Friction Is Not Holding Up Financial Success For Family Firms

Family friction isn’t holding back the UK’s large family-run businesses according to the latest research from Investec Wealth & Investment (UK).

Key Findings:

• Nearly 80% of large family-run businesses admit to bust-ups over entitlements and individual opinions

• But more than nine out of 10 say profit margins have increased in the past two years and 89% say the business keeps costs under control

• Around 4.8 million businesses are family-run, and they are estimated to contribute £575 billion to the UK economy

Family friction is not holding back the financial success of the UK’s largest family-run businesses which are seeing strong growth in profit margins while keeping costs under control, new research with family-run businesses from wealth manager, Investec Wealth & Investment (UK), shows.

The independent study with family businesses which have an average annual turnover of £7.81 million found conflicts over entitlements and individual opinions are very common.

Around four out of five (79%) of the family-run businesses across a wide range of sectors say their firm has suffered from family infighting in the past five years with 35% admitting it happens a lot. Less than one in five (18%) say there has been no conflict.

The bust-ups are not driven by intergenerational squabbling – around 92% questioned say there is a good or even excellent level of agreement between the different generations over how the business is run.

Any family friction there is does not affect financial performance, the study shows. Around 91% say profit margins at the family business have increased in the past two years with nearly one in five (18%) saying profit margins have increased by 30% or more over the period.

Financial health of family-run businesses is generally strong – around one in eight (12%) described it as excellent and 63% as good with a quarter (25%) saying the financial health of their firm is average. The study identified a strong focus on cost control – around 89% described their firm as frugal.

Analysis shows around 4.8 million UK businesses are family-run – around 86% of all private sector businesses – and they employ up to 13.9 million people while contributing £575 billion to the UK economy.

More than four out of five (83%) say the cost structure of their business is tight with 22% even describing it as extremely tight. However nearly half (49%) admit debt levels at their firm are high or very high.

However the study found that the country’s largest family-run business generally believe they are good or excellent at retaining talent within the business. Around 19% described their firm as excellent at talent retention while 70% said they were good and 11% said talent retention at their firm was average.

Marc Wright, Head of Entrepreneurs, Private Office, at Investec Wealth & Investment (UK), said: “Family-run businesses make a huge contribution to the UK economy and are a vital part of their local communities, so it is encouraging to find they are in strong financial health with profits rising and a strong focus on cost control."

“Inevitably there will be disputes and disagreements among families and that applies very much to family-run businesses. Money can often be one of the most contentious topics even for close knit families, with inheritance a common cause for friction."

"For family run businesses the focus is widened – this is not just about money, now, it is the ongoing direction of the business and thus the future of not only family wealth, but the well-being of employees so can be incredibly emotive."

“It is important that families have trusted advisers around them who can take an objective, independent view of finances, ownership and business strategy so as to help their businesses continue to flourish.”