the survey of UK family businesses. These areas are: - Lack of strategic planning - Succession planning So, let’s take a look in more detail... Medium-term strategic planning The overall theme is “the missing middle”; a lack of mid-term planning. Research shows that family businesses have short-term plans (1-12 months), and they also have a clear vision of where they’d like to be in the long-term future. However, there is a lack of mid-term planning - how will you get from where you are now, to where you want to be?
Just 25% of UK family businesses survive past the third generation. This type of planning and mind-set will enable you to have a clearer vision of what actions need to take place to successfully onboard the next generation of successors. PwC’s survey suggests that many family businesses have great ambitions to grow. But only 11% plan to diversify and a third plan to expand in to new territories. So have these businesses considered how they are going to grow? 14 | FBM SPRING 2017
Succession planning
7/10
It’s about taking the business from dayto-day tactical planning and towards strategically thinking about how to meet long-term goals. Strategic thinking will help you move your business to the next level.
There are some striking initial results concerning succession planning.
A third of UK family businesses have no succession plan - with only 13% saying that they had a robust and documented plan. Recruiting and retaining the right talent is a recurring theme. When hiring family members there is a tendancy to turn a blind eye to skills gaps.
What challenges are family businesses facing and what’s stopping 75% of family businesses reaching further than the third generation? 7 in 10 UK family businesses have members of the next generation working in the business.
%
20
10
Pass to next gen
30
Pass ownership to next gen, bring in professional management
The successing generation need to be properly prepared to take the business forward. Otherwise it will continue to depend on the previous generation!
Family businesses are agile and eager to adapt to customer requiements. However, they can be slow to address succession, globalisation, industry challenges and innovation; Four key attributes which need to be developed over time to ensure long-term growth and progression.
40
Sell/float
Is this a good strategy? Or, should successors work outside of the family business to gain experience and knowledge before earning thier role in the family business.
Future ownership change
For family businesses to buck the trend and progress from the second to third and third to fourth generation, these four issues should be addressed and managed. If you have any questions, contact info@fluidbusiness.co.uk
0
FBM SPRING 2017 | 15
GIVE THEM TIME TO GROW
By Ray Moore, originally posted on thelevelsblog.com
I have often been asked me about my use of the expression ‘time maketh the man’ in chapter 10.3 of my book (Can your business step up to the growth challenge?)
Thinking back now on some incidents and decisions I made, they still make the hair on the back my head stand up so heaven only knows what he went through!
Well let me start off by giving a little background. I always thought this was a well-known saying but as part of my research I could find no real references. So, perhaps it was something personal to the person who said it to me.
Interestingly, he constantly stretched me to achieve more and more, often way beyond my experience. This was positive pressure rather than negative downward pressure. By ensuring I was just outside my comfort zone I learnt to grow and push the boundaries myself. I was given the room to grow but always felt supported and comfortable to seek advice but never abdicated a decision. I was happy for him to hold me accountable.
In my mid twenties I was privileged to meet and subsequently work for a successful serial entrepreneur. My ten years working with this man were exciting, stressful and rewarding. With the power of hind sight I realise now he mentored me in the commercial realities of business although at the time I did not value the understanding he was passing on to me. In our early working relationship I was very green but he had faith in me. He quickly offered me a senior role within his group that was way beyond my years and experience. When he offered me the role he could obviously see that I was stunned and it was at that moment he uttered those words “time maketh the man, Ray.” He was prepared to put his faith in me. He could see my potential and that time would prove his judgement sound and I would step up to the challenge. Of course, I wanted to repay this faith by succeeding. From that moment on he was there to support me and continue to show his faith in my ability. Were there times I probably made him think he had got it wrong? Absolutely!
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In business, especially during family business succession, I see the next generation restricted and given no room to grow. The ‘retiring generation’ constantly diving in to question work ethics, decisions and undermining new thinking. Negative pressure with words of wisdom based on experience without any real explanation. The end result? Demotivated individuals who learn to fudge decisions, avoid accountability and feign taking responsibility. Their growth becomes stunted and the future of the business is at risk. Just like a young sapling eager to grow but starved of sunlight, water and food. So ensure the next generation have the ability and skills to take on the mantle. Then apply positive pressure to stretch them, give them room and then watch them grow. Be prepared to be astounded and be proud of the result. Give praise and don’t take the credit. Allow ‘time to maketh the man’.
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“By ensuring I was just outside my comfort zone I learnt to grow and push the boundaries myself.”
- Ray Moore
FBM SPRING 2017 | 17
THREE TIPS FOR SUCCESSION PLANNING Succession planning should be a priority for every organisation, whether or not it’s a family business. It is the responsibility of the current and the future leaders to make succession a success. But where do you start? We’ve put together our top three tips that are essential to a successful transition from one generation to the next. Start early Where are you now? Where do you want to be? But most importantly, how are you going to get there? To get to a stage where you can take a step back and let go of the ‘reins’ to your business you need to allow plenty of time. It generally takes a minimum of five years. The more time you plan into succession the smoother transition will be. And, don’t forget to talk! Discuss succession with your family and employees. They need to be kept in the loop and they need to know what’s expected and required from them. Choose the right person for the job One of the most important components of your plan should be to make sure you’ve chosen the right successor. What skills and personal qualities are needed to take on this role? Is there a skills gap? You need to think about how this can be filled. It could be through
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training, coaching or gaining further experience. Whatever you choose, it must be filled otherwise cracks could begin to show over time. The successor should see this as an opportunity and not as a burden or something that they HAVE to do. If the next generation feel forced into the business, you’re almost guaranteed that the company won’t withstand the test of time. Choose your successor wisely and involve them in your decision. Give them a chance to shine Succession is a process, you won’t wake up one day and find that it’s ‘complete.’ Your successor(s) may require ongoing support and advice. But by stepping back and giving them a chance to gain experience for themselves, they will learn the valuable lessons that you learnt. Take on the role of ‘mentor’ – let them come to you for advice and guidance. But, don’t micromanage their every move. This will only lead to a loss of confidence in their own ability and decision-making skills. But, they will have a lot to learn from you so take the time to work together and collaborate; as Otto van Bismarck said: “Only a fool learns from his own mistakes. The wise man learns from the mistakes of others.”
revised edition must-read for any business owner!! "AWhat Ray Moore does is fundamentally describe what every business owner must go through to succeed. He provides light at the end of the tunnel and the 'levels' that we undertake to get there. Business education at it's finest. Read it.
"
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