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UK Family Business Survey 2017Great opportunities p03/Family Businesses in the Digital Age p11/Professionalising the family p13/Making a success of succession p15

The ‘missing middle’Bridging the strategy gap in UK family firms

2 The ‘missing middle’: Bridging the strategy gap in UK family firms

“ What’s always held us together is the ‘family factor’ – that’s what’s given us continuity”.

Tim Wates, Director, Wates Group

Executive summary ........................................................................................01Great opportunities ........................................................................................03Driving growth ...............................................................................................05 10 steps to effective strategic planning .....................................................07Innovation: Tapping in to new ideas at Greg Rowe Limited .............................08Family Businesses in the Digital Age ............................................................... 11Professionalising the family ............................................................................13Making a success of succession .......................................................................15 Five ways the current generation can support the next gen ....................... 18 10goldenrulesforambitiousnext gens .................................................... 19FamilyOffice ..................................................................................................21Afinalword ....................................................................................................23Research methodology ...................................................................................24Thanks and acknowledgements ......................................................................25Appendix: The people behind the stories ......................................................26

Page 13Professionalising the family

Page 11Family Businesses in the Digital Age

Page 15Making a success of succession

Page 03Great opportunities

Contents


This is the 8th Family Business Survey we’ve run at PwC, and it’s the largest and most comprehensive yet. Senior executivesfromover2,800firmshavetaken part in our global research and over100firmsintheUKfromsectorsas diverse as agriculture, retail and manufacturing.We’vespokentofirmsjustapproachingtheirfirstgenerationaltransition, and those that can measure their longevity in centuries rather than years. We’ve talked to the founders of successful enterprises, ambitious next gens, and professional CEOs. We discussed global megatrends such as digital technology and globalisation, and the personal and professional challenges of ‘keeping it in the family’. And we’ve talked in depth to many families who generously gave us their time and whose stories we are proud to feature in this report.

Family businesses pride themselves on their ability to change, but in practicemanyfindthishard.Morethan a third of our global survey respondentsthinkfamilyfirmsarelessopen to new thinking and ideas than other companies. Skills, mindset and culture are all factors, as is the lack of a coherent strategic plan to guide the direction of innovation investment. But how do family business in the UK stack up compared to the overall global picture (at 100 businesses a statistically significantproportion)andwhatshouldwe make of the inherent contradictions that seem to prevail between aspiration and reality?

Brexit is arguably the biggest single disruption to affect UK businesses in recent times. As such their reaction to it is probably a good barometer of an overall attitude to change – and radical change at that. Unsurprisingly UK respondents were among those who felt Brexit was likely to have a negative impact on them over the next one to two years. However this view is not reflectedinrelationtoexports,withUKrespondents predicting the percentage of overall sales to rise from 19% to 24% overthenextfiveyears.

Executive summaryA change of heart

2UK Family Business Survey

UK family businesses were below the global average in seeing the need to keep pace with digital and new technologies as a challenge. This would seem a positive indication of a willingness and a readiness to embrace technological change. Yet at the same timeourfindingsrevealedthattheirdigital strategies could be in better shape with the UK lagging behind in feelingthattheyhaveastrategyfitforthedigital age(49%vsaglobalaverage of53%).

The alignment of family and business strategy is another interesting area where UK family businesses came in lower than the global average. The differencewassmall(65%comparedto69%)buttheimplicationspotentiallyaremoresignificant,pointingperhapsto underlying issues relating to culture and behaviours. This is a very sensitive area where issues can be difficulttotackleorresolveandarerarely quick to deal with. The resultant delays and distractions created could impede the ability of the business to be commercially agile and make decisions in a timely manner meaning they may lose out on opportunities to seize competitive advantage. It is interesting to note that whilst 78% of UK businesses (compared to a global averageof82%)haveatleastoneprocedure in place to deal with family conflictonly53%ofUKbusinesses(versusa64%globalaverage)haveoneof the four ‘main’ procedures in place;

• measuring and appraising performance(37%)

• familycouncil(14%)• conflictresolutionmechanisms(24%)

• familyconstitution(14%)

When it comes to planning ahead, 13% ofUKrespondents(comparedtoanaverageof15%globally)feltthey had a robust, documented and communicated succession plan. Not sofarbehind,butisthisasufficientlystrong position from which to counteract or avoid the ‘steady state’ inertiaofthe4th Generation?

Onpaperfamilyfirmsarewellpositioned to make a success of innovation and change, telling us consistently they believe they’re able to re-invent themselves with each new generation.Globally,57%saidsothisyear which is a 10% increase since 2012. But is this really true?

The UK is below the global average in a number of key indicator areas such assuccessionplanning,diversificationand adopting a global perspective which would suggest they’re not as geared up for change as they need to be or believe they are. Their heads might acknowledge what needs to be done but their hearts are still not in it.

Sian Steele

Sian Steele UK Family Business leader PwC UK

+ 44 (0) 1223 552226 [email protected]

https://uk.linkedin.com/in/sian-steele-6b022523

@SianSteele


This year’s results tell us that despite tough economic conditions and the accelerating pace of change, the family business sector continues to be vibrant, successful and ambitious. Familyfirmsarevitaltoalleconomies,offering stability, a commitment for the long term, and responsibility to their communities and employees. They also tell us that family businesses can be an engine for change and innovation.

There are two key unique challenges facing family businesses, which are not faced by other non-family owned business – transitioning the business from one generation to the next and developing family members to take on leadership roles. Failure to tackle these challenges can ultimately result in a business failing, which impacts not only the family but also their local economy and society.

Developing a strategy to deal with such challenges requires engagement with both the family and the business. Both sides need to be understood to ensure that the right strategy is being developed, which takes account of differing perspectives and objectives.

Great opportunitiesWhat makes family businesses different?

82% 76% 73% 56% 71% 29% 40% 26%

Stronger cultures and values

Measure success differently - more

than just profit and growth

Decision making is faster/more streamlined

Take a longer term approach

to decision making

Take more risks Need to work harder to reruit / retain top talent

Find it harder to access capital

More entrepreneurial

74% 72% 71% 61% 55% 40% 48% 32%

Global

UK

How family businesses differ from non-family businesses

Q: How do family businesses differ from non-family businesses? Please tell me how much you agree on a scale of 1-5, where 1 = disagree strongly and 5 = agree strongly. Base: All UK respondents (2016: n=100), all Global respondents (2016: n=2802).


When we work with business owning families, we spend time understanding their ownership structure, their governance structure and their investment structure to ultimately support them in developing a family and business strategy that properly takes account of the multiple dimensions.

A business owned by a controlling owner will have different issues than a business owned by siblings and these issues will differ again if the business is owned by a group of cousins. Reliance on key individuals, sibling rivalry or lack of commitment to the business are just some of the issues different groups may face.

How these different groups manage and control the business will also vary – a controlling owner will likely have far more involvement and authority than a cousin consortium who may be owners only, leaving the management to a professional team.

Theinvestmentprofileofabusinessand a family typically changes over time, as the ownership and governance structure starts to evolve. More often than not what starts out as a focussed family business will slowly evolve tobecomealargermorediversifiedbusiness,reflectingtheinputandobjectives of the broader family group. Where the business has been particularly successful and large sums have been paid out, there may also be a range of ownership and management vehicles,suchasafamilyofficewhichhelps support the family diversify and manage the wealth. These are natural and positive transitions that family businesses make which facilitate long-term ownership and involvement of the family.

“We have an amazing network in our industry, and many of them are family businesses, just like us. They have the same long-term view and the same values. That combination is very powerful.”

Martin George, Chairman, Whitworth Bros.

WefindthatUKbusinessowningfamilies want to better understand their ownership, governance and investment structures to help them assess how they are different. Building awareness of their structures will ultimately enable them to improve their strategy for owning and managing the business. There are numerous books, theories and tools available to help educate families on what it means to be a business owning family, but nothing compares to learning from other family businesses. Whilst each family business is different, they can learn from the experiences of others to tackle the challenges relating to family leadership and succession.


In the decade that we have been surveying family businesses we have talked to founders, next gens and professionalCEO’soffamilyfirms–andwehaveidentifiedsomerecurringthemes. Some of the themes really underscore the great qualities we know family businesses have; entrepreneurial spirit, a focus on longevity and legacy, and a commitment to their people and their markets. We also see less positive themes around dealing with some of the tough issues like succession planning.

The overall theme of this year’s report is the missing middle; the gap between the entrepreneurial vision that drives the creation of a business and the long termvisionthatallowsfamilyfirmsto pursue strategic goals to sustain the business for the future. For a vision to become a sustainable reality it needs to be coupled with a clear and well executed plan that bridges the gap between now and the more distant future.

Driving growth

“Our ownership structure gives us the luxury of thinking long-term, and we’re not chasing revenue at the expense of putting anything at risk. It’s about organic growth, growing alongside our customers and anticipating their needs.”

Jenny Houldsworth, Non-Executive Director, Johnstons of Elgin

Long-term future growth

68% of family firms prioritise their long-term future

But only 17% prioritise innovation, the bridge to the long-term future

When there’s no strategic planning in the medium term

The bridge to the future may be in danger of collapsing


When there’s no strategic planning in the medium term

Long-term

future growth

The bridge to the future may be in danger of collapsing


But only 21% prioritize innovation, the bridge to the long-term future

INNOVATION

Long-term

future growth

Long-term

future growth

Strategy gap: ‘The missing middle’


Oursurveydatatellsusthatfamilyfirmsare performing consistently with 60% showing revenue growth in the last year and nearly all expecting this to continue in the next few years. Interestingly, when you look at the businesses that we surveyed only a quarter have survived more than three generations – our results don’t capture the stories of those no longer in business.

Morethanthreequartersoffirmstellusthat they plan to achieve their ambitions for growth by continuing to sell the same products and services and the UK is lagging behind its western European peers in its appetite for exporting to new territories with only a third planning expansion to new territories. It will be interesting to see how this is impacted by new trade agreements being brokered post-brexit, when we survey in 2018.

Whilst only 11% plan to diversify within their core business, raising concerns about the survival of these businesses, nearly half plan to start some kind of new entrepreneurial venture making them on paper at least better poised for the future. In order for new ventures toreallyflourishgoodrobustmedium-term strategic planning will be needed.

Interestingly when you look at how UKfamilyfirmsplantofinancetheirgrowth more than half plan to use externalfinance,whichissignificantlyless than the global average of 78%. One wonders if the bullish growth ambitions will be realised with a cautious approach to funding.

There are other challenges facing UK family businesses and whilst 7 out of 10 feel they are more agile and streamlined in decision making than their non-family counterparts there are consistent concerns around attracting and retaining the right talent to help them succeed and, more broadly,aroundfindingstaffwiththeright skills.

If UK family businesses are to achieve their full potential they will need to spendmoretimefinetuningtheirstrategic plans, thinking about the medium term, anticipating disruption and preparing for it in advance. Disruption may come from industry development, digital or indeed changes of leaders within the business, to name just some, and all need planning for. For some succession planning is an exercise to be tackled outside other business planning but to be effective it needs to go beyond simply mentally choosing a successor and be developed as a core strand of the medium-term strategy.

