Professional advice for next generation and family businesses
Connecting Family Businesses In January this year, William Notcutt was appointed as the new Chair for the eastern division of the Institute for Family Business (IFB). The IFB supports and promotes UK family businesses, by connecting families, representing family business in Government and providing the latest family business knowledge. Nick Banks who leads the Ipswich Business Advisory Team at Scrutton Bland sat down with William to talk about his role and his thoughts about why family businesses are so important.
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You are a fourth-generation member of Notcutts Ltd. Tell us about your family business. I am one of six fourth-generation owners of the business. In 1892 my great grandfather started with a small nursery in Ipswich and in 1897 purchased a more established nursery business in Woodbridge, which supplied the country estates and large townhouses of the day. Diversifying into landscaping, the business developed its range and scale and opened its first garden centre in 1958. This side of the business grew rapidly during the 1980s and 90s. Since 2007 it has divested itself of almost all the other business activities inherited or accumulated by the third and fourth generation and is now almost exclusively focused on garden centre retail, operating the fifth largest chain of garden centres in the country. You recently started your own business venture. What drove you to do so, and could you tell us a bit more about what this business is all about? After twenty years at Notcutts, I left seven years ago for strategic reasons so that I could develop my own diversified agricultural estate business, William Notcutt Estates. It includes arable farming, renewable energy generation and forestry, commercial and residential property, and furnished holiday lets. You have been a strong advocate of the role family businesses play in our economy and society for many years. What drives this passion? I have long appreciated the responsibility and opportunity that family businesses represent and have been keen to learn about it and communicate on behalf of the sector. Family businesses have the potential to provide the greatest luxury of all, choice, and when carefully nurtured, they can be a powerful force for good. What do you think makes family business different? There is a tremendous sense of duty that a kitchen table apprenticeship cultivates, a feeling of stewardship, with often illiquid but patient capital and the willingness to do what is right by past, present and for future generations; not just of the family, but of staff, customers and all stakeholders. This goes above and beyond a mere job or a financial investment, or the short-term reporting cycles which might encourage short term high risk strategies. For me, family business is all about sustained creation and preservation of wealth over generations. Family companies are often ‘unsung heroes’ of our communities. What do you see as some of the myths that surround family firms? The greatest myth around family business is nepotism. The responsibility of sustainably running a business for all stakeholders, for now and future generations, and adopting change to adapt to the opportunities of the economic environment means that all family members need to keep their foot to the floor; there are and there should be no easy jobs.
Why did you join the IFB and how has it helped you? I appreciated the opportunity that a peer group of family business owners presented in enabling improved governance and succession in our business. It provided the context for our older generation to gain the reassurance they needed before we embarked on the governance review, creation of family constitution and family council. It has helped to inform our wider family as responsible shareholders as they in turn have engaged with the IFB through Family Council Chair forums, next generation meetings, as well as drawing on other IFB resources. Why did you take on the IFB East of England Chair role, and what do you hope to achieve during your tenure? I wish to encourage other family businesses to engage with each other on local level. We are in an era of great economic and political uncertainty. The cross fertilisation of ideas and sharing of stories in a non-competitive environment could be of solace and support to regional family businesses, as they adapt to the new environment. The recipients should be business owners, their next generations or non-family managers engaged within the businesses. On a regional basis we need to ensure the sector maximises the opportunity to be that “power for good”, in support of the wider IFB objectives. What one piece of advice would you offer to a family business owner? To communicate. Engage early with the next generation and managers, to talk and listen widely to our own and the older generation and to reaffirm values with the next generation. At what point did the Notcutt family step back from working in, to working on the business? The Notcutt family has always been quite small in relation to the size of the business, so non-family managers, executive directors and non- executive directors have been engaged for many years. I was the last member of the family to work full-time in the business and the role of the family now is to work with the non-family chairman and through the nonfamily CEO to ensure that our values permeate through the business; whilst at the same time we are fortunate to not be burdened by working in the business. What external support can professional service firms give to a family business. Whilst naturally they must deliver competence in their professional sphere, understanding the family business sector and the opportunities and constraints that arise with intergenerational succession will enable them to add greater value. Advising the business is one matter, there is also a role in advising the family as there are times when the interests of each do differ. This tension is healthy where it is transparent, discussed and managed. The Institute for Family Business (IFB) is a not for profit, membership organisation supporting and promoting UK family business through events, connections, advocacy and the latest family business knowledge. They provide family businesses with key insights on important family business issues, and offer access to expertise and best practice from within and outside the family business community through connections with leading family firms and experts from all over the world. For further information on how Scrutton Bland can support family businesses contact Nick Banks on 0330 058 6559 or email@example.com
For more information on the IFB, please see www.ifb.org.uk E: firstname.lastname@example.org or T: 0207 630 6250 .
