Business

STARTING A FAMILY BUSINESS, THE DOS AND DON’TS

Published

3 years ago

12/03/2018

STARTING A FAMILY BUSINESS, THE DOS AND DON’TS

Family businesses form a significant and vital part of our economy. In fact, research by the Institute of Family Businesses (IFB) shows that, in 2015, there were 4.7 million families in business in the UK, and the sector contributed£460 billion to the UK’s GDP in 2016-17.

Family firms experience unique issues, however, and face specific challenges that have the potential to derail plans from an early stage. So how can these be anticipated and dealt with successfully? Here are some of the dos and don’ts when setting up a family business.

Do keep communications open

It is important to operate a culture of open communication within the business so that all employees understand the working relationships and different levels of responsibility held by members of the family.

Transparency is key in this respect and helps to prevent resentment from non-family employees. If it is believed that family members have been promoted purely because of their status rather than on merit, for example, the situation will lower morale and could lead to a high turnover of staff.

Keeping employees engaged and feeling included in the growth of the business encourages loyalty, and creates a trusting and supportive working environment for all.

Do put in place formal documents and agreements

At the startup stage families tend to work well together for the good of the business, with formal agreements often being overlooked or thought unnecessary. In many ways it is even more important for family firms to formally document business issues such as leadership structure, and salary rates, given the ease with which childhood roles or divisive family dynamics can be readopted.

Formal documents and agreements provide a strong framework with which to handle disputes. They ensure fair and accurate sharing of profits and eliminate the possibility of ambiguity in certain situations.

Defining the way in which disputes will be handled is also valuable in itself. This is a sensitive area for family businesses, and it is likely that to obtain objectivity, input from an independent professional will be required in drafting the documents.

Do promote and nurture family values

The family name, in conjunction with family values, often provides a strong and unique foundation for a business, and can offer a distinct advantage over other enterprises. The family’s inherent interest in making the business a success, simply because it is a family firm, is powerful and helps to determine their long-term guiding strategies.

This common purpose also tends to display itself naturally to customers in the form of extra energy, consideration, and attention to detail afforded to them by members of the family – in the interests of ensuring customer satisfaction, but also to encourage the long-term business success.

Do consider succession planning early on

It may seem a little pre-emptive if a family business has just started, but early succession planning is crucial to ensure the business is transferred in a tax-efficient manner when the time comes.

Consideration should also be given to providing formal leadership training to those likely to take over the reins of the business, so they are fully prepared, from a purely practical standpoint, for the challenges ahead.

… And the don’ts

Don’t make it ‘us and them’

Showing favouritism to family members when they are at work will engender bitterness and dissatisfaction amongst employees who are not members of the family. This is a form of discrimination, so it is crucial to praise and criticise all employees equally when appropriate.

Allowing an ‘us and them’ culture to develop creates unrest, reduces motivation amongst non-family employees, and is likely to ultimately result in lowered productivity. Demonstrating fairness should begin at the top, and become a key feature in how the business conducts itself.

Don’t ‘create’ jobs for family members

Paying a member of the family to carry out a job that would not otherwise exist, or placing them in a role for which they are not qualified, is not an effective strategy and can compromise long-term success for family businesses.

Adopt a policy with the business in mind, rather than the employment status of individual relatives. This could include making it clear the possibility of demotion or dismissal exists for all employees if they cannot fulfil the role for which they were taken on.

Don’t let business infringe on personal life

It is easy to allow business issues to seep into personal life, but never more so when it is a family-run firm. This can be a double-edged sword, but by keeping dinner table business discussions to a minimum,it prevents the line being blurred and helps to keep business and home lives fresh.

Separating business and personal issues is a difficult mantra to follow, however – there is a fine line between quickly talking about something that happened at work, and engaging in a drawn-out analysis that should really take place in the working environment.

Don’t rely solely on family advice

Being able to rely on family in the workplace is one thing, but failing to seek independent advice at various key stages is a dangerous strategy. External advisers bring valuable objectivity and are likely to take a broader viewpoint compared with members of the family.

From accountants to legal experts, impartial professional guidance offers a family-run business a broader commercial perspective with no inherent bias or presumptions, and an opportunity to understand current trends or changes in their market.

Starting a family business can be a daunting prospect and one which requires perhaps more delicate management than a ‘standard’ business enterprise. There is much at stake, both in terms of business success and personal relationships between family members, but balancing the needs of all personnel, whether family or not, is key to running a successful family firm.

Jeff Barber is a partner at Selling My Business he specialises in business disposals and acquisitions and has over 30 years of experience.

Business

Rio Tinto executives say goodbye to 2020 with chunky payouts

Published

13 seconds ago

22/02/2021

linker 5

Rio Tinto executives say goodbye to 2020 with chunky payouts 1

MELBOURNE (Reuters) – Three Rio Tinto executives forced to leave the company after the destruction of sacred rock shelters at Juukan Gorge in Western Australia all closed off the year with substantial payouts, Rio’s annual report released on Monday showed.

Chief Executive Jean-Sébastien Jacques, who stepped down from his role at the end of 2020, received total remuneration of 13.3 million pounds ($18.6 million) under Australian accounting rules, up from 7.1 million pounds a year earlier.

Despite the loss of about 2.7 million pounds in awards following a board review into the blast, the sum, which includes the value of share awards that have not yet vested, was boosted by Rio Tinto’s strong share price performance.