UK

Global

Global78%

UK56%

60%showing revenue growth

Growing core business in existing markets

New countries

94% 34% 52%85%

Family firms are performing consistently, with

Of those surveyed who plan to grow 10% or more, over three quarters plan to continue to sell in existing markets

Only just more than half plan to use external finance

7/10feel they are more agile and streamlined in decision making than their non-family counterparts

Organisation performance and challenges


For family businesses that do want to keep things in the family, here are ten steps to planning strategically over the medium term so that the business stays in business for the long term:

1. Focus on goals, not tactics: A strategic plan should not be confused with a business plan. A strategic plan is about setting your business goals over the medium term and deciding thedirectionofthefirm,whereasabusinessplanlaysoutspecificactionsa company must take in the next year to make the strategic plan a reality. Although having a good business plan is crucial, it’s only part of the answer.

2. Stand in the future and look back: Where do you want to be in threeyears?Infive?Inadecade?Beabsolutely clear about what you want the future to look like, and then decide what you need to do to get there, including the changes you’ll need to make to your products and services, balance sheet, working culture, and your organisational structure, to name just a few areas.

3. Stand in the present and look around: Take a long, hard look at the business as it is right now. Do you have a genuine competitive advantage? Are your ambitions realistic? What needs to change? Ask yourself whether you’re adequately assessing the threat of new competitors and the likelihood of new game-changing products or services.

4. Invite input: Although the CEO needs to drive the strategic plan, the more people who contribute to it, the more robust it’s likely to be. People are also more committed to something they’ve helped create. So involve skilled people from across the company, and enlist trusted outside advisers, including those with a good grasp of how the market is changing.

5. Be prepared for change: A rigorous strategic planning process should challenge the way you’re operatingtodayandtestitsfitnessforthe next phase. If it doesn’t do that, it’s not doing its job. So be open to different alternatives and approaches, accepting that you might need to adapt your own personal role, as well as the way the business operates.

6. Set a timescale: A good strategic plan is like an itinerary — it’s about when you plan to reach the milestones alongtheway,aswellasthefinaldestination.

7. Assign responsibilities: The CEO and board must take ultimate ownershipoftheplan,butspecificelements need to be owned and driven by appropriate managers and supported by the budget and resources necessary for success.

8. Translate the strategic plan into a business plan: Move from the strategic to the tactical by turningthefirstphaseoftheplaninto a programme of action and implementation over the next 12 months.

9. Measure, monitor, and adapt: As you implement the plan, assess how well it’s working and whether it needs tobefinetuned.Useobjectivekeyperformance indicators to evaluate progress.

10. Communicate, communicate, communicate: Don’t just share the strategic plan, but also communicate the progress you’re making against it. This builds a shared sense of commitment, energy, and sense of direction.

Ten steps to effective strategic planning


“Every circumstance is different, but you do have to take a much longer view than three years, three years is too short term”

Mike Roberts, Managing Director, Frank Roberts Bakery


It’softensaidthatfamilyfirmshavethe ability to reinvent themselves with each new generation, but it’s hardertofindreal-lifeexampleswhere this has actually happened. Greg Rowe Ltd is one of them. After growingahugelyprofitabletap-making business in the ‘80s and ‘90s, the family started up a new venture focusingondrinkingwaterfiltrationproducts, and is now expanding back into the kitchen taps that gave them their initial success. And it’s all down to the power of innovation…

GregRoweSeniorbuilthisfirstbusiness from his garage, with his partner, Bob Perrin. It eventually grew into the Perrin & Rowe range of luxury kitchen and bathroom taps, showers and accessories. The company’s success was also driven by theirinventionofTriflow.Theworld’sfirstthree-waytap,theproductdispensedhot,coldandfilteredwaterfrom a single spout and was patented in 1991.

As Greg’s wife Alex says, “At one point, there were Perrin & Rowe taps in everysingle5-starhotelinLondon,aswell as other luxury venues all across the world. Greg adds, “We grew at 30-40%ayearforaboutfiveorsixyears.” That international expansion was built on an exclusive distribution arrangement with Franke, the biggest sink manufacturer in the world, and over time, Perrin & Rowe expanding its sales in the USA. At the end of 20 years the business was turning over around £19m, and had three manufacturing sites. Greg Rowe Junior, Greg’s eldest son and his brothers, Scott and Todd wereallworkinginthefirm,alongsideother family members. But with retirement looming for both of the founders, the decision was made to sell their shares.

However, as Greg Rowe Junior says, “Once an entrepreneur, always an entrepreneur. When the chance came uptoacquireasmallfiltrationbusinesscalled FreshWater, Dad couldn’t resist. And it wasn’t just that – he also wanted to give me and Todd a chance to build a family business of our own, just as he had.” Both sons were prepared to “roll our sleeves up and do what had to be done”, but that task turned out to be even bigger than they expected, as the timing coincided with the 2008 credit crunch. “We knew FreshWater had problems,” says Greg Junior, “it was already losing money and lost even more when the downturn hit. But we’d bought it because it had a good digital sales platform, and we focused on growing that. It was tough, and we had to pare back to the bare bones, but we hung on in there. We focused on improving quality and streamlining the product range. And then we had a stroke of luck.”

Innovation

Tapping into new ideas Innovation at Greg Rowe Ltd


That luck was a call from the MD of Franke UK. They were still working with Perrin & Rowe, but had encountered some challenges, so they asked the Rowes’ new business if it was interestedinmakingfiltercartridgesfor a range of taps which Franke were planning to make themselves. “It was our breakthrough,” says Greg. “We started hiring engineers again – some of whom had worked with us at Perrin & Rowe – and set up a whole new call centre and after-sales function to deal with the Franke products. That turned out to be key, because it meant we were hearing directly from consumers about what worked with the Franke taps, and what didn’t. That was the spur to start working on a new tap of our own. Because when it comes to innovation, it isn’t just about engineering, it’s about practical issues like how the product is installed and used. Having that insight helps you identify what exactly consumers are buying from you. In our case, it’s not taps, per se, it’s water – water at the quality and temperature they want, in an instant. That helped us see that we’re not just competing with other tap manufacturers, we’re competing with kettles too.”

The result was Omni, a new multi-patented four-way tap, dispensing filteredboilingandcoldfilteredwater, as well as normal hot and coldflows.“It’seasytoinstall,andeasy to maintain,” says Greg. “We’re making around 600 a month, and they retail at £1,400. We’ve plans in place to begin exporting to Europe, China and Australia, and we’re adding to the range all the time. And everything we’ve done so far, we’ve funded ourselves.”

The key to the family’s success is their dedication to innovation, just as it was thefirsttimearound:“Around15%of our turnover went into R&D last year,” says Greg. “We empower our employees and apprentices to come up with new ideas, and we’re backing up our investment in our physical infrastructure with investment in digital – new websites, new systems, and better e-commerce platforms. We’ve never been followers and we never will be. We always want to be first.”


Thisyear’sfindingsrevealthat,whilethe threat of digital disruption is being felt by Senior Executives, many family firmslackrobuststrategiesforthedigital age.

The need to continually innovate came out as the biggest single challenge respondents see over the nextfiveyears.Despitethisonly54%of UK family businesses have ever discussed digital disruption at board level. Similarly, only half recognise the importance of having a digital strategygloballyand37%ofthenextgeneration say they struggle to get their business to engage on the subject.

Family Businesses in the Digital Age

“We’re doing a lot more with specialist bloggers who are real trendsetters when it comes to teen clothing. In this game you absoloutely have to keep up with trends.”

Damian Curran, UK and European Sales Director, Leisurewear

One quarter of family businesses in the UK feel vulnerable to digital disruption.

But only 54% ever discuss digital disruption at board level

Readiness for the digital age

So what are the threats and what do businesses need to do?


Tips for Family Businesses in the Digital Age

Creating and sustaining a culture of innovationOneofour2ndgenerationfirmfamily business respondents stated that“Familyfirmsneedtobeabletobreak free from ‘success syndrome’ – if they aren’t open to change it can lead to complacency, arrogance, and an excessively internal focus.” Having the right leadership and culture are the most crucial ingredients for ensuring innovation is at the heart of strategic management.

Data and Analytics: stay on top of the curveWhile many Family Businesses have begun to use simple analytics based on management information and reporting systems, we expect to see an increasing development of more descriptive and predictive analytics that combine internal and external structured together with unstructured data. This enhanced insight will enable Family Businesses to come up with the right strategies for growth in their business,operationalefficienciesandeffectiveness.

Cyber Protection: don’t get caught out!The question of security is an increasing concern both for family firmsandtheirrespectiveclientele.Wealthy families have always been ripe targets for cyber attacks and advancements in digital and technology have equipped criminals with new tools to operate. Family Businesses should be continually reviewing the protection they have in place to keep up with this pace of innovation, including threat and vulnerability assessments, contingency planning, data backups and network monitoring.

Educate, educate, educateIt is critical that Family Businesses provide training and guidance for both their employees and clients on how to adopt a digital mindset and achieve greaterlevelsofdigitalfluency.Oursurveyfindingsrevealthattheolderthe participant, the less they knew about their digital strategy, and it is important that these clients be brought into the digital conversation. This can include digital collaboration, new formsofdatausageandtheefficiencyof assembling new digital systems as opposed to coding from scratch. This will enable Family Businesses to take full advantage of new technologies and ways of working.

“Digital is absoloutely vital in reaching our visitor audience. We use everything – Facebook, Instagram, Pinterest. Everything.”

John Hoy, Chief Executive, Blenheim Palace


In 2014, our survey’s main theme was the professionalisation of the family firm.Thisyear’sresultsshowprogress,but there is still more that needs to be done.

Everyfirmwilleventuallyreachthepoint when it has to professionalise the way it operates, by instituting more rigorous processes, establishing clear governance, and recruiting skillsfromoutside,andfamilyfirmsare no different. This year’s survey proves – again – how important these priorities are.

For example, 28% of respondents (down2%from2014)saytheneedtoprofessionalise the business is a key priorityoverthenextfiveyears.Butthefamilyfirmhasanotherdimensionwhich other companies never have to tackle: the family itself. The issues here are much harder to address. They’re more personal, more complex and there is always a risk that if it goes wrong it may be terminal for the family; as we’vesaidmanytimes,‘familyfirmsfail for family reasons’. It’s no surprise, then, that progress in this area is slower, or that some companies like to think they have made advances when in fact, little has really changed.

This year’s survey shows that family firmsarecontinuingtoestablishprocesses to ‘professionalise the family’, including mechanisms such as shareholders’ agreements, family councils, and incapacity arrangements.

Bringing in external managers is another way of professionalising the business; this takes on an added importance and urgency in the context of the ‘missing middle’. At the most basic level, better processes and a clearer division of roles and responsibilities frees up time and space for the senior team to think and plan more strategically.

Professionalising the family

Need to continually innovate to move ahead

Competition in your sector

Ability to attract and retain new

talent

Keeping pace with digital and new

technology

General economic situation

Having to comply with regulations

Succession planning

within your company

Increasingly international environment

Need to professionalise the business

Containing costs

52% 64% 52% 56% 52% 58% 45% 47% 41% 54% 40% 42% 32% 34% 29% 36% 28% 43% 27% 36%

Global

UK

Key challenges for family businesses over the next five years

Q: I’m going to read out a number of factors and I’d like you to tell me how much of a challenge you think each one will be for your business in 5 years’ time on a scale of 1-5, where 5 means it’s going to be a major challenge for your business and 1 means it will be a minor challenge or not particularly important. Base: All UK respondents (2016: n=100), all Global respondents (2016: n=2802).


The role of the professional CEOWe’ve looked before at the advantages of bringing in an external CEO, and the challenges that this entails, both for the family and the professional coming in. Some external hires clearly relish the chance to make decisions quickly, and enjoy the autonomy that the family business model can offer.

