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Lynn
Welcome to the Female Entrepreneur Show with me, Lynn Hart, on KWIB Radio. Today, we’re joined by Anita Brightley-Hodges, Founder and Chairman of the UK’s leading organisation that supports and promotes family run businesses in the UK and Ireland. Welcome Anita!

Anita
Lovely to be on the show, Lynn. Nice to see you and thank you for inviting me!

Lynn
It’s lovely to see you too! Shall we start off with succession – the transition of one generation to the next can be difficult, both for the company and the family members. What should a family business consider to ensure that their finances can take the strain?

Anita
I think, when we’re talking about finances we need to think about the strategies and futureproofing the business. So I think, take a step back and think about future proofing the business which then encompasses all of the things around family, succession and business as a trading body. That’s really the starting point – getting that right is key. Focusing on the finance only and we’re on a hiding to nothing at the end of the day.

Lynn
Okay. How do you ensure that you’re setting children up for success?

Anita
I think that I have to talk from personal experience here because I have three girls. My girls are between 24 and 32. Probably, apart from Dame Stephanie Shirley, I’m a baby boomer and probably the first generation that promoted women running their own businesses and becoming entrepreneurs etc. I think that the next generation which are my millennial daughter and the generations x and y are the generations that need to have role models that say ‘you can do anything’ but coupled with that is understanding that nobody is successful in business without working hard, making sacrifices and being in the service of others. I think that with the generations that are following us now, it is quite a difficult message for them because they don’t come from an era as I did where my parents worked hard and you earned every penny. They need to understand that if you are going to be successful, all those ingredients are kindness, love, tenacity, experience, empathy and hard work, going the extra mile. When you are successful in business, then, particularly, there is no 9-5.

Lynn
Is this something you started doing in your own business? Tell us a little about your own business, Anita.

Anita
Family Business Place is quite interesting as it came out of a very terrible time for me when I lost my first business after 25 years, working as an international boutique branding agency. When I thought about what I wanted to do next and I had placed all of my staff in really good roles and my daughter was my PA at the time. She was offered a job with a top TV company – she went for the interview and turned it down. She said “where you go, I go” which I thought was really lovely. Then I was invited to a Family Business Conference and I’d never worked with the Family Business before because I’d always worked at international level.

When I got there, and because my background is in branding (about 10 stories), I was absolutely gobsmacked and so emotionally engaged with the people who were speaking and talking about their family businesses and the challenges, the terrible things that happen, the joys… all of those things. I look to myself and my daughter and thought, “actually, that’s us!” Myself, my daughter and now my youngest daughter is in… my middle daughter was in but then it wasn’t for her and we had to find a way to let her fly. Of course, that happens in a lot of cases and I thought ‘who’s looking after these people?’ Who can they turn to because the government most sees them as SMEs; the banks, financial houses and lawyers are mainly interested in the high-net worth and ultra-high net worth and they see them as ‘private clients’. I think that family business is like any other organisation – you have to be one to ‘get’ one. You know… if you want to help with victim support, then you need to have been a victim to understand that. If you want to be a foster parent, you need to have been fostered. I think if you’re a family business, there are things that are in our DNA as a family business that only you are able then to be in a position to truly help. 

So, I just thought ‘well, even though I had a terrible time and lost my business and I look back and think God must have had a plan for me and joined up all the dots for me to be here, a woman in business and running Family Business!’

All of our team, we all work four days a week. Everyone has a baby – I’ve got a grandson now so I have Wednesday’s off. Even my youngest daughter (she’s 24) has Tuesdays off to look after her nephew. We decided that, as a family, now we have grandchildren, we don’t have to ask permission. Let’s say we know that work has to be done so, how do we want to do it? As long as we know that.. All of our non-family staff are also mothers; it just happens that way. What they’ve said is that you cannot put a price on time. It would never happen in a corporate [company] that you’d say “Oh, Olympia, can you pick my daughter up at 4 o’clock, drop them to my mother’s and then come back?” Like, it would never happen but I trust everyone implicitly and we’ve got everyone’s back. And, do you know what, we’ve conquered everything and I’m just thrilled to think that that’s the way women do it. Women running businesses now is on the up – because of children now and because of the flexibility. 

