The PRWIRE Press Releases https:// 2018-05-23T02:42:34Z Yes. Every Family Business. 2018-05-23T02:42:34Z yes-every-family-business David Harland, Executive Chairman of FINH, has worked with large multi-generational family businesses for over 20 years. From that significant experience he says " You can rest assured that communication is an issue that every family business struggles with. Yes. Every family business." And perhaps this is to be expected when you consider the wide-reaching decisions that families in business must make. Questions of wealth, ownership, business and family roles, remuneration, transition and future vision must all be grappled with over and over again.These are all significant issues that impact the entire family unit regardless of whether the business is in it’s 2nd or 7th generation.  FINH has created this short E-book to provide some guidelines for family business and their communication, both at a formal and informal level.It is free and we would love you to share - Access the E-Book Here Free E-Book for Addressing Family Businesses Biggest Problem 2017-11-30T03:45:19Z free-e-book-for-family-businesses-addressing-their-biggest-problem According to Ernst and Young recent research, family business make up approximately two-thirds of all companies around the world.Transitioning those family businesses through the generations is the most important issue those family business and all of their stakeholders face. Without a formalised, effective plan 97% of family businesses fail to make it beyond the 3rd generation.Australian family business expert, David Harland, Managing Director of FINH has recently released an E-book on "Simple Steps For Family Business Succession". Via articles, statistics, infographic and short videos this E-book provides the large family business community with tips and the ability to identify barriers to family business succession. It provides a vital pathway to creating long-terms sustainability of family owned and operated businesses.  Succession - Family Businesses Biggest Problem 2017-11-20T02:25:10Z succession-family-businesses-biggest-problem According to Ernst and Young recent research, family business make up approximately two-thirds of all companies around the world.Transitioning those family businesses through the generations is the most important issue those family business and all of their stakeholders face. Without a formalised, effective plan 97% of family businesses fail to make it beyond the 3rd generation.Australian family business expert, David Harland, Managing Director of FINH has recently released an E-book on "Simple Steps For Family Business Succession". Via articles, statistics, infographic and short videos this E-book provides the large family business community with tips and the ability to identify barriers to family business succession. It provides a vital pathway to creating long-terms sustainability of family owned and operated businesses. David Harland is available for comment on 61 7 3229 7333 Family Businesses- Here How to Access Capital 2017-09-28T05:56:06Z family-businesses-here-how-to-access-capital Just like any other business, a family business will need funding from time to time. Usually, this will be to fund growth, but it might also be necessary to manage liquidity for transitions. More than half of businesses that responded to a 2015 KPMG survey said that they were currently seeking external funding.In most cases, raising capital comes down to selling equity. But selling equity often results in giving up control, and it’s no secret that family businesses are reluctant to do that. KPMG’s European Family Business Barometer, published in June 2014, found that 87% of businesses indicated that maintaining control was a key success factor.Besides control, traditional equity investors, such as venture capital and private equity funds, tend to look for quick returns and a clearly articulated exit strategy. That means an IPO or a trade sale after three to seven years. Again, this isn’t something that fits into the culture of a family business. Families are patient, long-term investors.An alternative route is debt. But, banks often don’t recognize the value of the intangible assets in a family business. The family bond that ties a business together and the sweat equity invested over multiple generations make family businesses what they are. However, when it comes to valuing those assets as collateral for a loan, banks are hesitant to recognize the true value. The result can be expensive debt, which is most certainly not patient in times of need.Family businesses need to look beyond traditional sources of capital to fund their business in a way that aligns with their objectives and the underlying culture of ownership. It’s worth considering what a family business can offer investors that other businesses can’t.So, what can family businesses offer that many other businesses can’t? Well, family businesses do have unique attributes which make for an attractive investment for the right investor: A lower risk profile. When someone is managing a business with the intention of passing it onto their children, they are likely to act more responsibly than management who are chasing short term bonuses. Sustainable growth. Family businesses pursue long terms goals and don’t chase short-term returns at the expense of long-term returns that underpin significant value. A family bond can be far stronger than the traditional relationships that make up a business. Higher returns on equity. The family business dynamic can create greater efficiency which results in a higher ROE. The above attributes make for a safe and attractive return for patient investors. The most appropriate investors often turn out to be other family businesses. This is commonly known as ‘patient capital’ because the investors understand family business.Although patient capital may indeed be patient, it’s important for a business to provide a dividend policy that aligns the investor’s interests with those of the family. A popular mechanism to achieve an exit for a new investor is a guaranteed share buyback scheme. Such a scheme would result in the company buying back shares at predetermined prices, if and when profit targets are met. Alternatively, investors can be rewarded with growing dividends, based on a percentage of annual profits. That type of policy will give the investor unlimited upside, without creating a burden on the business.Before seeking an investor, a family who is in business should ensure that they have considered the family’s investment policy and the needs of the current and future generations.  The business strategy should be coherent in the context of its position in a competitive industry and that the business strategy must seriously consider the purpose of the family.Allocation of capital should always be part of a longer-term strategy for the family and the business, rather than an afterthought that comes up only when capital is needed – either by the business or by the family.The next step is to find an investor that buys into the family’s values and goals, and who’s interests are aligned with those of the family. Relationships with investors usually go awry when family and management want one thing, and the investor wants something else. The most important factor when taking on an investor is to make sure that the investor and the family have the same long-term goals.There are investors out there who value the family business model. Finding them requires tapping into the right networks and making use of family business consultants with access to these networks. The search may also require patience. But, remember, making a rushed decision and choosing an investor whose objectives do not align with those of the family can have far-reaching consequences for the business. If a suitable investor cannot be found immediately, it is better to keep looking than to rush such an important decision.David Harland is Managing Director of FINH. If you would like to talk further about accessing capital for your family business please don’t hesitate to call on 07 3229 7333.  