But many CEO respondents this year citedthedifficultiestheycontinuetoencounter. Families can be reluctant to give up control, and external CEOs can findtheirprofessionaljudgementsover-ridden by family and owner decisions, which may appear to be based on emotion rather than rational argument.

Given the overall theme we have been highlighting this year, it is particularly significanthowmanyexternalCEOssay they are excluded from the strategic decision making process – many describe this in terms of decisions taken by the family ‘round the dinner table’. Another common observation is that professional managers are often calledupontobeanunofficialmediatorbetween different parts of the family.

Notonlycanthisbedifficultanddamaging to working relationships, it’s a role no professional manager should be asked to play: they need to focus their skills and energy on running the business. Many talented managers are, in fact, actively put off taking roles in familyfirmsforpreciselythisreason.Manyfamilyfirmsstillhavemorework to do to understand the value of an external CEO, and give them the freedom they need to do the job properly. If not, the risk is that they will not stay and the value to the business won’t be realised.

The role of the Board Itisnosurprisetofindthatlargerandolderfamilyfirmsaremorelikelytohave non-family non-executives: 79% of companies turning over more than £100mhavesuchdirectors,asdo75%offirmswhichhavereachedatleastafourth generation.

Manyfamilyfirmsstartwithnonon-executives at all, though most have formal or informal advisers who can act as a friendly sounding-board. When aproperboardisfirstestablished,thesepeopleareofteninvitedtobethefirstnon-executives.

But as they are friends of the family or existing advisers, they’re often more like insiders than outsiders, especially as many of them stay in post a very long time, which carries the risk of ‘going native’ (and hence the importance ofrenewingtheboardperiodically).They can still play a useful role, but our experience suggests that they’re unlikely to offer the independence or ‘edge’thatthefamilyfirmreallyneedsto maintain a competitive advantage. They’re certainly unlikely to challenge a strong founder or CEO to any significantextent.

Beyond ‘rubber stamping’: The contribution the board can make Inourexperience,manyfamilyfirmsare not making full use of their board: a good board is much more than merely a ‘rubber stamping’ body.

Here’s a summary of areas where a robust and objective board can make a real difference:

• Helping the owners separate what the company needs from what the family wants

• Fresh perspectives, relevant experience,andaccesstoinfluentialnetworks

• Help the CEO move beyond the tactical and the day-to-day

• Ensuring there is accountability across the business

• Assistance with risk management • Objectivity, independence, and an

‘outside-in’ point of view • Support and advice on planning for

CEO succession• A‘safeplace’fordifficultdiscussions• Smoothing the transition to the next

generation • Planning and advising on exit

strategies.

of UK family businesses have non-family on the board.

While one fifth have non-family share ownership of the business

70%Usage of non-family members


Making a success of succession

70%

have members of the next generation working

in the business.

There’s planning ahead and then there’s succession planning. Done properly this isn’t something you can start too soon.

As a business owner, if you’ve decided you’d like to pass the business on to your children, you need to start preparing for that pretty much as soon as you decide to have them. A host of factors, whether the product of nature or nurture, have the potential to seriously impact how the next generation shapes up and the type of owners, managers and leaders they will become. Whether a subsequent generation approaches their destiny with a sense of stewardship rather than a sense of entitlement, is, as just one example, something that could potentiallybeinfluencedearlyonby the way they are brought up and the values and behaviours they are encouraged to hold dear.

Our survey reveals that 70% of family businesses in the UK have members of the next generation working in the business. This is in line with the global average of 69%, but how well is it actually working? In reality, the next gen often lack the requisite skills and experience and owners who devote time and energy to developing their children before they join the family firmareaproactiveminority.

“It’s about getting the timing right, ensuring you have the right skills coming through, and the next generation are properly prepared”

William Lees, Managing Director, JW Lees

Next generation involvement in the family business


Even those who arrive on day one with a level of business acumen under theirbelt,canstillfindithardbeingaccepted, particularly if they display any signs of ‘privileged position syndrome’. Ensuring complete parity with the rest of the workforce, for example, in relation to performance monitoring and measurement, is key tominimisingthedifficulties around integration and perceived contribution that the next gen can face.

Succession planning is, in fact, a subset of something called the family strategy. This is the route map which should, in theory, provide clarity and direction over how the family will function as a cohesive group and achieve its goals. For maximum effectiveness all round, it should also be aligned with the business strategy. It is, however, often a less well understood and less rigorously deployed aspect of running a successful family business.

Our survey this year told us that 65%ofUKfamilybusinessesbelievethe family strategy and the business strategy are completely aligned (similar totheglobalaverage)withonly14%admitting to misalignment here.

But to what extent is this statistic an accuratereflectionofthesituation?Many business still don’t document their family strategy, so quite apart from this being a priority area when it comes to professionalising the business, it can make it challenging for the board and management to carry out an independent and objective evaluation of any alignment. In addition, family strategies tend to be much broader than business strategies which can make “completealignment”difficult.Itbegsthe questions what is the purpose of the family strategy and is total alignment actually necessary?

Say their family and business strategies are aligned.

65%

Alignment of family and the business

“Even if they don’t come in to the business, training them to be good shareholders is important.”

Mike Roberts, Managing Director, Frank Roberts Bakery

“It’s a challenge all family firms go through as the business transfers from one generation to the next. We do have different management styles, but we both believe passionately in this company and we both share the same values, the same values that inform the whole business.”

Rob Amar, Managing Director, RH Amar


Certainly to the extent that the success of the business is dependent on all familymembersbeingunifiedarounda common set of goals and values, then the existence of a family strategy that facilitates this is clearly key - and of course the process of developing a strategy can, in and of itself, be a catalyst for building connectivity and consensus. It is interesting to note that the ‘missing middle’ – the key insight resulting from our analysis ofthisyear’sfindings–highlightsapredominance of family businesses without a strategy for achieving their goals and aspirations and therefore, arguably, without anything for the family strategy to align to.

The absence of a strategy, this all-important ‘missing middle’, is potentially at the heart of many of the challenges facing both the current owners and the next generation of family businesses. It means everyone is simply feeling their way and no one has thought through the implications of a particular course of action or crucially, put any support mechanism in place for if/when things go wrong.

It means that misalignment between business and family is, in reality, almost certainly higher than 14% and it means that succession planning is therefore very likely to be inadequate or in some way compromised. Given that we know few family strategies tend to be documented, it’s perhaps not so surprising to discover from our survey thatonly13%offamilybusinessesin the UK have a robust, documented and communicated succession plan in place (slightly lower than the proportion globally).

But what else might be behind such a low percentage? Well, it’s a challenging process that often gets put on the ‘too difficult’pile.Itrequirestime,trustand transparency and can increase the likelihoodofconflict.78%offamilybusinesses in the UK do have at least one procedure or mechanism in place todealwithconflict,(showingthatfamily businesses recognise the need to minimiseriskinthisarea).

However given this is 4% lower than in 2014 and lower than the global average of 82%, there would seem to be room for improvement.

Our survey reveals that one third of family businesses in the UK plan to pass the business ownership (but not necessarilythemanagement)ontothenextgeneration.38%plantopassthemanagement of the business onto the next generation while 22% plan to sell orfloatthebusiness(downfrom26%in2014).Butisthenextgenready?Along with a host of other challenges, they can often feel overwhelmed at the prospect of having to step into the shoes of a strong owner.

More and more family businesses are encouraging their next gen to gain outside experience before joining.

A robust succession plan should make provision for early and ongoing investment in their development and preparation, helping them to address these challenges and ensuring a smooth transition for all parties. Succession planning is all about ensuring evolution rather than revolution when it comes to handing on the business and, as we set out saying, it’s never too early to start.

Only13%offamilybusinessesin the UK have a robust, documented and communicated succession plan in place

13%Succession plan in place


Therearefivekeythingsthecurrentgeneration can do to make sure the next generation have the best chance to succeed:

1. Plan ahead. The single most important success factor for succession is a good plan. That starts with detailed career and development planning for the next gen, so they can get a wide range of experience and acquiretherightskills.Ifpossible,findways for them to work outside your home market, as well as outside the familyfirm.Thiswillhelpbuildtheircredibility if they do eventually decide to come back to the family business.

2. Make it an opportunity, not a burden. Many of the next gen are excited about the chance to work in thefamilyfirmandtakeitoveroneday. But make sure they don’t feel expectation as a burden, and have the chance to make a free choice about their own future.

3. Give them the chance to build something of their own. 44% of respondents this year talked about the possibility of setting up new entrepreneurial ventures to run alongsidethemainfirm,and47%ofthose questioned in our next gen Great Expectations Survey1 said they would like to do this. Such ventures can be a wonderful way to give the next gen their own area of responsibility, where they can learn, explore new ideas, and gain vital skills. And who knows – those new ventures could evolve into thefutureforyourfirm.

4. Understand where and when to let go. Almost all next gens say they would welcome continued support from their parents when they take over(91%inournextgenresearch),and many talk with feeling about the mentoring they’ve received, and the lessons they’ve learned. But there’s afinebalancebetweenbeingthereto help, and never letting go. It’s an understandable wrench to step back from a business you’ve run, and in many cases, built – 61% of next gens in Great Expectations acknowledge this as a challenge in their own family.

So spend time discussing the exact shapeofyourfuturerole,andfindyourself something else to do beyond the business, so you won’t constantly be tempted to ‘just show up’.

5. Address family governance. One positive role the current gen can play is in relation to family governance. We allknowhowdangerousconflictsandmisunderstandings can be in family firms,and52%ofnextgensinourGreat Expectations Survey said that they were worried about the prospect of dealing with ‘family politics’. The older generation are ideally placed to help manage this, both through their experience and the ‘gravitas’ of age.Soifyourfamilyfirmhasn’tyetgot to grips with family governance, orcouldbenefitfromaproperfamilyconstitution or family council, why don’t you take on this task yourself, so the next gen can concentrate on taking on the business.

Five ways the current generation can support the next gen Sian Steele Family Business Leader, PwC UK.

1 https://www.pwc.com/gx/en/services/family-business/next-gen-survey.html


Increasingly there is less expectation that next gens will go straight into the familybusinessaftertheyfinishtheireducation. The older generation are actively encouraging next gens to get outsideexperiencefirst.Itmeansyoucan make a more informed decision before joining and then come to the familyfirmwithvaluableskills.Itwill help manage the assumption that you’re only there because of your family name.

‘Try before you buy’When you’re at university, and in your firstjobs,trytokeepyourlinkswiththe family business. Keep in the loop about how it’s developing, and the trends and issues it’s dealing with. Gain experience in the holidays. Find ways to ‘connect without committing’ – in other words, get some experience of what it’s like to work there, the culture, and the sort of role you might aspire to eventually. Internships in university holidays are a great example.

Eight golden rules for ambitious next gens


Be aware of your own behaviourYou need to understand that you’ll be under scrutiny from your fellow employees – it may not be fair, but it’s a fact, and you’ll just have to manage it. For example, they won’t invite you for a drink if they want to moan about the boss, and some will try to befriend you purely for their own ends. And it’s tough juggling all those different hats – employee, owner, heir apparent. So be aware of how people perceive you but, don’t let it hold you back. Develop your own ‘brand’ and work ethic.

Don’t put pressure on yourselfJust because you’re a family member it doesn’t mean you have to progress to the top and make it onto the board, any more than if you were working in another type of business. Ambition is great, but the bigger and more complex the business gets, the more challenging this aspiration can become. Don’t let the family name create unrealistic expectations (either yours oranyone else’s).