Jacques and two other executives left Rio after the company determined their positions had become untenable after a backlash against a board review that originally imposed only financial penalties for the destruction of the sacred sites.

Rio Tinto’s remuneration committee, led by non-executive director Sam Laidlaw, granted “eligible” leaver status to the three executives, meaning they avoided stiffer financial penalties for the incident.

“In making the eligible leaver determination the Board fully recognised the gravity of the destruction at Juukan Gorge but was mindful that the three executives did not deliberately cause the events to happen, they did not do anything unlawful, nor did they engage in fraudulent or dishonest behaviour or wilfully neglect their duties,” it said in the annual report.

Rio’s iron ore head, Chris Salisbury, who stepped down in September, received total remuneration of A$6.7 million ($5.3 million) including termination benefits and unvested share awards, from A$2.9 million in 2019. Salisbury lost a A$1.1 million short-term incentive.

Head of Corporate Affairs Simone Niven forfeited 525,000 pounds in short-term incentives but received 5.1 million pounds, including 1.1 million pounds in termination benefits and unvested share awards.

Independent Rio Tinto Director Michael L’Estrange, who lead the initial board review, had a 46% increase in fees and salary. His total remuneration rose to A$227,000 from A$201,000.

Chairman Simon Thompson was paid 939,000 pounds, up from 934,000 pounds the year before.

($1 = 1.2695 Australian dollars)

($1 = 0.7136 pounds)

(Reporting by Melanie Burton; editing by Richard Pullin)

Business

Australia’s Macquarie raises guidance after U.S. winter freeze

Published

2 hours ago

22/02/2021

linker 5

Australia's Macquarie raises guidance after U.S. winter freeze 2

By Paulina Duran and Jonathan Barrett

SYDNEY (Reuters) – Macquarie Group lifted its profit guidance on Monday, sending shares to 12-month highs, as its large North American energy business profits from the winter storms sweeping across Texas and other states.

Macquarie said it expects its fiscal 2021 profit to jump by as much as 10%, after warning just two weeks ago that earnings would be “slightly down”.

The energy business unit, designed to move large quantities of gas to meet unexpected demand, has single-handedly increased the overall profit forecast of the investment bank by about A$400 million, analysts said.

“Extreme winter weather conditions in North America have significantly increased short-term client demand for Macquarie’s capabilities in maintaining critical physical supply across the commodity complex,” the company said in a statement.

Macquarie is the second biggest gas marketer in North America, behind oil major BP. It purchases natural gas and moves it along pipelines and grids, typically from an area where usage is low to high-demand markets.

The deadly winter storm that crippled infrastructure and left millions of Texans without power meant electricity generators had to compete for natural gas supplies, pushing up prices sharply in the deregulated market.

The urgent supply situation has provided Macquarie with an unexpected windfall

“Macquarie appears to be capitalising well on volatility and financial market dislocation,” Bank of America Securities analysts said in a note, as it increased its earnings forecasts for the Sydney-headquartered company.

Macquarie’s performance hurt last year by the pandemic, with subdued deal-making and deteriorating economic conditions leading to a rise in impairment charges.

But a strong initial public offering of its majority-owned data analytics software business, Nuix, late last year and a fillip in the energy business have helped push its share price back to pre-pandemic levels.

The company, which also operates Australia’s largest asset manager and investment banking business, is set for extra boost from a rebound in local M&A activity this year.

Macquarie’s shares were 4.31% higher at A$148.39 early on Monday, the highest level in a year, outperforming a broader market that was flat. The share price eased slightly in afternoon trading.

Earlier this month, the Sydney-based financial conglomerate had forecast full-year earnings for the group to be “slightly” lower than in fiscal 2020.

Macquarie’s Commodities and Global Markets division contributes close to 40% of its group earnings. Analysts had previously raised concerns that the pandemic could erode profits from the division if high energy-use industries shuttered.

(Reporting by Paulina Duran and Jonathan Barrett; Additional reporting by Shriya Ramakrishnan; Editing by Peter Cooney, Jane Wardell & Shri Navaratnam)

Business

Baidu-Geely EV venture names Mobike co-founder as chief

Published

2 hours ago

22/02/2021

linker 5

Baidu-Geely EV venture names Mobike co-founder as chief 3

BEIJING/SHANGHAI (Reuters) – China’s Baidu Inc and automaker Geely hired Mobike co-founder and former chief technology officer Xia Yiping as chief executive of their new electric vehicle venture, the search engine giant said on Monday.

Baidu last month had announced it would set up a company with Zhejiang Geely Holding Group to leverage its intelligent driving capabilities and Geely’s car manufacturing expertise.

“Xia has extensive management experience in the field of smart cars and mobility services,” Baidu said in a statement. “We welcome Xia Yiping to join Baidu’s auto company and look forward to his contribution to Baidu and the automobile industry.”

Reuters reported Xia’s appointment last week, citing people familiar with the matter.

Xia served as Mobike’s chief technology officer until the company was acquired by food delivery giant Meituan in 2018. Prior to Mobike, he worked at Ford Motor and Fiat Chrysler.

(Reporting by Yingzhi Yang, Yilei Sun and Brenda Goh, Editing by Sherry Jacob-Phillips)

Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.