3 Signs You Are Out of Your Depth when Advising a Family Business 2016-11-15T06:23:08Z 3-signs-you-are-out-of-your-depth-when-advising-a-family-business The real value of a trusted business advisor is most apparent when there is conflict in the family. Most enterprising families work together quite well when times are good, and there are many non-specialist advisors (such as accountants and lawyers) who perform good work under these conditions.  Conflict resolution is a different animal. The Harvard Business Review perhaps said it best decades ago: “A family-owned company is often grievously complicated by friction arising from rivalries involving family members who hold positions in the business, or at least derive income from it.” That was written by corporate psychologist Harry Levinson, a pioneer in the understanding of how emotional health impacts job conditions. Levinson notes that serious family conflicts will harm or kill good businesses, concluding that “the only real solution is to move towards professional management.” If you work for family businesses, you may be faced with unfamiliar or uncomfortable positions. Sometimes the best decision for the business (and yourself) is to consult a specialist in the field of family business.  With that in mind, here are three signs you may be out of your depth when advising a family business: 1) When you know there is conflict in the family and it is impacting on the business outcomes. Let’s say you are aware of emotional struggles between the founder and some of his family members. You observe that business performance might suffer if the conflict goes unresolved. Whether you want to help or not, you may not feel qualified as an expert in conflict resolution.  This leaves you in a difficult situation. The conflict will not go away if you do nothing, but if you intervene and cannot bring the family a structured and calm approach to resolution, there is a chance you are going to be a net harm to the family.  These are exactly the kinds of situations in which a specialist family business advisor makes sense. Someone with the expertise and neutrality necessary to bring conflicting individuals together and make healthy compromises.  Left to fester, family conflicts normally bleed over into the business. The process works the other way, too. Consider the types of conflicts listed below — every single issue creates potential spillover effects to the other column. Interpersonal Family Conflicts - Sibling rivalry - Health issues - Age and mental stability - Infidelity and divorce - Substance abuse - Individual legal problems - Who is included in “family?” Business and Ownership Conflicts - Estates and succession - Control - Non-family influences - Distribution of profit - Leadership and strategy - Family employment policies - Handling poor performance 2) When you know they need family governance but you don't know how to get started. In How to Choose & Use Advisors: Getting the Best Professional Family Business Advice, Dr. John Ward and Dr. Craig Aronoff write that the first lesson professional advisors must understand is “the need of business owners to make succession, strategic, personal financial and family plans that reflect overlapping business, personal and family goals.”  In an international survey of over 300 C-suite executives of family firms, only 11% use family business consultants or specialized management consultants. Family businesses, for a variety of reasons, are not as quick to reach for the third-party advisory option, and often to their detriment. They are distinctly different and, in many cases, need different advisors.  Family business governance models tend to be primitive, especially in the first-generation — meetings occur across the kitchen table or shop floor, nobody keeps minutes, and perhaps there are no outside influences on the business structure.  In these cases, specialist advisors already have a ready-made plan. Non-specialist advisors are not usually experts in family business governance structures. To avoid complications or mistakes by trying to set up family governance structure on your own, it is probably best to contact a specialist family business advisor. 3) When you have perceived conflict of interest because you are engaged by one key family member. A lot of very intelligent accountants, lawyers and bankers end up making sub-par family business advisors. This is not because they lack professionalism or hard work.  Let’s take a common example. You may interact with lots of family members within a particular business, but you personally favor working with some members of the family over others. You really want to be an independent and impartial professional, but others may still perceive favoritism.  A similar but related problem can surface when some family members try to leverage their relationship with you to advance their personal agenda or to win favor in the planning process. Specialist family business advisors are better equipped to overcome these obstacles. Part of specializing in family interactions means displaying emotional intelligence in the service of professional competence and performance-based results.  How to Solve the Family Business Sectors Biggest Issue. 2016-10-21T05:39:11Z how-to-solve-the-family-business-sectors-biggest-issue Every year, the KPMG and Family Business Australia survey family businesses. Every year, those surveys reveal that “balancing family and business issues” are a top concern, yet only a small minority of family businesses use a constitution. By now it’s a widely circulated fact that nearly 90% of Australian family businesses don’t survive into the third generation. It’s a really big problem, and no problem that large has a simple solution. But that doesn’t mean your family business can’t take a few simple steps to protect itself from falling apart when it’s time for the grandkids to lead. Let’s classify family business failure into two groups. 1) The first is business failure, which every business must deal with in their own way. 2) The second group is family failure, which is a unique problem for family businesses. If you really want to put your company on equal footing over the long term, you need to be able to handle family problems before they hit crisis mode. To accomplish this, I’ve long argued for a written family constitution. Family constitutions intimidate some people, but they shouldn’t. All a family constitution really does is clarify family values and create better rules for working together. I think it’s well worth every family business member’s time to learn about family constitutions. If, after learning more about family constitutions, you are still afraid to start, consider this: the very process of building your own unique constitution will likely bring people together, strengthen family bonds, and create more emotional investment in the business. The Benefits of a Formal, Written Family Constitution I’ve recently outlined six good reasons to write a family constitution, but I’ll focus on a few more here. Begin with one of the most obvious and easiest to overlook: the constitution is written and formal.  