Flexibility doesn’t mean less hours, it just means different hours. I think men are cottoning on to that as well now and I think there is a movement afoot. From what I read and hear about from large corporates is that they would like to be more like family businesses. Well, they can’t because in a family business every single person in that business counts!

Lynn
So what are the ways in which you support the family businesses then?

Anita
Supporting family businesses… first of all, we had to build a community because that community didn’t exist. That community has now come to a point where we have a membership organisation because family businesses have said that they’d like to know other family businesses. They’d like to belong. So that is thriving and we have national events all around the UK, in the north and south and we do private and small forums etc. I think the events part of what we do fluid and we love it!

Lynn
How many members do you have?

Anita
We’ve been going for 4 months in respect of membership and we have a hundred already. I think that’s great. We priced it so that is it £150 so for a mum and pop start up. The larger ones don’t need us but bless them, they join us anyway because they can see the support.

Supporting family businesses – from research that is readily available, there are terrible stats which are that only 30% make the transition from the first generation to the second generation. Only 12% make it from generation 2 to generation 3 and only 4% make it from generation 4 and onwards. So, they’re terrible stats really. It doesn’t mean it’s all about failure but mostly it’s about shutting up your doors as you don’t know how to transition from one generation to the next.

Lynn
So why is that failing?

Anita
Two main reasons: the first reason is communication. It’s hard to talk to your parents about tricky things. You know what it’s like in your own family – especially if you are working. If we’re talking about ownership, money, business and also just being a family – they are all entwined. Not being able to put a structure around that means that it is all quite messy and a bit fuzzy round the edges. There are no boundaries and you can be talking about business at home or, you might bring your home problems into the board meetings. It just happens like that.The second reason is that there is an acute lack of succession planning. There will probably be succession planning in terms of finances – of course there are, so financially, they’re usually taken care of. Legally, they’re usually taken care of – usually, the family will say that they have a will and in that will, it will be larger/smaller, complex or less complex but, I think, more importantly than that is actually that succession, in terms of next generation leadership – being able is not being capable. You could be the youngest child but you might have the gift, skills, experience and the passion to be the leader. So how do you sort that out with the family? How do you do that? How do you take the emotion out of that because we’re talking about transitioning a family business into a family.

Lynn
It sounds amazing what you are doing…

Anita
I love it!

Lynn
I can tell! Going back to my questions and it follows on from what you just said… Do you need to change the structure of your family business to facilitate succession?

Anita
I think it is quite hard because when you run a family business, you want to look after your family. You often hear people say ‘nepotism’ and I think there is a place for nepotism in a family business. If you have a child that has a disability or perhaps a learning disability, why wouldn’t you find a role for them in the business; it doesn’t have to be managerial – it could just be a role for its own sake. Why wouldn’t you build a business where your kids are looked after. You just have to make sure there is an education, development programme, leadership training programme – you have to put everything in place to give them the utmost possibility for success. It just has to be thought through just like any other business organisation where you go in at one level, you learn things, leadership etc. In a family business it needs to be the same. I think it is important the structure is changed for that and also families are quite introspective; they don’t trust outsiders. I’m a great believer in non-exec directors and other consultants that are part of that family management team that can give an outside view and bring their own view of the world, their experiences in business and influence. There are so many things that go on in an ordinary business and they are no less in a family run business.

Lynn
At which point, talking about succession planning, should the family business start to think about their succession planning?

Anita
A word from a very, very wise family business that I admire hugely and she said it’s never too early. So succession in terms of letting the children understand that the family business provides for them starts when they are very young. What we have to do is stop this whole notion of ‘entitlement’ because by the time we get to the third generation that business will be successful and the children will think that they’ve always lived in a nice house and always gone to private school, always, always… Of course, that is not good when you are thinking about the entrepreneurial spirit, risk management and responsibility – so, the younger, the better. Then the children can grow up thinking “I love this and want to be part of it – it’s in my DNA” or “you know what, I think I’ll go and try something else” or “I can’t think if anything worse – I don’t want to be a housing developer, I want to go and set up solar panel plants in the deserts of Ethiopia” or “I want to volunteer overseas” or “I love the arts”… I think you’ll always be part of that family business but perhaps in a different guise or bring something different to it.

