Author Archives: Charlotte Tong - Director

About Charlotte Tong - Director

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Charlotte has responsibility for a varied portfolio of clients, and is particularly passionate about family-run businesses, many of which operate in the hospitality and leisure industries.

She is committed to developing close working relationships with clients to deliver a personal and seamless added-value service.

 

Taken together, some of the statistics from a recent Family Business Survey are particularly enlightening.

The survey found that the overwhelming majority of family firms (85%) intend to remain family-owned. Yet while almost half (46%) are worried about the long-term sustainability of their company, only 38% have a succession plan in place.

For family businesses, long-term success is especially dependent on effective succession planning. Yet it’s hard to get right – and that’s precisely because they’re family-owned. It gets complicated by the personalities, relationships and emotions of the people involved.

That’s why it has the potential to go devastatingly wrong.

In one case I know of, a well-meaning father divided his business between his two children, without discussing their own aspirations with them. One sibling had no interest in being part of the firm, and simply wanted to cash out. The result was a bitter lawsuit, causing untold damage to the family dynamic.

A strategic approach

Charlotte at the 2019 Family Business of the Year Awards

While participating in the judging process for the 2019 Family Business of the Year Awards, it was clear to me that successful firms approach succession strategically.

Family Business of the Year Awards 2019

They put a professional decision-making process in place, often with the help of specialist family business advisers (FBAs). This replaces emotions and knee-jerk reactions with logical and rational long-term business planning.

The task of strategic succession planning should begin with an objective information-gathering exercise. At Goodman Jones, we do this by speaking to all family members, whether they work in the business or not, as well as major stakeholders from outside the family (such as company directors, senior managers, advisers or shareholders).

This helps to achieve several crucial outcomes:

• It gives everyone concerned a safe space to express their ambitions and desires for the business, the family and themselves.

• It promotes an open discussion between family members about their visions of the future – which can lead to new ideas and opportunities, such as offering complementary services.

• It allows us to test and – if necessary – challenge any assumptions from family members about what others might want.

• It reveals any differences between the aims of the different generations involved.

• It provides a base from which to seek any compromises that may be required, and establish a plan that everyone’s happy with.

• It identifies any skills gaps in younger family members who intend to take a role in the business, so that training can be arranged well in advance.

Then once the plan for the future is agreed, we can support the business and the family with tax planning, advice on transactions and/or exit, and training and development for the next generation. And we’ll work with the family to regularly revisit the plan, and update it as needed.

More than a business plan

However, the real value of strategic succession planning goes far beyond such practicalities. Many of our family business clients tell us that they get much more from the process than a robust plan.

They often find that the strategic and commercial vision for the business is more unified, and more coherently defined. And they come away with improved and more open relationships; certainty over the future; and confidence that they’ve made the right decisions for the business and their family.

It’s never too soon to plan for the future. Not to mention for the unexpected: illness, death, and life-stage changes such as the birth of children can suddenly change the equilibrium of a family firm.

So think about investing in the long term now; there really is nothing more important for your business and your family.

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We recently had the pleasure of taking part in judging the Family Business United annual national awards, Hotel & Leisure category. The process got us thinking hard, just what is it that makes a family business so successful, and specifically how does this apply to a family run hotel business?

The key points that we identified were:

Clarity and Unity of vision

The clarity and unity of vision of the family members both running the hotel and providing investment behind the scenes. As well as ensuring good governance, this also means aligning and managing family involvement and interests beyond those directly involved in the business.

Focus on the essence of the business

The ability to focus on the essence of what attracts guests but ensuring that how that’s delivered evolves over time. Whatever it is that makes the hotel different, whether that’s about appealing to families, pampering adults or simply delivering a top quality service, needs to evolve to fit the current market expectations and adapt to new trends. Hotels have failed because they’ve stuck rigidly to how previous generations have operated in the belief this is what will work today. This encompasses understanding the current market and adapting to new trends.  It also includes integrating and embracing the latest developments in technology, from EPOS to green recycling schemes.

Imparting the vision and values throughout the entire organisation

The success of the business will by necessity involve a strong management team. Part of their role is understanding and imparting the vision and values throughout the entire organisation. This should flow through into everything that the hotel does, from the initial guest welcome right through to the special touches at breakfast.

 

Having a clear, impartial view of the skills needed in the business

Given the 24hr nature of running a hotel, it is typical that some key roles within the business may not be performed by the family members themselves, and so motivating and listening to ideas from outside the family is also vital. The family must identify and develop talent within the staff team, which in turn will nurture and strengthen the internal culture of the business.

Engaging with the community the business is part of

To have the support of, and engagement with, the local community brings a two-way benefit to any local business. For a family there will be multiple connections with the local community and these often lead to differentiating the hotel from the competition. For example, the restoration of a historical building using local materials, right through to hosting the local school sports day.

Long term strategy and succession planning

Long-term strategy and succession planning. It’s never too early to start encouraging the younger generation to participate, whether through developing new business streams such as wedding planning and photography, or supply-chain integration to provide a farm-to-table experience.

Solid financial model

A strong financial model will provide a stable basis on which to grow the business. It should include a strong budgeting process. This will ensure they are able to make reliable cashflow projections and also scrutinise and understand the cost base to determine whether any cost savings can be made. A good model not only enables forward planning but will allow  management to focus on the business operations rather than spending a lot of time on financial reporting.

What we loved most about being involved in the judging process was seeing the enthusiasm and passion that each of the family businesses had. Their core values really shone through, demonstrating that caring for the environment and their local community was equally as important as ensuring that staff were happy and that the business was growing profitably.

The winning combination? Clear vision and values, a united family and management team, and solid financials.

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