There’s an old Chinese proverb, “the palest ink is better than the best memory.” This is one of the unofficial themes of the Family Legacy Asia, a pro-family constitution advocacy group based just North of Hong Kong. The benefits of written rules are obvious for governments, schools, and even recreational sports leagues. Those same benefits can apply to families. A family constitution creates rules and boundaries for family members. This isn’t a gimmick; the rules are intentionally created during a sober moment, before emotions run high, so everyone can agree on fairness and process. The idea is to create a strong, unifying bond based on love and emotional acceptance, then codify it in a document for making decisions and resolving conflicts. A lot of family issues fester because members don’t have a safe, understandable way to discuss them. A family constitution helps identify difficulties so they can be conquered. Every year, the KPMG and Family Business Australia survey family businesses. Every year, those surveys reveal that “balancing family and business issues” are a top concern, yet only a small minority of family businesses use a constitution. Most importantly, a family constitution lets a family express and share its own values. Sharing values and teaching them to children is a highly underappreciated aspect of building a lasting family business model. Those values will inform the leadership structure, succession, community involvement, and long-term goals. Get It Right the First Time: Use an Outside Facilitator Each family constitution should contain certain rules, or themes, for successful implementation. This creates a problem or two. First, whomever negotiates and writes the family constitution should know what they’re doing. That person probably needs strong interpersonal skills and some kind of arbitration experience. Second, even if a family member possesses such skills, there might be budding conflicts of interest. It’s difficult to trust the impartiality of interested parties. Of course, a family could write a constitution and amend it over time using trial-and-error. This approach isn’t very efficient, though, and leaves plenty of room for conflict or emotional hang ups. The better solution is to use a trusted outsider. Ideally, this should be an expert whose credentials aren’t questioned by the whole group and who can ensure the process is open-minded and accessible for everyone involved. Only you and your family can decide if it’s worth creating a family constitution. The first step, though, is to learn about what a family constitution is and how it can help ensure long lasting, multi-generational success. And then have a look at the online family constitution we created with Cleardocs. It is a a non-binding document that sets out the family's policies for achieving family harmony and maintaining wealth. Six Good Reasons to Write Your Family Business Constitution in 2016 2016-02-10T02:18:36Z six-good-reasons-to-write-your-family-business-constitution-in-2016 It is important for every family business to communicate effectively and to reach decisions that optimally balance the needs of both the family and the business.As the complexity of family and business relationships increase, families can turn to a formal “family constitution” to create a healthy communication and decision-making environment. While not legally binding, a family constitution is held together by the positive recognition and buy-in from all involved. The process and the policies created within a family constitution are always reflective of the values and beliefs of the family group.The intent is to build around a sustainable model that promotes generations of pro-growth decisions. Here are six reasons why you should write your family constitution in 2016. It Will Lay the Groundwork for Tough DecisionsFamily business leaders have to make the same difficult decisions that any regular business leader needs to make, except that the family business leader often has to consider complex personal and family relationships. It’s easy to make judgments based on emotion in family businesses, which is why a pre-determined, rational family constitution can help cooler heads prevail. Through developing an effective constitution, the family will have already identified the basis on which critical decisions will be made. Your Chance to Create Ethical GuidelinesFamily constitutions are bound by moral force. If you are serious about building a unique, marketable brand – for both employees and customers – then it’s important to have a business code of conduct. Equally, your family constitution can lay out the preferences of the family in how they as shareholders would like the company and it’s capital to be directed, provide family thinking around certain shareholder decisions and influence the culture of the business and its employees.These guidelines can also include family conduct outside of the business, conduct with any social media interaction, and communication processesbetween family members. Build Cohesion and Internal Harmony Your family constitution is developed by the family group. Ideas are workshopped and opinions are shared. When consensus is reached, it’s done so with unity. Members of the family learn together through a participative process. The resulting document is a codified representation of internal agreement and harmony. The Chance to Improve Your Bottom LineThough not a cure all, the process of creating a family constitutionperforms a lot of critical functions that can make business more effective and, by extension, profitable. The family constitution defines the leadership structure, provides a tool for succession, informs communication and conflict resolution guidelines, and – perhaps most importantly – it clearly and concisely identifies the family business’ long-term goals. With that clarity in mind, it’s easier to take effective action to build a profitable company for the long term. Establish the Rules around ConflictConflict is a natural part of running a business. However, when colleagues and employees are also family members, ordinary conflict can take on new dimensions. You should have a plan in place to deal with conflict if your business is going to build a strong, multi-generational legacy. No family constitution can prevent conflict entirely, but it can provide a road map to successfully manage, resolve and define conflicts in a constructive way. Plan Ahead for ThoseEntering and Leaving the Family Business. No challenge is as serious or as easy to mishandle for family businesses as the issue of family members transitioning both in and out of the organisation. Creating a family constitution provides a robust framework for families to commence their communication and education around succession. Policies such as the employment and remuneration of family members in the family business, education expectations, stewardship and philanthropic activities can all be discussed when writing the constitution. A constitution is a dynamic document so initiating formal family meetings as part of this process can ensure the items resolved can always be open for discussion and improvement. For Advice on a constitution for your family business please call FINH 07 3229 7333 FINH And Cleardocs Release an Online Family Constitution 2016-01-21T01:02:13Z finh-and-cleardocs-release-an-online-family-constitution Brisbane-based family business advisory firm, FINH, has worked in partnership with Cleardocs