If setting up a new company is challenging, handing over an established one to the next generation also poses its own issues.
In the UK, 94 per cent of construction firms are family-owned – more than 892,000 in all – and we know the majority of these hope to build a strong business they can pass on to the sons and daughters. It’s one of the largest family-run sectors in the whole of the UK, which is why many in the industry are members of the Institute for Family Business (IFB).
Two of the main challenges family businesses speak to us about are how to plan for succession and strategies for engaging the next generation. People don’t work forever, so ensuring the next generation are not only engaged with what you do but learning the ropes and gaining experience is vital.
What to consider
Ignoring the future and putting off succession planning can pose a major problem for any company, and family businesses are no exception.
It can be tempting to postpone thinking about the future to focus on building the business now. But where families have an advantage over other businesses is that they already know who their future shareholders are, giving them a chance to start preparing early.
So what should you be thinking about?
In our experience, the best transitions are planned well in advance, with both parties co-operating on building the best approach.
We at the IFB had the chance to witness a great example of transition, operated by Wates – a wholly family-owned construction services and development group. Wates provides a good example of how intense forethought and collaboration can help create a successful succession plan.
Around 10 years ago, the third generation at Wates handed over to the fourth – over a period of three years – based on planning that had begun in the late 1990s.
The family’s innovative approach to this succession was based on the senior generation gradually stepping back, rather than suddenly stepping down. The family transition successfully culminated in 2008 and they are now looking at how the fifth generation will take over running the company.
A delicate balance
Inspiring and educating the next generation sounds straightforward, but it can be a difficult balancing act: finding the right balance between guiding and encouraging the next generation, educating them about their responsibilities and opportunities, and allowing them to set their own path.
Most importantly, young family members should never feel forced to join the business – that’s not in anyone’s best interests.
The IFB works with family business owners and managers in the construction sector to help them build stronger relationships and engagement with the next generation. Families must learn from each other, share experiences and overcome their challenges, and the IFB offers a range of resources offering advice and insights.
Ultimately, planning and preparing now will safeguard both your company and your family’s future.
Elizabeth Bagger is executive director at the Institute for Family Business
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