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2/1/2016 Lessons learned from running a family business | KINIBIZ
http://www.kinibiz.com/story/issues/211274/lessonslearnedfromrunningafamilybusiness.html 1/4
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Richard Eu
ENTERPRISE, ISSUES | JANUARY 30, 2016 11:00AM
Lessons learned from runninga family business
Previously, Eu Yan Sang group chief executive officer Richard Eu discussed how hestarted with the family business and his plans for it. Today, he gives some advice on howto run a family business and take it to greater heights.
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KINIBIZ spoke to Eu Yan Sang group chief executive officer Richard Eu recently about his plans for thebusiness. Today, he shares what he learned from running a family business and gives some salientadvice to those who want to take their family business to greater heights.
What have he found to work or to not work when working in a family business?
According to Eu, a family business is a bit more complicated becausethe dynamics are multidimensional.
“It’s not just about one manager talking to another manager or series ofmanagers. The people you talk to are sometimes also your relatives.Sometimes they could be of a different generation. How you talk to acousin might be different from how you talk to those from a youngergeneration. There’s a different dynamic.
“Thus, you have a business relationship as well as a family or bloodrelationship. In a way you have try to keep them as separate as
possible. We’ve had this discussion before, such as, what would your niece or your son address you as ina meeting. These are some of the issues that would come up. You have to make it clear that business isbusiness and you don’t bring the family into the boardroom,” he said.
In a way, it’s about keeping it separate, isn’t it?
“Yes it is. For example, I could say to you: ‘I want you to do this; look, I’m your manager’. You can saythat to anybody. But you can’t say, ‘I want you to do this because I’m your father’. On the other hand, ifyou say to me, ‘I don’t agree with what you’re saying’, then you have to consider this: I’m hearing thisfrom a colleague or a member of staff, not my child or my family. You’ve got to eliminate the emotionalelement,” he explained to KINIBIZ over the phone.
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Does he have a tough experience that resonates with him, that he has learned from?
“When we started the clinic business in Australia,it was very tough because of the overheadstructure – the cost structure. As a result, we hadto sell the business but we learned from thatexperience. As a result we developed a clinicbusiness in Singapore, Malaysia and Hong Kong,which I think is a bit more profitable and moresustainable. A lot of it is in the cost structure, andalso the management structure. We’re stilllearning, but I think it’s a pretty good idea of whatworks and what doesn’t,” he said.
One interesting thing that KINIBIZ observed is that despite being founded in Malaysia,Eu’s family decided to list Eu Yan Sang in Singapore. Why did they choose to list inSingapore?
According to Eu, the final decision was either Singapore or Hong Kong. “We thought that in Singaporewe would get a slightly better pricing. However, I do think Hong Kong is good too when you have a largeChinabased business,” he explained.
Does he have any regrets in listing in Singapore and not in Hong Kong?
“No, not really. I think it’s useful to have a base in Singapore. Because we get a lot of support from thegovernment compared to in other countries, like in Hong Kong in particular,” he said.
Eu added that their biggest market is Hong Kong, which contributes about 40% of revenue, followed byMalaysia and Singapore. “I think Malaysia and Singapore are about the same size. Because of thecurrency, it might be Singapore that is slightly ahead.”
What is his strategy for growing his business in the next three to five years?
“We have just released a press statement about China (referring to a recent partnership with HCareInvestments Holding Limited, an investment vehicle managed by CareCapital Advisors, a leadinginvestment and business consulting firm with extensive expertise in the healthcare industry in China).”
Under the partnership, EYSI will receive asignificant injection of capital and managementexpertise in China to expand Eu Yan Sang’s brandreputation and heritage and build up a scalabletraditional Chinese medicine business in China.
“That (market) would quite difficult. One of ourstrategies is to find strong partners. We also havemade an acquisition in Australia which we haveannounced previously. We have acquired abusiness with seven stores. So we’re bringing inthe management team for that business as well,” he explained.