to create what they believe is the worlds first online Family Constitution. If you want your family business to last through the generations, this tool will be invaluable. You can view it here AND read our blog below on "6 Good Reasons to Write your Family Constitution in 2016". _______________________________________________________________________________ 6 Good Reasons to Write your Family Constitution in 2016- David Harland, Managing Director of FINH It is important for every family business to communicate effectively and to reach decisions that optimally balance the needs of both the family and the business. As the complexity of family and business relationships increase, families can turn to a formal “family constitution” to create a healthy communication and decision-making environment. While not legally binding, a family constitution is held together by the positive recognition and buy-in from all involved. The process and the policies created within a family constitution are always reflective of the values and beliefs of the family group. The intent is to build around a sustainable model that promotes generations of pro-growth decisions.     Here are six reasons why you should write your family constitution in 2016. It Will Lay the Groundwork for Tough Decisions Family business leaders have to make the same difficult decisions that any regular business leader needs to make, except that the family business leader often has to consider complex personal and family relationships. It’s easy to make judgments based on emotion in family businesses, which is why a pre-determined, rational family constitution can help cooler heads prevail. Through developing an effective constitution, the family will have already identified the basis on which critical decisions will be made.  2. Your Chance to Create Ethical Guidelines Family constitutions are bound by moral force. If you are serious about building a unique, marketable brand – for both employees and customers – then it’s important to have a business code of conduct. Equally, your family constitution can lay out the preferences of the family in how they as shareholders would like the company and it’s capital to be directed, provide family thinking around certain shareholder decisions and influence the culture of the business and its employees. These guidelines can also include family conduct outside of the business, conduct with any social media interaction, and communication processes between family members.  3. Build Cohesion and Internal Harmony Your family constitution is developed by the family group. Ideas are workshopped and opinions are shared. When consensus is reached, it’s done so with unity. Members of the family learn together through a participative process. The resulting document is a codified representation of internal agreement and harmony.  4. The Chance to Improve Your Bottom Line Though not a cure all, the process of creating a family constitution performs a lot of critical functions that can make business more effective and, by extension, profitable. The family constitution defines the leadership structure, provides a tool for succession, informs communication and conflict resolution guidelines, and – perhaps most importantly – it clearly and concisely identifies the family business’ long-term goals. With that clarity in mind, it’s easier to take effective action to build a profitable company for the long term.  5. Establish the Rules around Conflict Conflict is a natural part of running a business. However, when colleagues and employees are also family members, ordinary conflict can take on new dimensions. You should have a plan in place to deal with conflict if your business is going to build a strong, multi-generational legacy. No family constitution can prevent conflict entirely, but it can provide a road map to successfully manage, resolve and define conflicts in a constructive way. 6. Plan Ahead for Those Entering and Leaving the Family Business. No challenge is as serious or as easy to mishandle for family businesses as the issue of family members transitioning both in and out of the organisation. Creating a family constitution provides a robust framework for families to commence their communication and education around succession. Policies such as the employment and remuneration of family members in the family business, education expectations, stewardship and philanthropic activities can all be discussed when writing the constitution. A constitution is a dynamic document so initiating formal family meetings as part of this process can ensure the items resolved can always be open for discussion and improvement. Contact FINH on 61 7 3229 7333 Could Your Family Business Survive Without You? 2014-12-23T07:22:22Z could-your-family-business-survive-without-you Family business leaders are integral to the success of their business. Their knowledge, connections and instincts have kept the business going. But is there a business without them? This months article I focus on what family business leaders need to consider and quickly. David Harland - Managing Director of FINH Take a few minutes to work through a thought exercise with me: You’re driving to work one day and someone speeds through an intersection, colliding with your car and putting you in the hospital. How well would your business manage without you?  Consider these questions to help you understand how central your presence is to the long-term success of your business:  - Do my clients do business with me or with my firm?  - Who would step in and take over my duties right now if I were suddenly absent?  - What would happen if no one could reach me on the phone for a day? A week? A year?  - Must I be present for every important decision about the business?  - Am I confident that my designated successor is ready to take over my role? After years of hard work, your business may be at serious risk if it’s too reliant on your constant presence and management. A Family Business Institute study found that 88% of family business owners believe that their family will still control the business in five years; unfortunately, just 30% of family businesses survive into the second generation. This sad statistic can be generally attributed to a lack of succession and continuity planning. In the future, the success of your business will depend on how well you have prepared it to manage without you. If you are among the estimated 40% of business leaders who intend to sell the firm to outsiders, prospective owners will want to see strong internal structures and a business that’s succession-ready.  The valuation of your company will largely depend on predictable future cash flows. If buyers believe that the business won’t function well without you, it will drastically decrease the valuation of your company. Too many family business owners have unrealistic beliefs about the saleability of their firms. Formal structures, market dominance, predictable cash flows, and clear business succession plans for key managers are absolutely critical to maximizing the future value of your firm. If you intend to pass the business on to a family member, succession planning is even more essential to ensure that the firm doesn’t become one of the estimated 75% that don’t survive into the second generation. Advanced planning, training, and preparation are required to ensure that your heir is prepared to take over the top job.  