Lynn
So who would you bring in to help with the succession planning?

Anita
Me, of course! It’s very important to bring someone in from outside because they can take the emotion out of the situation whilst still having empathy. They are trained (as I am with the Family Firm Institute in Boston – so that coupled with my own background in communications really has held me in good stead). That person needs to be trained and also experienced enough (have seen it, been there and done it) in family businesses because, although family businesses are as unique as a finger print, the issues they face around succession and communication are the same – just bigger/smaller, more/less complex etc. To have a trusted adviser is really important because when I work with family businesses, they become friends for life because it’s so fundamental.

Lynn
That was something I was going to ask because it’s something you can’t just do once? You’ve got to keep doing presumably over the course of time?

Anita
In the work that I do, very often, I will bring a family business that I know that has experienced something very specific along to another meeting because I know that ‘xx’ went through this and has come out the other end and can tell you that it is worth it. I think like most things, if things are painful, and you don’t know what the outcome is going to be, you can bury your head in the sand and do nothing. Trust is something that is earned and happens over time. It’s not really like saying I’m an accountant, I’ve got this qualification, give me your books and I can have a look at those and do it for you. We’re talking about people’s lives, their happiness. There are only two words in my vocabulary that are worth anything: one is trust and the other is joy. But getting there is the hardest thing!

Lynn
Absolutely and obviously combined with that, there is the management, ownership and tax issues as well to deal with. They’re really touchy subjects, especially within a family as you said earlier.

Anita
That’s right. I’m not an accountant and I’m not lawyer but you’re absolutely right. Those things are fundamental. We always have to look at a family business in the round so the work I do has one eye on the commercialism and commercial success of that family business. I would normally bring a team in and around me or use the family’s existing advisers, if we felt after doing the exploratory work, that they are up to it. Don’t forget that you don’t know what you don’t know and nor do lawyers and accountants. So if they’re not experienced in succession and what that means, then they are not going to be the best people to go to. Also, to understand the wider estate planning, tax implications and inheritance tax and all those things, for many family businesses these are forgotten until it’s too late.

Lynn
So how does a family business ensure that they look realistically and plan accordingly?

Anita
There are a couple of things really. There needs to always be a management team. We might call it a management team, we might call it a board structure… but in my view and my experience now, I think that most family businesses would benefit from having a trading board and a family board. So the trading board just looks after the operations of the business and its success and that really deals with all of the ‘normal business of the business of being successful’ as with any normal business. The family board really consists then of family members who are working in the business and those who are not working in the family business but they will be working in other business and can bring that expertise. It might be that the family board deals with what are they going to do with wealth. Is it going to be for philanthropy or something else – are they going to set it up as a private equity wealth arm? What are they going to do with their wealth? What’s important to them and what are their values? What do they want to hold on to?

Those things are then fed into the trading board via someone who is a non-exec who straddles both [boards]. Certainly that is something that I feel needs to happen and which doesn’t happen very, very often. It’s a simple thing to do really and that means then that all families can be involved but it’s understanding where the boundaries are; what you think is important because we all want as a family is to be loved. We want our families to know that what we think matters and that we have things that have value.

Lynn
Families obviously want to be very fair. How do you go about share allocation?

Anita
That’s a great question and can be very tricky. So for example I’m working for a family business at the moment (I won’t mention any names). The mother decided to give all of her sons equal shares in the business.

Lynn
Seems like a good idea!

Anita
Seems fair… However, two of the sons didn’t want to be in the business. They wanted to plough their own fields really. And in fact went off to do extraordinary things and be successful in their own right. So one of the sons loved has loved it and wanted to do it. He was paid a salary for being involved as a manging director and chairman etc. Then the shareholders would meet and do a recce as to how successful the business had been. But, as things happened, they all felt that they needed to have an input as to how the business was run as well. But, of course, that was quite upsetting for the one child that’s had the remit to do all the work. You can imagine that it’s got worse and worse and now it’s time for succession; they’ve all got children and so you’re talking about cousins and there are a lot of assumptions that makes it complicated. There is no-one that feels safe enough to speak the truth about it without making the relationships more tense, more complicated… don’t want to go there etc but they got to the point where they realised they couldn’t do it themselves. I think being fair is one thing and doing the right thing is another. But at the core of it, the business provides the wealth and opportunity for the family that needs to be protected. The family needs to be protected. So the work that I do is about protecting the family in light of the business. Fairness is really important but actually, to transition from a family business to a business family is the biggest transition really.