If he could turn back time, what is the one thing that he would have done differently?
“I think that some of our socalled failures happened because we were too impatient. And maybe we didthings too quickly,” he said adding that he’d have taken a longer time to start it up could he have a doover.
To what extent has he you encouraged his children to be part of your business? And whatkind of succession plan does he have in place?
“Actually my son is working in our business already – my eldest son. He’s part of the Hong Kongmanagement team. He’s also assisting in terms of business strategy,” he said.
In regards to succession planning, Eu said that “Basically, we’re looking at a restructuring in the nearfuture to realign some corporate positions and that would be part of the succession planning. Thesuccession planning is not just for my own position. It’s also for other positions in the company.”
“What I didn’t make clear to you is that the company relies pretty much on professional management.We’re not just looking at my position, but throughout the group. It’s really dependent on professionmanagers, not family members. It doesn’t matter whether the children are interested or not interested.
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Even if they’re interested, they have to prove themselves. We also take the view that the company isprofessionally managed anyway, so to us is all a matter of finding the right family member. The rightperson in the family or a professional manager.”
When asked how he would advise entrepreneurs who want to take their family business international,Eu said that it’s about finding the right people.
“My advice is actually similar – for family businesses that are SMEs and so on, they want to gointernational, they have to look at their talent pool. If they don’t have the right talent inhouse, theyhave to hire the right people. It’s easier said than done. Sometimes it’s more of trial and error.Sometimes you’ll be lucky. I think it’s almost entirely depending on you getting the right person to do it.If you don’t have the right person, you have to be very careful, the opportunity might not look good ifyou don’t have the right person.”
What are some of the do’s and don’ts that an entrepreneur should do in running a familybusiness?
“You see, the dynamics are very different whenyou are a pure entrepreneur and you’re having astartup. You’re pretty free to do whatever youwant. And it’s different. Especially nowadays, alot of entrepreneurs are getting funded by privateequity and special investors, and not just by theirfamilies.
“The way we view stakeholders is different. Whenyou’re in a family business and especially if itcontinues for more than three generations – youhave to define the family business as one where it’s been going for more than two, three generations.And you have different generations involved in the business, either as shareholders or in themanagement, or both. Then it goes back to how is the relationship between each one of them. I thinkthat you have to try, if possible, to take out emotion. You have got to run it like any other businesses.Call it a family business, but I think you have to be very careful.”
“I can’t be more specific, because it’s based on case by case. How many family members, is there apatriarch who is still controlling it, what are the plans for the next generations, is there one in place? Ifyou have many family members in the business and you don’t have a proper succession plan, you’regoing to have problems. So these are some of the issues.,” he explained
Eu said that in his case, he was a bit lucky in the sense that because of the buyout, we (he and hiscousins) restarted the whole thing. “And so the relatives – my cousins and I who are in the business – and it was a conscious effort by us to get into the business. It’s not something we inherited. We actuallyhad to buy the business back. It might be that when you’re in the family business you might try to thinkof some way of renewal of generation to generation, it really depends on the circumstances of eachfamily.”
Does he have any additional advice for entrepreneurs?
“I think it is important to try to change beyond your own immediate business problems. A lot of times,entrepreneurs are very much focused on the daytoday issues of running the business. And you almostget obsessed by it. I see that in myself – all you think about is the business. But I think that it’s good totry and take a step back from time to time. Really cultivate other interests. Because I think that you haveto have both the world’s eye view as well as the bird’s eye view,” he said.
He added that a business owner can’t just immerse himself or herself in the business to such an extentthat he or she doesn’t see what else is going on around him or her. “I think it’s good to take a short breakfrom time to time just to look at everything else that is going on. I’m sure there are lots of entrepreneursout there who are doing this already, but I would say that this is something I found quite useful,” heconcluded.
Yesterday: Keeping the family dream alive
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