Fortunately, there are many ways that you can make your business more succession-ready: Implement a transition plan: Every family business leader needs to have a transition plan. It’s absolutely vital to your family’s financial success to plan ahead for the eventual transition of your business. Whether your succession is in internal or external, success requires significant advanced preparation. Create continuity plans for key employees: It’s critical to plan for the sudden absence or transition of your senior employees and managers. Cross training, written procedures, and advanced planning can help prevent a sudden illness or termination from affecting operations. Retire gradually: Most business leaders plan to retain some attachment to the business after they retire. Whether it’s sitting on the board or becoming a special adviser, a gradual separation from the business can help you adjust to retirement and ensure that your skills and experience are available when necessary.  If you’ve completed our thought exercise, I hope you’ve come away with some thoughts about how to improve the sustainability of your own business. If you haven’t implemented succession or continuity planning, please make it a priority in 2015. Your family and future self will thank you. Want a private chat about transition planning? Contact FINH on 07 3229 7333 Why the Rising Generation Needs Its Own Dreams 2014-12-12T08:12:10Z why-the-rising-generation-needs-its-own-dreams The next generations needs aspirations and passions beyond the family business. For many families the company provides, income, employment, stability and connectedness, but leaves little room for an individual's aspirations. David Harland – Managing Director FINH Multigenerational family businesses start as the dream of the founder. The dream takes many parts: the freedom of self-employment; the financial security that comes from hard work; eventually, the joy and pride in bringing children into the business. However, Jay Hughes, one of the world’s leading experts on the preservation of family capital, suggests that the founder’s dream can become a “black hole” that sucks in and swallows the dreams and aspirations of everyone nearby. When spouses and children become stewards of the founder’s dream, it can be very easy to lose sight of what they, themselves, want out of life. This lack of self-determination for members of the rising generation can diminish their interest in the business or build entitlement. When future generations don’t have the freedom to find their own way or make their own mark on the family’s legacy, they can become resentful and angry. One might ask: what else could they want besides financial security, a good job, and a prepared place in the world? Well, they might want a lot more. Much of our work as family business advisors is taken up by the knotty problem of preserving our families’ intellectual, financial, human, and other capital so that it endures long after the founding generation has left the scene. Everything we do, whether it be instituting formal governance structures, developing succession plans, or bringing in sources of outside investment capital, is all done to ensure the safety, security, and long-term health of the family. We have found that one of the leading causes of failed generational transitions is the loss of a family’s human and social capital. Simply put, if the second or third generation of a family doesn’t buy into the dream, the family ceases to flourish. Hughes makes a somewhat controversial proposition in his new book, The Voice of the Rising Generation: by helping the members of the rising generation find their own path in life, business leaders may risk pushing them away from the business. However, by prodding them - by action or inaction - into a place in the family business, they may be assuring future failure by leaving the firm in the hands of unprepared, unmotivated, resentful heirs who don’t want to be there. Hughes uses the Odyssey to frame this epic issue. Odysseus’ son Telemachus languished at home for the decades his father was away, never allowed to grow to manhood and find his own dreams. Members of the rising generation must go on their own adventure to discover and bring to life their own dreams. Founders and current business leaders can help their potential successors define and create their own dreams. Here are some suggestions: Keep the pressure off your family by allowing young members to choose their own career path. Support them in their endeavours outside the business and set expectations for those who want a place within the business. Research shows that one of the success markers of a multigenerational family business is that they require family members to gain experience outside the business. Encouraging young members of the family to seek experience outside the family business is also key. By gaining real-world experience outside the safety of the family fold, future leaders develop critical skills and build an identity for themselves that’s not completely associated with the family business. The business also gains by having qualified managers with industry experience at the helm. Find mentors. Mentors play an important role in the development of the rising generation. Founders and current business leaders can be too wrapped up in business needs or their own hopes to be good candidates. Mentors, whether they be friends, colleagues, or other relatives can nurture that all-important human capital and offer potential heirs the wholehearted support they need to discover their own dreams. Don’t be a tyrant. Future leaders want a say in the future of the business and it can be a struggle to balance your vision for the business with their expectations. If you find yourself frequently crossing swords with family members over strategic or operational issues, you may need a safe space in which to discuss your different visions. If you feel your successors aren’t ready to take leadership roles, set expectations for their future growth within the business. In the end, much of what I’ve written here can be boiled down to two points:  1. Ask your loved ones what they want and; 2. Be prepared to let go of your own dreams enough to encourage them to pursue theirs. Want to know more? Contact FINH on 07 3229 7333 Time to Professionalise the Family Business? 2014-11-10T03:53:25Z time-to-professionalise-the-family-business-1 Being too comfortable in a  family business can be a problem. Family companies more than others need to take steps in order to remain competitive. If you feel your family enterprise is in danger of complacency, you need to read this article. - David Harland – Managing Director of FINH  Competitive pressures and rising costs are forcing many Australian business leaders to realize that it’s time to take their businesses to the next level. A recent PWC study found that 40 percent of family businesses (globally) believe that professionalising the business will be a key challenge over the next five years. A 2012 KPMG survey of European family businesses found that 80 percent intended to bring in non-family executives and directors in order to keep the firm competitive in a challenging world.This need to modernise is a key shift for family businesses who now realise that they can hire the professional experience and skills needed to run a competitive business while keeping financial and strategic control of the business within the family. Professionalising your business typically involves incorporating the systems and structures of a competitive company while keeping the unique culture and family values your firm was founded upon. The process is designed to make the firm more profitable, growth-oriented, and competitive. It