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The next generation – a time of change Any time of change in a business will be both an opportunity and a threat, and none more so than in a family business when handing on to the next generation.
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In an ideal world, the handing over of a family business can be planned for, however in the real-world life is rarely that simple. Sometimes unexpected events or a disagreement amongst family members means a quick handover is essential. Running a business which may have been started from scratch by family members who know every transaction is a very different proposition to running a large organisation, where it’s essential to delegate many of the functions which previous generations did themselves. This is particularly true of finance. In many early stage businesses, a family member will take responsibility for the money, and trust isn’t an issue. Then the business grows, and the next generation is faced with a different scenario. With finances so critical to the long-term survival of any business, a good finance team, which should include your external accountant, can make the difference between success and failure. So, what are the important things any next generation business owner needs to consider when selecting their accountant? • Do they understand the key drivers to the profitability of the business operations and can they advise on key performance indicators (KPIs)? • Do they understand the working capital cycle and cash needs of your particular business? • Have you discussed with them what information you need to run the business and at what intervals? For some businesses such as transport, a weekly profitability report by unit is key. For others a quarterly statement with costs by income stream reconciled to the overall profit is a more accurate measure. • Do they focus on key controls, including the balance sheet, to ensure all costs are captured and reported results are accurate? • Will they help you to regularly review key aspects of the profit statement and balance sheet with your accounts team, such as aged debtor listings and profit by units / income streams? • Do you meet before the year end on tax issues for the business? • Do you get together to discuss the interaction of personal and business finances and proper remuneration of family and key management? Nothing splits a business more quickly than unfairness on such issues. • Do they discuss and review key threats to the business such as fraud, cyber security and retained key personnel? • Have they brought you up to date with latest issues such as the requirements for Making Tax Digital or insurance on cyber fraud and key person policies? Above all, don’t underestimate the value of an external adviser who is not afraid to challenge and advise, even when the messages are difficult. Not only can their external experience be invaluable, but for family members they can be a source of support and perspective. For find out more about the professional advisory services available to support family bushinesses contact Sue Gull , Corporate Services Partner at email@example.com
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Recognising Family Business
Designed to recognise the ‘best of the best’ from within the local business community, the East Anglian Daily Times Business Awards are an annual event in the region’s business calendar. In 2018 Scrutton Bland sponsored the Family Business award, a category within which the judges were looking for an established family business which demonstrated all-round excellence, drive, ingenuity, professionalism and resilience.
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Finalists were selected from all over the region and the judges made their decision based on financial distinction, employee training and development, response to change (such as new technology), involvement in the community and strategic leadership. The finalists were also expected to demonstrate how their business reflected their family’s values, and to show the judges how they have created an organisation with a clear vision for the future with which all family members are in agreement. James Tucker, Business Advisory Partner at Scrutton Bland sat on the judging panel who rigorously judged all of the entrants against the strict criteria. After much deliberation the judges awarded the prize for the Family Business category to Cardinal Healthcare, who operate two residential care homes in Baylham and Barham in Suffolk, as well as an in-home care service. The other finalists were Breheny Civil Engineering, motor trade business John Banks Group, and Rosedale Funeral Home. Cardinal Healthcare is based in Barham, and is run by Prema Fairburn and her sons Adrian, David and Jonathan. Cousins Alex and Raphael are lso involved in the business. Commenting on the winner, James Tucker said: “Cardinal Healthcare has recently undertaken a large capital project to expand one of its homes. The additional rooms are already fully occupied, and it is not hard to see why. This company puts a lot of thought into how it operates its business and has created a lovely environment for its residents. As well as the physical environment and committed staff, the company invests in technology to improve the experiences of residents and staff alike. The strong family bond shone through during the visit, with many members of the family actively engaged in the business.” The business began in 1986 with one small nursing home. These days, the Fairburn family manages two large nursing care centres at Barham and the 55-room Baylham Care Home, as well as operating Primary Homecare, a Suffolk-wide care in the community service. Adrian Fairburn, director of Baylham Care Centre commented “This award is a great testament to the hard work, dedication and caring attitude shown by the Cardinal Healthcare teams. We know that our staff go far beyond standard expectations of quality and service in care home nursing and personal care, but it is always nice to have that publicly recognised.” Scrutton Bland regularly work with a range of family businesses throughout the region, supporting management teams in all aspects of running their business operations including succession planning and helping with managing the relationship between the family and other shareholders, and the resolution of family conflicts. James Tucker can be contacted on 0330 058 6559 or email firstname.lastname@example.org
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0330 058 6559 scruttonbland.co.uk
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