Insist on a proper appraisalToo many next gens we’ve worked with have never had a proper appraisal intheirfamilyfirm,thougharguablythere’s even more need for it in their case. How can you grow and develop if you don’t receive honest, balanced feedback? Insist on regular feedback and appraisal which focuses on both successes and areas for development and future focus.

Handle change with careSome of the next gens we’ve worked with want to emulate their parents; others aspire to make big changes. But if you’re in the latter camp, you’ll need to manage that sensitively. Family firmspridethemselvesontheirquickdecision-making, but there will be personal factors in play if you want to change something your parents spent their lives building. Even relatively small changes – like bringing in new systems – need to be approached with tact, and a strong business case. Different generations often have very differentriskprofilesdependingonthestage of their careers and their lives and this often causes a lot of tension.

Communicate, communicate, communicateThe challenges of balancing the personal and the professional make it even more important to be able to talk openly and honestly about business issues. Succession is the most obvious one – many of the older generation just don’t want to think about this, either because they’re not ready to let go, or because it entails making choices between their children. But these issues need debating and they need planning for, and the longer you leave it, the harder it will become.

Make sure succession is a process, not an eventSuccession needs to be planned a long time ahead. That gives you, your family and the rest of the business time to adjust and prepare for the transition. It’s an important period where you can make sure you have the skills you need, and plug any gaps with a proper development programme.

Enjoy it!If the conditions are right, working in your own family business can be the most amazing opportunity. You can be part of something you really care about, become a guardian of it, and perhaps, one day pass it on to your own kids. It doesn’tgetmuchbetterthan that.

“We now have a rule that family members have to work for at least five years somewhere else before they join.”

William Lees, Managing Director, JW Lees


Business owning families face growing layers of complexity as their business grows and diversify, family numbers increase and, in many instances, thescaleofwealthissignificantlyincreased. In order to tackle this complexity, a family may need to employ a person or a group of people to helpthemrunandmanagethefamilies affairs.

While this can be achieved by just one trusted employee that undertakes that role, the tendency is to form an official"familyoffice".Sometimesfamily members themselves might be employedbythefamilyofficewithdifferent levels of responsibility.

There are predominantly two types of familyoffices:singlefamilyofficesthatlook after just one family’s assets and multi-familyoffices–whereseveralfamilies that have pulled their wealth together to proportionally increase their return on investments.

Thereisnotacleardefinitionoffamilyofficeasitwillvaryaccordingtothespecificneedsofeachfamily.However,somedefineitas“aninternal(independentlystaffed)organisationalunit that provides administration, management and strategic planning on allfinancialandnon-financialaspectsof the assets of one of more families”.

Despite the current expansion of family officesgloballyonly28%ofUKfamilybusinessessurveyeduseafamilyoffice.

The survey also indicates that one of the main services provided is advising on and managing investments, closely followed by accounting support.

Other services commonly provided include property management, legal advice and strategic support for the business. More broadly it may also include support of philanthropic activities, managing travel arrangements and dealing with thehiring,firingandmanagementof domestic staff. In some instances educating and developing the next generation will also fall to the family officeteam.Theservicesprovidedabsolutely depend on the unique requirements of the family and the type of wealth and assets it owns.

There is of course a cost element to establishing and running a family office.Whilethereisnotasetbar,mostmulti-familyofficesareopentoclientswhohaveatleast£25millionto invest. A shift is however underway, as the rising prestige of being part of afamilyofficeisdrivingthemarkettotarget families with much lower sums to invest.

Family Office

Despite the current expansion of family offices still only 28% have one.28%

Usage of a ‘family office’


Forsinglefamilyoffices,thesenumbersare less relevant as they may be set up based on their total net worth which can include hard assets.

Decidingtosetupafamilyofficeshould be the result of the calculation ofcosts,benefitsandsavings,justlikeany other business decision. While technology is streamlining processes and therefore reducing costs, the most important thing the family can do is to think about which problems they are trying to solve and then think about what support is really needed. A family officemaynotbethesilverliningtosolve everything but often having a separationbetweenthebusiness(es)and the family’s affairs can be beneficialandprovideamoreefficientmanagement of both.

PwC Family Office Digital Platform

In response to requests from clients, we’ve developed a family officedigitalplatformthatwillenablefamiliesandtheiradvisorstoefficientlyandsecurelymanageallofthefamily’saffairsandassets in one simple and easy to use online tool, whenever and wherever they are.

The easily accessible, useful and meaningful data offering on which the family can base their decision making and run their affairs, lies at the heart of this new digital platform.

The reporting tool provides a clear breakdown and valuation of a family's investments, assets and business activities. This centralisation provides better quality data for oversight and decision making.

Thenewfamilyofficedigitalplatformhasbeendesignedwiththis in mind and and is customisable to the bespoke needs and requirements of a family.

Different levels of access to documents, functionalities or financialinformationcanbeconfiguredfordifferentusers(e.g.thefamily,professionaladvisorsandfamilyofficemembers)andaccess to the platform is highly secure.

AsfinancialinstitutionsandHMRCbecomeincreasinglydigitised,the platform will evolve to be able to assist with automated tax returns,automaticinformationcollectionand preparation.


Areas of focus

Succession

A robust documented well communicated plan will stand the best chance of success.

Reinvention

An essential factor in the longevity of family businesses, nurturing and sustaining entrepreneurial spirit will be challenging and rewarding as well as providing welcome diversification.

Digital

The impact of digital revolution will be felt by everybody and brings huge opportunities for many and risk for those who are unprepared, ensuring that the family business board is equipped with the right skill and support will be imperative.

Next generation

They are the future. They bring continuity of family and business, new ideas, energy and enthusiasm. Engage them at the right time, support and nurture them and crucially talk to them about the shared value and purpose in the role they play.

Professionalisation

Introducing and regularly refreshing the governance models for both the business familyand thefamilybusiness is essential.

Family businesses remain a vital part of the UK economy, providing stability, local jobs, and contributing to communities. In a challenging economic environment they bring the opportunity for reinvention, entrepreneurship and innovation. There is no room for complacency and those that survive from generation to generation focus on robust strategic planning, taking them from where they are today to where they need to be for the long term.

UK family businesses have ambitious growth plans but in order to consistently delivery they need to continue to focus on a few key areas shown below.

UK family business owners are beginning to recognise and embrace the pillars of good governance, particularly the need to have good forums for communication, effective conflictresolutionplans,aconstitutionto guide all parties and a family counsel to ensure effective delivery of these. Increasingly this will need to extend to the establishment and governance of a familyoffice.

Family businesses are certainly up for the challenge and all those that we speaktofeelconfidentandexcitedabout the future and the opportunity that it poses. We hope that with good governance, strategic planning and a clear roadmap for the future many of these family businesses will be here for many years to come.

A final word


Research methodology

‘Family business’ definition For the purposes of this survey, a‘familybusiness’isdefinedasabusiness where:

1. The majority of votes are held by the person who established or acquired the firm(ortheirspouses,parents,child,orchild’sdirectheirs);

2. At least one representative of the family is involved in the management oradministrationofthefirm;

3.Inthecaseofalistedcompany,theperson who established or acquired the firm(ortheirfamilies)possess25%ofthe right to vote through their share capital and there is at least one family member on the board of the company.

Turnover (sales) (US$)

$1bn+

$501m - $1bn

$101m - $500m

$51m - $100m

$21m - $50m

$11m - $20m

$10m and under

4%

2%

28%

23%

12%

7%

24%

Number of Generations

4+ Generations 22%

23%

37%

17%

3 Generations

2 Generations

1 Generations

Sector

Manufacturing

Contruction

Retail

Wholesale

Business activities

Transport

25%

16%

10%

9%

9%

8%

Family Role in the Business

Own butdon’t managethe company

4%

96%Own and manage

the company

Survey methodology Between 9 May 2016 and 19 August 2016, 100 semi structured telephone and online interviews took place. Between October 2016 and February 2017 14 face to face case study interviews were conducted. The telephone and online interviews were conducted by Kudos Research, and averagedbetween25and35minutes,the face to face interviews conducted by PwC and lasted up to 60 minutes. The turnover of participating companies ranged from £8m to more than £1bn.

All results were analysed by Jigsaw Research, an independent market researchfirm.

UK respondent profile


Firstly, we would like to thank the 100 family business owners and managers who generously gave their time to participate in the survey. We would also like to thank those family businesses who told us their stories, which have added colour, insights and the personal touchtooursurvey findings.

Thanks and acknowledgements

This survey would not have been possible without the commitment and dedication of our external advisors: Jigsaw Research (James Flack, Sarah McKeeandAnnMorgan);KudosResearch(EfisioMeleandhisteamofinternationalinterviewers);NetEffects;andlast–butmostdefinitelybyno means least – our case study writer, Lynn Shepherd.

At PwC, we know that the most successfulfamilyfirmsarethosein which there is a good balance between professional management, responsible business ownership and a healthy family dynamic. We have a keen understanding of the unique subtleties of family business, and we have the tools, experience and focus to help family businesses optimise the positive forces in family enterprises, while anticipating andminimisinganyconflict.Nomatter what the size, industry or market, PwC’s advisers assist family businesses across the globe. From strategy and governance, to business transition and private wealth, to putting values in action, we have the tools, people and presence to help family enterprises build lasting value.

Sian Steele UK Family Business leader PwC UK

+ 44 (0) 1223 552226 [email protected]

https://uk.linkedin.com/in/sian-steele-6b022523

@SianSteele

Clare Stirzaker Partner, Family Governance

+44 (0) 20 7804 2504 [email protected]

https://uk.linkedin.com/in/clare-stirzaker-50741328

@StirzakerR

Supporting family businesses at PwC

This year we’ve also talked face-to-face with senior executives from family businesses across the UK to get their insights, observations and personal views on business, family and working inthefamilyfirm.We’redelightedtoshare their stories in our report and thank them and our survey participants for participating. Read their stories at www.pwc.co.uk/fambizsurvey/stories

Appendix The people behind the stories

Page 27Blenheim PalaceJohn Hoy, Chief Executive

Page 9 Greg Rowe LtdGreg Rowe Senior, Chief Executive Greg Rowe Junior, Director Alexandra Rowe, Director

Harrison SpinksSimon Spinks, Managing Director

Page 31 Harrison Wipes Stephen Harrison, Managing Director

Page 33 Johnstons of ElginJenny Houldsworth, Non-Executive Director Chris Gaffney, Finance Director

Page 35 JW Lees William Lees, Managing Director

Page 37 Leisurewear International Yamin Ibgu, Finance Director Damian Curran, UK and European Sales Director

Page 39 Medina Dairies Raoul Lustermans, Chief Information OfficerBilal Yaseen, Director of Operations

Page 41 PJ Care Jan Flawn, Founder Neil Russell, Chief Executive/ ChiefOperatingOfficer

Page 43 Reynolds Tony Reynolds, Managing Director

Page 45 RH AmarRob Amar, Managing Director

Page 47Roberts Bakery Mike Roberts, Managing Director

Page 49 Wates GroupTim Wates, Director

Page 51 Whitworth Bros Martin George, Chairman



Blenheim Palace is one of the most spectacular buildings in the UK and a World Heritage site. It was built to celebratethebattlevictoryofthefirstDukeofMarlborough,and300yearslater is still the family home of the 12th Duke, which makes it one of the most enduring ‘family concerns’ we’ve ever profiled.