also often requires separating family ownership from the management of the business so that the business can thrive while family members still enjoy financial benefits and control. Usually, professionalisation includes some or all of the following: the creation of formal legal and financial structures to separate family ownership, the institution of family governance systems, identification of competitive obstacles and defining gaps in knowledge and experience, the establishment of training and succession plans for family employees, and other structures unique to a business’ needs. Ultimately, the goal of a professionalisation plan ought to be: Giving the entrepreneur’s vision structure and setting the stage for future growth. Allowing the family firm to grow more rapidly. Attracting higher quality employees and giving family members the professional education they need to manage effectively. Assisting the firm in preparing for valuation or the search for capital from private equity, patient capital, or traditional lenders. Planning for succession. There are a few key signs that you may recognize in your own business that indicate it’s time to professionalise the business: A need for external capital to navigate a liquidity event or grow the business. A founder or business leader with little or no time for strategic planning or thinking about the business’ future. Lingering family issues that impede business growth. A high turnover rate among non-family employees. If these seem like issues facing your business, then there are a few initial steps that you can take to jumpstart the professionalisation process. Bring together the key stakeholders of your business for a strategizing and brainstorming session. Discuss the group’s vision for the future. As the business leader, restrain yourself from dominating the conversation and focus on listening deeply to what the others who care about the business say. Consider the threats and obstacles that stand in the way of achieving your vision. Discuss what steps can be taken to address these issues and overcome them. As a family business advisor, I’m obviously biased toward consulting outside advisors when taking on a project that’s so fundamental to the future of your business. There’s no one-size-fits-all plan for professionalising a family firm; all firms have unique circumstances, obstacles, and growth opportunities that inform a professionalisation plan. However, we have developed a professionalisation process that we use to help clients understand their competitive landscape, identify obstacles to growth, and develop a strategy to address their issues and achieve their growth objectives. Bottom line: professionalising your business will force you to confront hard truths about your business. Embrace the change; the future of your business may well depend upon it. Want to professionalise your business? Call FINH and speak to David on 07 3229 7333 Tips for Conflict Resolution in Family Business 2014-10-08T03:40:18Z 8th-of-october-2014-tips-for-conflict-resolution-in-family-business Conflict in business is seen as normal. In a family business there is the stark reality that the conflict can go on to contaminate harmonious family relationships. This doesn’t have to be the case though and this article outlines some tips to keep the outcomes of conflict positive and manageable. - David Harland – Family Business Advisor Conflict happens in any enterprise. However, when your co-workers are also your family, conflict can take on new levels of complication and affect both familial and business operations. There are many common sources of conflict in a family business: Everyday spats over business operations, conflicts between older and younger generations over succession or the future of the business, or resentment stemming from feelings that certain family members are being compensated in excess of their productivity can all lead to conflict. Often, working and non-working family shareholders have different opinions about the distribution of business profits or compensation, causing friction that can lead to power struggles that damage business operations. Even garden-variety family drama can blossom into full-blown family crises if they aren’t adequately addressed. We’ve seen many situations where in-laws or partners of family members attempt to exert influence or otherwise involve themselves in the business. The hazy line between business time and family time can mean that family issues are dragged into work and business issues can contaminate family time. Rivalries between siblings or others members of the family can turn ugly when there’s money or authority at stake. Whatever its source, resentment and frustration can eat away at business and family harmony. Many (if not most) family businesses struggle to confront sensitive issues because they want to avoid conflict. The problem is that conflict can never be avoided – only prolonged. The end result is often that small kerfuffles turn into major family crises because there was no early intervention. The vast majority of family conflicts can only be resolved through early, direct conversation and a commitment to honest dialogue. In my opinion, successful long-term family businesses: Anticipate conflict and can have productive conversations when they arise. Clearly communicate their values and expectations to each other. Use formal councils or family meetings to address grievances in a structured way. Are willing to actively work at their communication skills and invest in training and guidance. Fortunately, there are a lot of ways to build healthy communication into your family business. First of all, start early and speak often. Sometimes, spotting trouble early and addressing it before the problem grows is enough. Other times, even large problems can be addressed through a series of conversations that tackle small aspects of the problem, rather than trying to solve a big issue all in one go. In my opinion as a family advisor, one of the best places to hash out major issues is at a formal family meeting. This might sound unnecessarily complicated, particularly if family members see each other regularly. However, while your family might be great at discussing everyday business and family matters, it’s very common for families to feel unable to tackle the big issues - the elephant in the room. A formal structure can help families set policies, open lines of communication, and give members permission to bring up big issues. An effective communication structure can also help avoid major conflicts by giving the family space to manage the inevitable issues that will arise in a family business. Mediated discussions can help when a thorny issue simply cannot be resolved internally. Oftentimes, issues have become so large and the relevant parties so entrenched that constructive dialogue is no longer possible. In these situations, an objective outsider who is trained to resolve disputes and negotiate tricky emotional territory can help cut through the drama and focus on the issues at hand. We have found that many clients achieve more in a few hours than they have in the last decade. Family retreats offer the opportunity to get away from the everyday and come together as a family business team while doing something fun and constructive. Retreats can involve all family members, just those who are active in the business, or may include spouses and young adults. What’s important is that you focus on building family ties and strengthening communications. Family retreats are not just events – they should