But Blenheim Palace is a business too,andoverthelastfifteenyearsthefamily and trustees have overseen the transformation of that aspect of Blenheim’s activities under the managementofitsfirstprofessionalCEO, John Hoy. We travelled out to his beautiful workplace to ask about the special challenges of a position at the Palace.

Why did the family decide that they needed a professional CEO? When was that decision made?The Palace is actually owned by a family trust, which has family members as trustees, as well as some high-profileexternaladviserswithexpertise in areas like the law and land management.About15yearsago,the11th Duke decided to bring in two of the younger members of the family, who had City and business experience.

That was the catalyst, because they quickly realised that Blenheim needed tomoderniseifitwasgoingtofulfilits potential, and generate the money needed to keep the palace in proper repair. Part of that modernisation was about changing the business structure, and part of it was bringing in different skills. That’s when they hired me. I hadlandmanagementqualifications,and experience in running a big estate at Knebworth, and major leisure attractions like Madame Tussaud’s and WarwickCastle,soitwasagreatfit.Andfor me – a fabulous opportunity.

What was Blenheim like when you arrived – what did you find?It was a tourist attraction, but I wouldn’t really call it a ‘business’. There was no budget process, no proper reporting, no strategy, no long-term plan. There wasn’t even a World Heritage site management plan, and you really do need one of those if you have that status. So there was a really pressing need to professionalise the way we worked. We didn’t do marketing or PR back then either – that was a hangover from the ‘70s and ‘80s, when sites like this used to assume that if you opened the doors people would just come. And yes, it did work that way for many years,

butby2003thatwasn’tenoughastherewas so much competition. So there were some big challenges, but there were big opportunities too.

What did you do?We did a complete review, both of what we were doing, and how we did it. And right from the start, I had huge support both from the Duke and the trustees, and more recently from the 12th Duke, since he inherited. I couldn’t have made as many changes as I have without that degree of engagement. They supported me in instituting the professional business processes you’d expect from an entity of this size, and then I started looking at what we were offering people,becausethefirstprioritywasthecore activity – our visitor experience.

We opened up more parts of the Palace, and built a new attraction called ‘The Untold Story’. We also changed the ticket pricing structure to makeitmoremodernandflexible,andwe introduced an annual pass, which was pretty ground-breaking at the time but proved to be a great success. A place like this can struggle to get repeat visits because people think they’ve ‘done it’ iftheycomeonce.Soyouhavetofindways to tempt them back again;

Protection, promotion and posterity The business of heritage in the UK

Leisure & Tourism

Blenheim Palace

CEO

John Hoy


the annual pass was very good at that. We also extended our open season to almost the whole year, which, again, is quite unusual in our sector but allowed us to offer special events in the winter as well.

We also completely overhauled the supporting commercial activities – much better catering facilities, and a superb new shop which is probably one of the best of its kind in the country. Having done all that, our next objective was to explore how we could diversify, and bring in new sources of revenue we weren’t tapping into. We’re bang in the centre of the country, with excellent transport links, and we have 2,000 acres of some of the most glorious grounds in the UK, but we simply weren’t making the most of any of that. We hardly ran any events, for example. In the last ten years all that has changed. We have events all year round, from celebrity weddings to huge public events like BBC CountryfileLive,whichattractedover125,000people.Wehavesportsevents,and car rallies, and fashion shows, and contemporary art installations. The Ai Weiwei show in 2014 was phenomenal. Another case of people telling us ‘you can’t do that’, and us replying ‘yes, we can’.

So there’s a huge amount going on, but itisworking–whenIfirstcamewehadaround300,000visitsayear.Thisyear,we may well reach the magical million across all of our activities.

Have you diversified in other ways?Definitely.Thefilmlocationsideisreallybooming - we were used for Spectre andMissionImpossible5,aswellasall sorts of smaller productions. And that involves a whole lot of new skills too – you have to balance the need to protect the fabric of the building (literally,insomecases)withwhatafilmunitneedtobeabletofunctionefficiently.Ourheadofoperationsisvery good at this, and her team are very experienced, and as a result we’ve got a reputation for being good to work with. That’s essential.

Wealsolookatdiversificationinawidersense – not just diversifying what we do at the Palace itself, but within the much larger estate, which is another 10,000 acres. For example, we invested in an industrial estate in Witney, to ensure we have a more even balance between industrial, agricultural, and residential property. Ironically enough, that same site used to be owned by the estate until the government compulsorily purchased it before the last war. We also have our ownconstructionfirm,BlenheimEstateContractors Limited, which is building both commercial units and market/social housing. That whole area is very complex, with a lot of tax and planning issues, and we always have to decide if a particular development is the right thing to do with land that’s been part of the estate for generations. On the other hand, it can bring in vital revenue, and we’re looking to channel some of that into a new charitable trust, which will make it easier for us to apply for lottery funding for some of our capital and restoration projects at the Palace. At any one time there’s about £40m of work that needs to be done, and at the moment we manage about £2m a year which implies a 20 year cycle. But it’s like the Forth Bridge: by the time you finishyouhavetostartalloveragain.

Another diverse venture is Blenheim Palace bottled water. That’s fabulous because it gets our name out there in the sort of restaurants and hotels that our potential visitors are likely to use. We’re now exporting the water too, with an emphasis on China and Hong Kong. North America and China are the two most important overseas markets for us, in terms of our visitor numbers.

How important is digital in reaching your visitor audience?Absolutely vital. We use everything – Facebook, Instagram, Pinterest. Everything.

What role do you see the Palace playing in the wider community?There are lots of answers to that. On a commercial level, I see Blenheim as a lynchpin for tourism in the Oxfordshire region. It’s imperative that we all work together to maximize the value of the visitors who come here – we’ll all do better if we don’t stand alone. That’s why I sit on the Visit England Advisory Board, and why I was part of setting up Experience Oxfordshire, as well.

Looking more locally, we take our responsibilities to the neighbouring area very seriously. The social housing venture is an important part of that, and the events we run can have a big economicbenefitbeyondtheestatewalls – we did a study of the last Game Fair at Blenheim and the wider impactwasaround£50mfortheareaas a whole and new events such as CountryfileLivewillalsocontributestrongly to the local economy. There’s also our education work, and all the efforts we’ve made to improve our environmental performance. Things like reducing our waste, and cutting our energy and water consumption – all things that you probably wouldn’t think a stately home would be doing.

All of this is part of the same overall purpose – the same sense of responsibility. This estate has been herefor300years.Wedon’tjustownthe land, we’re part of the landscape. That’s why everything we do is driven by the need to be conscientious land-owners, and careful custodians of the family’s heritage, both now and for future generations.


The Harrison Spinks bed business isnowintoitsfifthgenerationwiththree generations still involved in the business. Harrison Beds spent the majority of the 20th century as a mid-range mattress manufacturer, with a solid reputation and solid returns, though very little real growth. Then the ‘90s recession hit and the business suddenly found itself in trouble.

The current MD, Simon Spinks, takes up the story: “We’d expanded into a new building and took out a lot of debt tofinanceit,butwhenthedownturncame the bank wasn’t exactly supportive. I started by making some operational changes to cut our costs, but there’s only so much of that you can do. We needed to grow our top line as well; the question was how? In the end we got our inspiration from two things: one was looking back at the past, and the other was looking ahead, at innovation. I did some research about where the business came from and went through a lot of the old archives. That’s when I found references to the name ‘Spink & Co’. That was the firsttimeIknewmygrandfatherhadever used that as a trading name. The second thing was to look around at our own industry and see which of our competitors were actually making money. Surprise, surprise, it was the ones that had some sort of unique selling point, a technology that allowed them to sell at a premium.”

That insight prompted Simon and his father to look at new ways to make beds, and Simon came up with an idea inspired by a Ford car engine. It was, in essence, a spring within a spring, which led to the creation of a completely new type of mattress, and some extremely valuable Intellectual Property. That mattress was launched onto the market as a premium-priced product under a new Spink & Edgar brand name. “That was a big change for us: we’d never thought of ourselves as a consumer brand or acted as one, probably because we had too much of a ‘small business mentality’.”

Changing the way the world sleeps Innovation and reinvention in the UK

Harrison Spinks

Managing Director

Simon Spinks


Since then, the company has continued to innovate, with a pioneering 100% natural mattress which deliberately runs counter to the current fad for memory foam mattresses. They also owna300acrefarmwheretheygrowtheirownnaturalfillings–hempandflaxandalsorearsheep.Theylocallysource as much as possible, including fibrecropsandwoolfromotherlocalfarmers. As Simon says, “We’ve never been afraid to swim upstream.”

These innovations have helped propel Harrison Spinks to annual growth rates of around 20%, but that degree of success eventually becomes a challenge in itself: “The risk is complacency, because success is not a burning platform. So you have to create that. And you have to be prepared to fail: you’re not a truly innovative company if you can’t handle the possibility of failure, because if you don’t fail, you don’t learn, and if you don’t learn, you won’t succeed.”

The next challenge is to ensure the recent upgrade of the company’s IT infrastructure is fully integrated and standards of production and customer service are maintained and enhanced as the company gets bigger. And there will be more innovations to come, too. As Simon says, “Our mission is simple: we want to change the way the world sleeps.”


From scrap metal to compostable wiping cloths 125yearsofhistoryatHarrisonWipes

Manufacturing

Harrison Wipes

Managing Director

Stephen Harrison

In 2016, the Harrison Wipes family businesscelebratedits125thanniversary. What started in Great Yarmouth in 1891 as a textile rag and scrap metal business is now one of the world’s leading suppliers of high-performance non-woven wipes. “Even a hundred years ago, we were an international business,” says Stephen Harrison, the current MD and great-grandson of the founder. “You only have to look at my great grandfather’s passportin1925toseethatweweretrading in countries as far away as Japan at that time.”

Since then, the business has evolved as technology has improved, and customers’ needs have changed. “For example, we used to weave only our own rags, now we are the UK partners for two of the world’s largest nonwoven producers, Chicopee® and Sontara®, providing advanced wiping solutions to our customers. This includes compostable cloths and pre-impregnated solvent wipes to help tackle the environmental issue of VOC emissions. Our real expertise is in developing specialist wipes for veryspecificuseswhichareusedbycompanies such as Bentley and Jaguar. We’ve come a long way from the heavy-duty cloths we used to supply tofactoriesinthefirsthalfofthelastcentury.”


Thestructureofthefirmhaschangedas well. By the late 1990’s, the business had13familyshareholderswhowere not directly involved in the business; not the ideal share structure for a forward thinking business planning a growth strategy as a non woven converter. By 2002 a deal was eventually put together to enable a full share buyback. “It was important for me to consolidate ownership with working directors so as to be in control of the business’s destiny,” says Stephen. There is now the prospect of a new generation coming through. “I’m getting to a point where I probably needtohaveafivetotenyearplaninplace,astheyoungestofmy3boyswillgraduate from university in 2021. I feel it is really important that all of the boys get the chance to work somewhere else before they decide if Harrison Wipes is the right place for them to have a career. This is in the best interest both for the boys and the business.

They should only work here if they feel passionate about it, not because it is expected of them. So, the long-term planneedstobeflexibleenoughtocopewith lots of different scenarios.”

It’s not just about a new generation of the family: “We’ve also made the transition to a new era of employees. We used to have a big group of staff whohadbeenhereformorethan30years,withthefinalemployeeretiringin 2016 after 47 years of service. Almost everyone who’s here now has joined since 2002. So, it is now about maintaining and passing on the values of the business to the new team to help ensure continuity in the next generations.”

Those same principles apply in relation to the Board. “If you’re a long-established family business it’s really valuable to bring in outsiders to keep you challenged. It’s so easy to get consumed by the day-to-day issues, and lose sight of the bigger picture. Especially if, like me, you’re mainly focused on the sales and marketing and spend most of your time on the front line. My non-exec ensures we tick all the boxes on governance, and have a long-term strategic vision as well as a short-term operational plan. He is alsogreatataskingdifficultquestions– and challenging the status quo from an impassioned perspective which is exactly what we need. Geoff Brady once told me that he was introduced to Harrison Wipes by a colleague as “the most boring business in the world”. If by ‘boring’ he meant stable, resilient andefficient…that’sjustfinebyme.”


The Johnstons of Elgin textile business dates back eight generations and 220 years, making it Scotland’s second-oldestfamilyfirm.Inthattime, changing customer tastes and the advent of new technology have transformed both the product and the production. As Chris Gaffney, Finance Director says, “People sometimes say family businesses can struggle to reinvent themselves over time, but to survive successfully for over 200 years you have to reinvent yourself several times over. For example, we were oneofthefirstfirmsinthecountryto export cloth to the US and we’re still developing new international markets today. These days, most of our business is making luxury accessories and knitwear for some of the world’s premium brands. But alongside that we’re also building our own brand and we are supporting that with a new retail presence on New Bond Street in London.

We’ve also invested in online retail and in our home interiors range but all of that is built on the same foundations as itwaswhenthefirmwasfirststarted:fantastic craftsmanship and the highest quality products. So what we do may change, but the values we believe in are stillthesame.”

Having family ownership has given the business stability over the years, but ever since the 1980s there have been professional CEOs running the firm,supportedbyafamilyChairmanand non-executives as well as senior managers hired from outside. As Jenny Houldsworth, Deputy Chairman says, “As family members, we see ourselves as custodians for the next generation. Having that perspective means that you’re much more open to bringing in non-family expertise with fresh ideas who will challenge how we do things. It means you get the best of both worlds – innovation and drive for improvement, alongside the knowledge that the family is behind the business, with a long term view, investing for the future.”

The luxury of the long-term view Past, present and future at Johnstons of Elgin

Johnstons of Elgin

Jenny Houldsworth, Non-Executive Director

Chris Gaffney, Finance Director


The commitment to innovation comes through both in the appointment of a new Creative Director and an ongoing programme of capital expenditure, which last year included investment in a new jacquard loom and whole-garment knitting machines. These produce lighter-weight accessories and seamless garments to be sold alongside the company’s signature cashmere lines. Chris Gaffney commented “Given the size of our turnover, we actually have quite a complex business model. We have a lot of different customers in varied markets, and many products and product types. Managing that complexity comfortably is therefore always a challenge - in particular, ensuring we deliver on time and that we can manage the peaks and troughs of the manufacturing cycle. As the “Johnstons of Elgin” brand grows we’ve also put resources into understanding our ecommerce data, how to market ourselves online, and really getting to know our consumers and the way they shop.”

Looking ahead, both the family and thefirmarefitforthefuture.“Wehave strong governance processes in place, designed to cope as the family gets larger with each generation,” says Jenny. “And we’ll be sticking to the growth strategy that’s stood us in such good stead up to now. We’ve never been interested in growing sales for the sake of growing sales. Our ownership structure gives us the luxury of thinking long term, and we’re not going to be chasing revenue at the expense of putting anything at risk. It’s about organic growth – growing alongside our customers and anticipating their needs, even as we build our own brand and make the most of new opportunities, for example in the US and China, both of which have huge potential for us. Because when it comes down to it we love change - we thrive on it, and we always have.”


The JW Lees brewing business goes back as far as 1828, when John Lees started up a brewery as – in effect – a hobby business, after a lifetime as a cotton mill owner in Oldham and Manchester. In the 190 years since then, the business has grown,diversified,reorganised,andweathered wars, both inside and out.

As William Lees-Jones, its current MD says, “by the time my father joined in 1958thefirmwasstruggling-likelotsof post-war family businesses, it had nearly been sold, was short of cash, and my grandfather and his brother had been at loggerheads since 1906 when third generation family owner JohnWillieLeeshaddied.Butin1955JW Lees was back under single family ownership - since my grandfather had finallyboughtoutalloftherestofthefamily - and so the business was ready to rejuvenate itself. The family pulled together and then set about rebuilding the business, with my father running the beer business, and my uncle running the pub business, and then in the 1970’s we acquired Willoughby’s which is the wine and spirits side of the business.

At one point we had probably gone too farintermsofdiversificationwithpubsin France, a hotel in Wales, off-licences and cash and carrys. You see that a lotinfamilyfirms–theyoftengrowby expanding into a range of closely related segments, all of which seem to make sense at the time but sometimes it’s hard to keep all the plates spinning at the same time. I became joint managing director in 2000 and then solemanagingdirectorin2003,andspent the next ten years focusing us again on our core activities, which are running pubs and brewing beer. That said, we’ve also sold lots of pubs that werenolongerfitforpurpose,whichmeans we currently have a war-chest whichhasbeenspecificallybuiltupforgrowing our pub estate. In fact we’ve bought six new pubs in the last two months which is good to see.”

These days, three of the sixth generation of the family work full-time in the business, and sit on both the executive committee and the Board, alongside other directors who have beenhiredinfromoutsidetofillkeyroles like Finance Director, Operations Director, People Director and Sales Director. Two more sixth generation family members are non-execs and sit on the Board along with two members ofthefifthgeneration.“Wealsohave external advisers, who are very important to us in terms of challenging our strategy and offering their own expertise. But the business is still very much family-led. In fact, my personal viewisthatfamilyfirmsshouldalwayshave a family CEO or Chair, and if they don’t they should really sell the business because they could probably invest their money better elsewhere.”

William began his career in advertising inLondon,andjoinedthefirmsevenyears later as a marketing manager, then moved to sales and after that the commercial side, before taking on the role of joint managing director.

Making a success of succession JW Lees

JW Lees

Managing Director

William Lees-Jones


“And the ‘joint’ aspect of it was very important – it was a key part of our succession thinking. We built in an extended handover period as part of the plan, and it was over two years in the end. That type of long-term planningissocrucialinfamilyfirms.If you talk to people in the family business sector and ask them what’s the biggest issue they always say ‘succession’. Getting the timing right, ensuring you have the right skills coming through, and that the next generation are properly prepared. We have a rule that family members havetoworkforatleastfiveyearssomewhere else before they join. My elder son, for example, is studying for a degree in Hospitality and Hotel Management at the Ecole Hoteliere de Lausanne and spent two weeks with us on a fairly rigorous programme this summer, so he could experience thebusinessatfirsthandandthen,when he comes to decide whether he wants to join the family business,

he’ll be making an informed decision which will be good for him and good for the business. When he graduates I think he’ll probably go and work for one of the big international hotel groups overseas – that sort of outside experience is invaluable. Also, I do not think that rushing family members into family businesses is a good idea.”

Another challenge is combining the values and stability of the family firmwiththeneedtolooktothefuture and embrace change. “In the family business sector, there’s always going to be a challenge attracting talent and there’s always going to be a challenge in terms of innovation. You can’taffordtobetoopaternalisticand over-controlled – you have to give the people the freedom and ability to achieve. That means being aprogressivebusiness,andfindingaway to balance the experience of older family members with the enthusiasm of the younger generation as well as listening to and engaging with the professional managers that are working inthe business.”

What does the future hold for JW Lees? “The thing that keeps me awake at night is how we can continue to build a really great business. The family firmswhoarereallygoodatthatarein markets like Germany – there’s a lot we can learn from their approach in terms of building long-term businesses and attracting talent. In the next few years we think the real growth in the UK leisure and hospitality sector will be in food pubs and hotel bedrooms, rather than city-centre bars, and we’re shaping our business accordingly. We’re keeping our business structure simple so that it can support that growth, and investing in the infrastructure and resources we need. Our biggest challenge is to get people to physically leave their homes and come into our pubs and pub restaurants, and to do that we have to exploit all the resources technology now gives us. We just doubled our digital marketing budget, and that’s just the start.”


Leisurewear International is the business behind the Minoti children’s clothing brand, which is rapidly becoming a major international success story. The parent company has been in existence since 1998 and grew its business by making a range of adult and children’s clothing for retailers like TKMaxx and Next, under those labels.Butinearly2015,thedecisionwas made to focus on Minoti and its babywear extension Babaluno, and grow these brands both in the UK and overseas.

Yamin Ibgui, the Finance Director explains: “For many years we designed and developed brands and ranges for retailers. But we want more than that now. We are focused and driven to develop our own brands and that’s where we are now. From 2015wehavemainlydesignedanddeveloped our brands, so we can be more independent. We aim to have a full Minoti range by the end of 2017 - everything from clothes to shoes and accessories. Our mission is for Minoti to be a one stop shop. We’re starting to implement that up to age eight, but in timetheambitionistogouptoage13.”

Growing the Minoti business isn’t just about building the brand, it’s aboutbecomingafully-fledgedretailoperation, from stores, to stock, to distribution. One way the company is doing this is by expanding its franchise operations:“AswellasfiveMinotishopsintheUKtherearenowfivefranchise outlets in China, and four in Venezuela. Two will be opening soon in Pakistan, and we think the Middle East will be really big for us. We’ve alsohadenquiriesfromasfarafieldas Azerbaijan, Colombia, Dubai, Iran, and Libya.”

Small sizes, big ambitions Minoti children’s clothing

Leisurewear International

Damian Curran, UK & European Sales Director

Yamin Ibgui, Finance Director


Leisurewear’s export strategy is reflectedbytwothirdsoffamilybusinesses in the UK, currently exporting their goods or services (up from 61% in 2014 and higher than theglobalaverage).Whenchoosingnew export markets, economic and political stability followed by the size and growth potential of the country are the key considerations for Leisurewear. This mirrors 71% of UK family businesses who ranked economic and political stability as the main factor in deciding which existing countries and/or new countries they will sell their goods and services to in the next5years,followedbysize/growthpotential(51%).

Yamin Ibgui, continues: “managing thefinancialaspectsofdoingbusinessin some of those countries is very challenging.”

Leisurewear is also making use of agents in some markets: Damian Curran, the UK and European Sales Executive believes that this approach “is a good route for Leisurewear – they’re representing us in the Netherlands and in Spain, which has started growing again now that the economy is picking up, and we’re looking at how we replicate that model elsewhere in Europe – Denmark, Switzerland, Germany, France. Also in the US, eventually. Over the next year I’d like to see our overseas sales via the agents to grow to around £1m and after that, who knows?”

Digital is another growing area, as Damian explains: “We’ve started selling through Amazon. That has its own challenges but when it works, it works really well. It’s a massive marketplace and I’d like to get to the stage where they’re doing all the fulfilmentforus-inotherwords,theystore, pack, pick, and deliver. We want to grow our own online shopping too, but at the moment the site is more about building the brand, if I’m honest. But that’s really important, and we’re backing it up by doing a lot more with the specialist bloggers, who are real trendsetters when it comes to teen clothing. In this game, you absolutely have to keep up with trends.”


One of the themes that the Family Business survey explores is the interaction between the personal and theprofessionalinthefamilyfirm.It can be a challenge working with your relations, and it can blur the boundaries between work and life and make achieving the right balance evenmoredifficult.NotsoatMedinaDairies. The business is run by four members of the Hussain family – the children, nieces and nephews of Sardar Hussain, who started a milk delivery business in Windsor in 1980. “The family has seven houses here,” says Bilal Yaseen, who oversees operations. “Four in one road next to each other and three behind in the next road. It’s very normal in our culture – back home in Kashmir, the family has one massive house and everyone lives there together.”