be the start of your commitment to better communication and healthy conflict resolution. Bottom line: Conflicts happen in a family business. Resolving them takes time, honesty, and good communication skills. Ignoring problems never works because if you ignore them long enough they turn into crises that can damage the business and cause your family to suffer. If you’re concerned about conflicts in your business or your ability to resolve them, reach out to an expert. It’s time well spent. Want Expert Advice Solving Conflict in Your Family Business? Call FINH on 07 3229 7333 A Capital Revolution for Australian Family Businesses 2014-09-03T06:54:14Z a-capital-revolution-for-australian-family-businesses Family businesses struggle to find sources of external financing. It’s a common problem faced by thousands of family businesses around the world: the need for capital to fund expansion, new lines of business, or to facilitate liquidity events during critical transitions. This lack of financing has consequences: without adequate capital, businesses stagnate and are unable to diversify or take advantage of new opportunities that arise. Why the problem? In general, Australian family businesses are shut out by traditional sources of capital like banks, venture capitalists, and private equity investors. There is often a mismatch in goals, culture, and expectations that make it difficult for family businesses to get the capital they need at terms they can accept. Private equity investors usually want equity stakes and quick turnarounds that don’t mesh well with the conservative financial structure of many family firms. In response, increasing numbers of family businesses are breaking with the short time horizons and different goals of traditional lenders in favour of high-net-worth investors with similar values – so-called “patient investors.” A recent global survey of family businesses conducted by KPMG found that 58 per cent of respondents were currently looking for external financing. On the other side of the transaction, 44 per cent of high net worth individuals - defined as those with at least $US 10 million in investible assets - had already invested in a family business. Even better, 95 per cent of those investors had “positive experiences,” which we hope to mean that they are likely to engage in further investments. Patient capital investing is poised for growth in Australia for a number of reasons: huge demographic shifts as the baby boom generation hands over control to their successors, stagnant interest rates, and impatience with the short-sightedness of traditional lenders and investors. There’s also a crowd effect at play; multigenerational investors and the family offices that serve them are seeking alternative long-term investments and partnerships with other like-minded families who share their values. As generational and financial transitions occur, family businesses will need new ways to diversify their capital outside the business and will naturally seek to invest with partners they can trust. There are many benefits of patient capital to consider: support from likeminded partners who can help your firm expand into new markets, a willingness to consider longer time horizons and the long-term health of the business, and a shared family business philosophy. Most patient capital deals are also flexible and don’t require ownership stakes, which leave family leaders able to retain control over business operations. As with any source of financing, there are potential drawbacks to consider. The wrong terms or the wrong partner can be costly. It can also be challenging to navigate cultural differences when dealing with foreign investors and seemingly small differences in communication style and values can turn into big problems at the negotiating table. Furthermore, due diligence on both sides is extremely important given the risks involved in international transactions and the intimate nature of the patient investor relationship. We believe that it’s well worth bringing in an outside consultant for the deal-making expertise and risk mitigation perspective alone. The benefits of working with family business consultants is that we have the connections to broker deals and the experience to guide clients through the process while looking out for red flags and cultural mismatches. FINH as the Asia-Pacific partner of de Visscher & Co, have facilitated financing for multiple Australian family businesses, who have used our global network of patient capital investors to tap into new markets, overcome liquidity issues, and jump-start the next generation of growth in their firms. In our experience, family businesses who are interested in exploring patient capital opportunities, should consider the following: 1. Get your house in order first. Make sure that you have professionalised your business and have governance systems in place before approaching outside investors. Sort out any family discord and make sure that your key stakeholders are on-board with your goals. 2. Do your due diligence and find an investment partner that shares your goals, philosophy, and culture. 3. Work with professionals who can source deals and help you avoid errors and disappointments along the way. 4. Understand the value of your business and the opportunity you are offering; don’t be blindsided by weaknesses in your business that could damage your ability to seek external capital. If you’re interested in learning more about how our global network of patient capital investors can help take your business to the next level, call us on 07 3229 7333. Family Firms Eye ‘Patient Capital’ From Private Backers 2014-08-21T04:38:53Z family-firms-eye-patient-capital-from-private-backers As Australia's major provider of patient capital (families investing in families), The Australian Financial Review contacted us this week to comment on recent KPMG research stating that 58% of sophisticated family business were seeking external finance & bypassing traditional avenues such as banks. Here is the article and our thoughts. -David Harland Family Business Advisor Large family-owned businesses around the world are increasingly looking to high net worth individuals to fund their expansion and shunning private equity firms, according to professional services giant KPMG. Christophe Bernard, the Paris-based global head of family business for KPMG, said family businesses simply don’t like the private equity model of ownership for a period of five to seven years and have much longer horizons and different values. “The strategy of private equity is not part of the family values,” he said. Mr Bernard, who is in Adelaide ahead of a Family Business Australia conference from August 21 to 23, said a global survey conducted by KPMG of large, sophisticated family businesses across 29 countries showed 58 per cent were seeking external finance. But they were bypassing the traditional avenues of finance from banks because of the narrow criteria applied to cash flows and other benchmarks, despite the low interest rate environment around the world. There was an increasing trend of large family businesses connecting with high net worth individuals who understood the need for patient capital and the returns that could come in the future. The KPMG survey, which included family businesses in Australia, used a benchmark of $US10 million ($10.7 million) in liquid assets for its definition of a high net worth individual. The survey found that 44 per cent of high net worth individuals had already invested in a family business and that 95 per cent had found