All four cousins worked their way up from the bottom: “That’s the way we do it in our family. My uncle trained all of us, making sure we got experience in all the departments. One summer holidays you’d be doing the cash and carry runs and dealing with the suppliers, and the next you’d move into the dairy, delivering milk, collecting money. I’ve never worked anywhere else but here – none of us have.”

Sardar was actively involved in every aspect of the business until his death in 2009, and the sudden transition to the next generation was inevitably a challenging one. “My brother, Sheazad, who’s now CEO, was only 30atthetime,”saysBilal.“AndIwasevenyounger.Itwastoughatfirst,but we made sure we had good advice and mentors, and brought in some experienced non-executive directors as well. Since then we’ve also hired professionals in senior specialist roles.”

One of these new people was Raoul Lustermans, who joined as CIO from thepackagingcompanySmurfitKappaafter eight years as their Head of IT. “The family realised that they needed a more strategic approach to IT,” he says. “Especially with the big new contracts we’re now supplying.”

From doorstep milk deliveries to ambitious foodservice company Medina Dairies

Medina Dairies

Raoul Lustermans, ChiefInformationOfficer

Bilal Yaseen, Operations Director


Those contracts include Iceland and Farm Foods, and most recently, Sainsbury’s, which was a huge win for the business. “In the past, most of our customers were small convenience stores,” says Bilal. “Working with supermarkets is a step-change, because just one of those contracts equates to thousands of small stores.” That said, the experience of supplying smaller stores has given Medina invaluable expertise in the logistics side of the business, which has turned over the yearsintoasignificantcompetitiveadvantage. “These days we are, in effect, a logistics company,” says Bilal. “Our delivery network is so vast that our suppliers actually ask us to do their distribution on their behalf. That’s why we’re not just the third largest milk processer in the country, we’re also the UK’s biggest wholesalers of bread, even though we don’t make any of it ourselves. At the moment we’re shifting around1.5millionloavesaweek.”

This supply chain expertise has helped Medina weather the volatility in the UK milk market. “It’s also helped us protect our margins,” says Raoul. “And there’s even more we can do in that area.” Looking ahead, the goal is to develop the foodservice side of the business – again building on Medina’s logistics expertise. “We already have a small foodservice division based in Covent Garden,” says Bilal. “So we have access to the products, we have the distribution network, and we have contacts with the customers - train stations, airports, restaurant chains, café chains. For us, it’s all aboutdiversification.That’swherethefuture lies.”


Now more than ever, the newspapers are full of stories about the UK’s demographic ‘time-bomb’, and the difficultyoffundinglong-termcarefor the elderly and vulnerable. But one family business in the Midlands is not only providing award-winning care,butmakingaprofittoo.Sowhat’stheir secret?

PJ Care was founded in 2000 by Jan Flawn, who was then a senior manager in the Department of Health. She saw a way to provide high standards of care at a price the NHS couldn’t achieve, and had the courage of her convictions. “I put a business plan together and worked out I needed £750,000tobuildthefirsthome,butnone of the big banks would lend me any money. They told me I was a nurse, not a business woman – that I had no experience, and my model for a care home was completely different from the traditional approach, and there was no evidence it would work. But I knew what I wanted to do was a better way forward.”

Jan and her husband mortgaged their family home to get the loan she needed, and her son Neil joined them, after spending 10 years working for theDiplomaticService.“Ourfirsthome was a highly specialised unit for people suffering with a rare form of early-onsetdementia,whichcanafflictpeople as young as thirty. Because of thisageprofile,theircareneedsarevery different from those of elderly people. We opened on 1st April and by September we were full and already making£1mprofit.Howdidwedothat? By providing the care more cheaply than the NHS could do it. And that’s possible because we’re designed to do what we do and the NHS isn’t. We’re set up to do long-term care, that’s what our homes are designed and built for. That’s not the case in the NHS.”

Since then, the company has continued to expand; “In fact we could grow a lot more quickly if we wanted to. We could easily open another ten homes in the next two or three years by bringing in an external investor, but that would inevitably change the way we operate. We have always had a passionate belief thattheresidentscomefirst–thatwhatever they need, we’re here to provide it, even if that means a £10,000 bed. If we had an external investor we couldn’t do that. We’d lose the control we have now. And we’d lose the ‘family feeling’ which is so important here.”

Taking good care Family values at PJ Care

PJ Care

Founder

Jan Flawn


PJCareisn’tjustafamilyfirminterms of its ownership, it also cares for families, and employs families: “We don’t see ourselves as just caring for our residents, we also help their families adjust to what can be a very painful process of change. As for our staff, they are far and away the most important people in the company – the management is just here to make sure things work behind the scenes. That creates a really positive working environment, and many of our employees came to us because they know someone who works here. We’ve got a receptionist in Peterborough whose father is a resident there and it was visiting him that made her want to work for us.”

All the staff are empowered to make decisions, and supported to develop their careers: the company is funding a number of the care assistants to get professionalnursingqualificationsthrough the Open University. “That’s one reason why our staff turnover is so low, and we also pay way above the minimum wage. Our turnover is in the low teens, which is very low for the industry - I know some care homes whereit’s150%.Infact,wecompetefor staff with companies like Amazon and John Lewis, not with other care homes, because it’s easier for us to train somebody from scratch than to un-train what they’ve learnt somewhere else in the sector.”

Jan’s son Neil Russell is now Executive Chair, and her brother looks after Health & Safety and security. “Right from the start it was a family affair, and it still is. We have great external hires supporting us in some of the senior positions, and we did have an external CEO for a while, but it didn’t work out, and we’ve decided that, for us, it works much better to have one of the family running things day to day.” And Jan is still involved, though, she’s concerned to ensure that ‘involvement’ doesn’t mean ‘interference’: “I know PJ Care was my baby but now it’s all grown up and I’ve handed it over to my actual babies. I still want to be around but you don’t want to be there all the time because that’s unhealthy. You’ve got to give the next generation the freedom to make their own decisions, but be there when you’re needed to support them.”


Reynolds’ strapline is ‘more than just a greengrocer’. These days it’s one of the UK’s biggest suppliers of fruit, vegetables, and dairy products to restaurants, hotels, schools and caterers, though the business started from a single barrow in an East End fruit market just after the Second World War (and that very same barrow isstillthereinReynolds’ reception).

Tony Reynolds, the third-generation MD, started working weekends at the firmin1988,whilehestillhadafull-time job at a bank. “It was right at the beginning of the move towards themed restaurants–thefirstonewesuppliedwas TGI Friday’s in the West End. And at the same time the big supermarket chains were just starting to make in-roads on the traditional High Street greengrocery shops. So between those two trends, I spotted an opportunity. That’s how we’ve ended up in the sector we’re in.”

Andveryfewfirmsareasgoodatitas they are: the key to success in fresh foodisfast,efficientdistribution.“When you’re delivering fresh produce, you have to be able to deliver it seven days a week, because the product life is so short. Especially when your customers are at the premium end – quality is absolutely vital. That’s why we’ve invested so much in our infrastructure and our technology, and that’swhywetookoutourfirst-everloan to increase our warehouse space – and that was a really scary moment. But it’s all geared to meeting really, really high levels of service on a very consistent basis across the whole of the UK. My mantra has always been that I never want to lose a customer on a quality or service issue. It sounds so simple, but it is all about your logistics.”

The demand for fresh and nutritious food is rising: it’s the growth segment of the market and Reynolds has the business model to make the most of it. “We’ve been supplying quinoa for years, for example, so superfoods are not a new thing for us. And we also work alongside our customers to help them capitalise on new ideas and keep their menus fresh - we’ve got our own chefs and our own food development team too, which helps us keep ahead of trends in the eating out market. And in the last years we’ve been through a big exercise looking at what new products could complement our existing range. You have to keep it fresh.”

Keeping it fresh New ideas and a new generation at Reynolds

Reynolds

Managing Director

Tony Reynolds


New ideas are important in other ways too: “We talk a lot now about millennials as a key consumer group for the restaurant sector. They’re adventurous, and they’re very demanding, and all the trends of healthy eating, freshness, and provenance are bang on for them. You also have to use different channels to reach them – especially social media, - and that’s why it’s great to have young people in the business. That’s where my son Tom really brings something different - he can add so much more through his network and how his generation are thinking and shopping and eating.”

Tom worked in Wagamama for two yearsbeforejoiningthefamilyfirm,which gave him an invaluable insight into how customers in Reynolds’ sector operate. He’s now being mentored by one of the other senior Reynolds team – Paul Pegg, the operations director, who used to be CEO of the McDonalds supply chain for the UK and Europe. “I think it would be a lot harder for Tom to report directly into me,” says Tony, “but he’s learning a fantastic amount from Paul, as well as giving us that extra bit of dynamism that comes from the younger generation. Every business needs agitators - you always need disrupters, you need people who are going to make you think differently. And you need some humility too – just because my name is Reynolds doesn’t mean I have a divine right to sit in this chair.”

The biggest challenge right now? “Realising our potential,” says Tony. “We’ve made huge strides in the last few years in areas like brand positioning, infrastructure and customer satisfaction. The challenge nowistomakesurethebenefitsofallthathardworkflowthroughtothe bottom line. As for the future – who knows? We’re making sure we stayflexible,andagile,andopentonew ideas. You never know, we could end up being bought by an overseas investor - not because of what we sell, but the incredible platform we’ve built to sell it from. That’s a bit like being more interested in the barrow than the fruit. That would have made my grandad smile.”


RH Amar started life 70 years ago, when Raoul Amar started importing continental foods and selling them in the UK, at a time when food was still rationed. As the founder’s grandson, Rob Amar, says, “He was a real entrepreneur – he spotted an opportunity, and borrowed a couple of thousand pounds to set himself up. That’s the only money the company has ever needed to borrow.”

Over the years the focus has shifted to building premium brands, with a strong emphasis on imported and speciality products. RH Amar is now the UK distributor for household names like Crespo olives, Starbucks coffee, Ella’s Kitchen baby foods, and Kikkoman sauces. And over the years it’s helped shape the way Britain eats: “The product that really put us on the map was Filippo Berio olive oil. When we started distributing for them in 1983theonlyplaceyoucouldbuyolive oil was in a pharmacy. We were instrumental in creating the whole olive oil category. We did a great job withFilippoBeriofor25years–itwasa great relationship.”

Relationships are at the heart of the firm’ssuccessstory.“Groceryisoneofthe biggest industries in the UK and it’s one of the toughest too. To be a success in this sector you need to build really strong relationships with your partners – relationships built on performance, and on trust. Otherwise there’s a risk they either go elsewhere or think they can do a better job themselves. One of our great strengths – which we’ve built up over not just years but decades – is taking smaller challenger brands with limited budgets and competing against the big boys. The quality of the product itself is the foundation for that; the value we add is our understanding of the market, and our distribution capabilities.”

The company is now applying those same skills to a growing range of its own food brands, as well as those it distributes for other companies. “Being a brand owner as well as a distributor is something that started back in the’90s, but it’s become much more important in the last few years, highlighted by our acquisition of the Mary Berry’s grocery brand in 2014. One of the great thingsaboutbeingafamilyfirmisthatyou can move really quickly when you need to. That was absolutely key in 2009, when the opportunity came up to partner with two big brand owners that fittedreallywellwithourportfolio:DelMonte and McCormick, who own the Schwartz herbs and spices brand.”

Changing the way Britain eats Distribution and disruption at RH Amar

RH Amar

Managing Director

Rob Amar


Since then, the company has ensured it stays ahead of new trends in food shopping and eating, including the emergence of the new ‘dinner in a box’ companies like HelloFresh and Gousto, both of which are now customers. It also expects Amazon to be a top 10 customer before too long, having supplied them since their entry to UK grocery in 2010. “All these players are disrupting the way the market works, using technology to offer peoplesomethingdifferent,thatfitsinto their lifestyle. And in terms of product,they’reaperfectfitforus.It’salso a great way for us to diversify our revenue stream, and tap into a rapidly-growing part of the market.”

Rob joined the business in 2001 and has been MD for the last six years, though his father is still actively involved. “It’sachallengeallfamilyfirmsgothrough, as the business transfers from one generation to the next. We do have different management styles, but we both believe passionately in this company, and we both share the same values, the same values that inform the whole business. The most important of those is integrity, which is about how we do business, how we behave, how we work with customers, and how we treat ourcolleagues. It’s also the thing that a few years ago led us to commit to giving10%ofprofitstocharity.Wecallit: Winning the right way.”


There are few sectors so closely aligned to our traditional idea of a ‘family business’ than baking, and few more mature markets than sliced bread. The Roberts Bakery company is both, and it’s also a great example of how afamilyfirmcanturnresilienceandlongevity into competitive advantage.

The business was started by Robert Roberts back in 1887 as a small bakersandgrocers,butbythe1930sit was focusing on the bread side of the business, and making the most of new technology like bread slicers and wrapping machines. When a local flourmillerboughtashareinthefirmin the early ‘60s, Roberts was able to invest in a new bread plant. Output rose from around 200 loaves an hour to approximately1,500.Bytheearly‘80sbusiness was so good that the family could buy out the minority stake and becomeanindependentfamilyfirmonce more.

The current Deputy Chairman, Mike Roberts and his cousin Julia Roberts were already part of the business by then and have seen the company grow exponentially since, “By the late ‘90s we were making nearly a million loaves a week, and it’s double that now. We’ve gone from £1m or £2m of sales per year in 1976, to £94m in 2016.”

The company’s physical presence has grown too, from the back kitchen of its Victorian founder to a huge complex on 24 acres, which includes a brand-new facility which “future-proofs the business for the next few years”, and includes two baking plants, a packing hall, slicing and wrapping, and despatch.

And these days, it’s not all about bread, either. “Biscuits are big for us now,” says Mike. “Both commercially and literally – we make giant custard creams and bourbons that are four times the normal size. Our Little Treats business is really important to us strategically. It’s related to our core capabilities, but it’s also a different market from bread – the shelf-life is longer, the margins are higher, and the logistics are different, as is the consumer.”

But bread is still in the Roberts’ blood: “We’ve explored pretty much every aspect of the bread business over the years, and we keep up with how consumer tastes are changing. We experimented with gluten-free as that looked like a growing segment, but it didn’t work for us – it’s very niche and surprisinglydifficultandexpensiveto do well. Specialty artisan bread, on theotherhand,hasdefinitelybeenasuccess, and we’re constantly looking at new ways to make and sell our main staple, which is white sliced.”

Baker’s cousins Five generations at Roberts Bakery

Industry

Roberts Bakery

Managing Director

Mike Roberts


That ranges from new recipes and new production techniques, to selling frozen bread for export, making private label for distributors, and supplying the sandwich market. “We’re exporting to Europe, the US, and the Middle East, and though it’s still a small percentage of our sales right now, we’re looking to grow it.”

Roberts Bakery has innovated in the running of the business too: “We’ve expanded our distribution by working with a logistics company, which has helped us get into around 400 supermarkets. We’ve put massive investment into infrastructure too, including more sophisticated order planning and processes, SAP for IT, and ourfirstITdirector.We’veautomatedalot of our plant as well – we have robots making biscuits these days.”

Onlyaround3%2offamilyfirmsmakeit to fourth generation and beyond, butfifthgenerationislookinggoodfor Roberts. “I’m one of the fourth generation,” says Mike, “and we have around 9 people who could come into thebusinessfromthefifthgeneration.These days we’re more like a ‘cousins consortium’, in structural terms, but unlike many other long-standing familyfirmsthereareonlysevenfamilymembers with shares, and four of those are on the board. That could change with the next generation, but it’s a structure that works well right now. We have a non-family member, Robert Higginson, as our Chair, and he brings over a decade of experience at another family bakery business with him.

We also have specialist advisers who aren’t on the Board, but who help us with HR, marketing, and pensions. As for the next gens, we tend to think that30isagoodagetojoin.Thatgives people the chance to develop their skills, and make an informed decision about their career plans. We invited all the next gens to the last shareholders’ meeting, and the management team gave presentations about what’s happening in the business and where we want to go in the next few years. That’s the sort of knowledge they need to have if they want to work here, but they’ll also need it to be good shareholders. I think that’s a really important skill, and can get overlooked infamilyfirms.Buttostayinthatmagic3%,that’swhatyouneed.”

2 https://www.familybusinessinstitute.com/consulting/succession-planning/


The Wates Group is over a century old, and one of the country’s most prominentfamilyfirms.Overthattime, it’s evolved to match the evolution of the construction industry, moving from building suburban terracedhomesinthe1930s,todeveloping construction services in the ‘50s,tovolumehousebuildinginthe70s and 80s, to the business model it has today, which spans construction, property investment, and housing maintenance. All of which sit alongside a renewed interest in housebuilding. As Tim Wates says, “Over the years we’ve had to reinvent ourselves more than once. What’s always held us together is the ‘family factor’ – that’s what’s given us continuity, which is especially important in an industry that’s as cyclical as this is.”

The stability of the family ownership structure helped the Wates business weather the downturns – even the severe recession of the 1990s – and learn the lessons of those challenges. “We realised that we’d been too highly geared, in an effort to achieve more aggressive growth. These days we aim to grow more sustainably and keep the gearing at more manageable levels. The overall objective is to be ‘cycle resistant’. No-one can be cycle proof, that’s impossible, but you can have strategies and be structured in such a way as to make you more resilient. That’s what we’re aiming for. We want to be a top-notch business in the built environment – substantial, ambitious, and sustainable. That’s the bottom line.”

‘Keeping it in the family’ remains importanttoo.“We’relooking15or20 years ahead, at the sort of business we want to hand over to our children. We need an outlook and a corporate structurethat’sflexibleenoughtoadapt to new trends, and could allow us to change direction if that’s what we decide to do. We’re also looking at how to manage the family wealth, but also to support our children, whether that’s into a career in Wates, or not. We don’t expect any of the next generation to come into Wates and be Wates their whole life, without exploring what else might be out there. We wish to create opportunities for the whole of the next generation, so they can determine their own path, and become entrepreneurs, if that’s where their talents lie.

The ‘family factor’ Building for the future at Wates

Wates Group

Director

Tim Wates


We’ve looked at what other families do, and we’re clear that this has to be the right thing to do. It’s all part of developing a ‘professional ownership’ mentality, rather than a ‘running a business’ mentality, which I think all familyfirmsneedwhentheygettothis size and stage of maturity. Values are a key component of that – we have values that we consider are the values of family ownership, which relate to but aren’t the same as, the corporate values of the group.”

Wates also has a family council, and the younger generation will be encouraged to participate in that. “Though that, in itself, creates challenges. Sitting in a council meeting alongside the very experienced older generation can be daunting if you’re only 20 or 21, so we’re exploring ways to introduce them to it gradually, and buildtheirconfidence.Thecouncilisreally important to us as governance mechanism, so getting this right is key.

Looking ahead, setting the right corporate strategy for the long term is a big challenge for us, and in a family firmyoualsohavetobemindfulofthe day-to-day challenges of working together. We do work together well, but you can’t allow yourself to get complacent, and as time goes on and the number of shareholders grows, it gets harder. That’s why regular, respectful communication is absolutely critical.” Tim’s advice to other family firms?“Don’trelyonfriendshipandlove to get you through – if issues arise get stuck in and address them properly. And if it helps, bring in professional facilitation.”


The Whitworths milling business is perhaps unusual in that it has been the family business of two families. Started by two bachelor brothers(TheWhitworths)towardsthe end of the 19th century the business was eventually bought by the Grandfather of current family owner, Martin George.

The second generation of Georges expanded the business both organically and by acquisition, opening a second mill in Peterborough, and diversifying from milling to grocery products like dried fruit, and then into other sectors, some related (like bakeries)andsomenot(likethemotor business they bought because it was the cheapest way to run their vehicle fleet).

The speed of growth was so fast that Martin George, the third generation of the family and now the Chairman, was drafted into the business rather earlier than expected. “Our family has always believed in giving the younger members of the family the chance to develop their own skills and successes elsewhere before they come into the business - it’s all about confidence.WhenmyfatherdiedIfeltready to take it on, but the Trustees of the family trust held a majority holding of the shares and decided to runitthemselves.Itwasaverydifficulttransition, and it’s really coloured my own views about how important it is forfamilyfirmstothinkthroughthewhole succession and handover process very carefully, and understand all the implications. I would like to envisage one of my grandchildren doing what I’m doing and I’m sure my grandfather wanted that too”

Martin left the business temporarily, when he was appointed Chairman of Leicester City Football Club, which allowed him to prove his managerial skills and build some important new relationships, in particular with advisors and bankers – relationships that have stood him in good stead over the years when he has needed to act quickly with the entrepreneurial spirit that he has repeatedly demonstrated.

When Martin eventually re-joined the business in 1992 the business needed to refocus and Martin set about a back to basics shake up which saw a renewed focus on milling and a desire to be best in class.

Flour power Whitworths goes from strength to strength

Whitworth Bros

Chairman

Martin George


“My strategy is simple: focus on what you do best, invest in the future with the best new technology, and invest in people – both inside the business, and the partners you work with outside. We have an amazing network in our industry, and many of them are family businesses, just like us. They have the same long-term view and the same values. That combination is very powerful. Our customers regard Whitworths as being a world class operator, and we have grown to such a degree that only one company in Germanyisproducingmoreflourthanwe do in Europe. They are indeed bigger, but not better.”

“Wesayitismoredifficulttoretainexcellence than it is to attain excellence; that is our ethos. We cannot allow our standards to drop and our people know that as my Grandfather used to say a good name goes a long way and a bad name goes a sight further!”

And Martin is clear that having a Family member on the board is desirable, and indeed his son, Michael, is very much involved in the business now, but more important is the continued success of the business and the welfare of the families who work within the business

The business strategy may have evolved over the years, and the technology has certainly changed out of all recognition, but the same qualities that made Whitworths a success in the past are still underpinning its progress today: the ability to take the long view, while at the same time making bold decisions quickly in the here and now, to capitalise on new opportunities. “This is especially important when it comes to acquisitions – we were able to move very fast when it came to buying the Carr’s milling business last year. That’s the sort of business we are – agile, adaptable, and always aspiring to be ahead of the game.” And our strategy is clearly paying off with results to last April being the strongest ever, of which Martin is rightly proud.

And will Martin ever hang up his boots? Unlikely “work is my centrum – everything that happens has the business at the centre, even if I am shooting or on holiday or out a business event Whitworths is at the heart of it all. The fact is I get my biggest buzz out of what we’re doing now and continuing to do it”

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