it a “positive experience”. Mr Bernard said new private investors in a large family company needed to be flexible in their approach to investment opportunities, because often the owners want to keep the core business quarantined to the family only. Opportunities often presented themselves in an expansion into a new market or through a joint venture proposal, which did entail slightly higher risk. “You’re not going to have an equity stake in the head company,” he said. “It’s not the core business. That’s where we need to be flexible with the equity.” Family business expert David Harland said the patient capital supplied by high net worth individuals or cash-rich family offices is looking for certain prerequisites, including a defined growth plan, additive growth potential to a global portfolio and an established family governance structure. “A cultural fit between the businesses will also be high on their list,” Mr Harland said. Middle Eastern patient capital investors were currently reviewing projects in Queensland, attracted by Australia’s “safe” reputation. Mr Bernard said one of the main problems family companies needed to overcome was the need for businesses to grow at a faster pace to cater for new family members arriving with each generation. “Families grow faster than the business does,” he said. Dominic Pelligana, a partner in KPMG’s Melbourne-based private enterprise unit, said long-standing family businesses in Australia were eyeing fresh opportunities across a range of sectors, but one rule of thumb they use when looking where to invest is to closely scrutinise changing demographics. “Follow the demographics,” Mr Pelligana said. This means the bulging growth in Australia’s population aged between seven and 17 years, and the 69-plus category. In the seven to 17 bracket, one of the biggest opportunities was in the education sector, Mr Pelligana said. The growing number of people in the over-69 age group meant there was a focus on opportunities in healthcare, aged care and medical research. A Brisbane-based KPMG partner in private enterprise, Bill Noye, said a key element for the longevity of family businesses was for any internal squabbles to be sorted out promptly. When family-owned operations did fail financially, it was usually caused by disagreements among the family members. “Most family businesses go broke because they haven’t been able to manage themselves,” Mr Noye said. Want to find out more about Patient Capital? Contact FINH on 07 3229 7333 Employing Family Members in Your Business 2014-07-08T04:48:49Z employing-family-members-in-your-business As a family business advisor I have seen families where a family member may work 12 hour days as their “duty” and other family enterprises where a position in the business is seen as a right. Neither practice is correct, but they are difficult to address once entrenched. With that in mind this month's piece is on the 4 best practices to employ when employing close relatives. David Harland - Managing Director of FINH There are few topics as contentious in the family business sector as that of whether and how to employ family members. For many business leaders, giving children and relatives a place to work is one of the primary drivers behind owning a family business. Unfortunately, in our experience, blindly hiring family members without thinking carefully about how they fit into the current and future needs of your business frequently leads to family friction as well as problems for the business. There can be many benefits to employing family and many businesses count their employment practices among their strongest competitive advantages. Family members are more likely to be truly committed to the success of the business; when times get tough, family is more likely to stick together and do what needs to be done to get the business through; children who work in the business can provide a natural succession option when the older generation decides to step away from the business. There are also many ways in which employing family can go wrong. Some of the common problems I’ve come across as an advisor are: family members given inappropriate responsibilities or seniority; relatives being compensated well above their job title; non-family employees becoming demoralized when they realize that their career prospects are limited. In my experience, holding to the following best practices can help your business thrive while employing family and avoid many of the pitfalls related to family employees. Create clear job descriptions and expectations for each position Developing clear expectations for each role and identifying performance standards will help you bring every member of your firm up to the bar. Understanding exactly what you need from each employee makes it easier to conduct impartial reviews and objectively address any issues with your family and non-family employees. As part of the professionalization of your firm, consider creating career paths for each employee where you map out possible trajectories within the firm and decide on performance objectives together. For non-family employees, this process can help reduce turnover by showing them how they can progress within the firm. It will also help you identify ambitious employees who may be able to take on future leadership roles. Pay all employees market rates One of the best ways to prevent favouritism and promote loyalty among your employees is to establish market-based pay rates for each position in your firm. We generally recommend that family businesses separate ownership interests from employment. This allows profits from the business to be distributed to family members according to ownership shares while keeping work-related pay tied to employment. Establish that a job in the family business is a privilege, not a right Employment in in the business should be considered an opportunity and applications from family members must be evaluated on their merits. Every member of your family is not cut out to work in the family business. Even if your most cherished dream is to hand over your business to a child, it’s still important that your family members feel as though they have other options. Hiring a relative just because of a blood relationship can cause friction with other employees and lead non-family employees to become resentful, potentially affecting productivity or increasing turnover. The most successful multigenerational family businesses nearly all require family members to gain experience outside of the business before taking a position. Why? It gives them the opportunity to prove themselves outside of the family and avoids ossification of the family business by ensuring a steady supply of fresh ideas. Judge family and non-family employees by the same standards of success Setting clear expectations and benchmarking performance will help you keep work evaluations free from bias. If you are concerned about favouritism or maintaining objectivity, I would recommend that you bring in outside experts to evaluate your HR practices and set up a process for unbiased assessments. Ultimately, your business exists to make a profit. It isn’t a philanthropic enterprise for the benefit of your family. As an owner, you need to establish a clear business case for every employee you hire, including family members. Developing professional HR practices and standards for employment or promotion will help you avoid some of the employment pitfalls of hiring family members. Would you like to know more about best practices for employing family members? Contact FINH on 07 3229 7333.