Lynn
And that’s where you can help families. So what can be done to train successors moving forwards and working with them?

Anita
Successors and working with them…. Well the work that I do is to never look at a generation in isolation. You are your parents – you happen to be in the family business but most of who you are is nature. Then you are nurtured through things that affect you in life – life experiences etc. I think that if you are going to train a successor, first of all they need to understand what their legacy is. What are those values? What is the team goal? Where are we going? And then being on board with that but also then understanding what their own aspirations are. The reasons you will be running the business are not going to be the same as your parents. With every new born that comes into the family, the dynamics change. If you are a first born in a family, you have a particular family [setup] and when another child is born, the dynamics are different and a third child comes along, they change again. You might be an adopted child or you might be a member that is gay so how does that affect the blood line or succession.

So, nothing is ever done in isolation. I think what is at the heart of it is to know that we have one life. Enjoy it, cherish it, trust those around you and do a good job and leave the business and family in a better state than when you inherited it. They really are my guiding principles. Succession depends on where people are at, their level of education in terms of leading a business. Who is the one in the family who is the entrepreneur? Unless you have an entrepreneur in the family you cannot expect that business to flourish in the next generations. That entrepreneurship happened with the founders and doesn’t always happen in successive generations. But you can learn that but it is not something that’s instinctive because an entrepreneur is one that takes on risk and is prepared to understand and weigh up the pros and cons of risk. If you already inherit something of value, you are less likely to risk those things and so suddenly it’s understanding risk; what you’ve inherited, your parentage, lineage, what you’re know in the market for… what are your dreams. If your dream is to take something small and what to make it global – whereas your parents wanted to keep it small and bijoux – then there are different conversations. We live in a global village now so our networks and peer groups are scattered around the world and so life is so different than 5, 10 or 20 years ago – and it will be different in another 5, 10 or 20 years from now.

Lynn
So what is your image of the successful family business? The one that’s ticked all the boxes?

Anita
A successful family business is a family business that has made a decision. A decision that yes, we want it to be a family business for generations. Or, we want to run this family business and bring up to such a size and success that we would like to sell it and then decide what to do with the funds from the sale. We have to know what our goals are. So a successful family business is one that know its goals and the goals are fed into the family. The family then understand it and are singing from the same hymn sheet.

Then, we have to understand that, if failure means bad communication and bad planning, we have to ensure that we have good communication and forums for that. And also we have to have a plan for succession and when that’s going to happen because, don’t forget, in most family businesses, retirement is not a word in our vocabulary. There is a family business that I know of that you are only allowed to be in the family business until you are 50 and then you have to plan for your succession. By the time you are 60, then you have to have new life, new career etc – it’s part of the family constitution so there is no hanging around until you are 80 but you have to have used those 10 years to bring on your successors and to have also planned the next phase in your own life. I think that’s fantastic.

There are others that love their parents or the founders who say that their role now is to be an ambassador or to help other family members. For each phase of your life – you have to look forward to your new role but you have to plan that. There is handover day but handover day might be still be a little office in the business or somewhere you can go to – or a project as for most (particularly men) the family business is their ‘shed’ (men and their sheds!) and a lot of them find it hard to let go.

Letting go is difficult as it says “end of” whereas I think it should say “beginning of something new”. One of the things I do when I work with family businesses is what I call the ‘drop dead plan after the will’. This is really about ‘before I go, what do I want to have accomplished’. I get them to draw a horizontal line and on the left put a dot to suggest the date you were born and, on the right, take a stab at the date you think you will die. In my family, my mother passed away when she was 83 so I thought, okay, I’ll push it a bit and thought I’ll live until I’m 85. On that horizontal line, put your current age. It’s very sobering to see how close that gap is to the end date. I’d urge everyone to do it…

In that gap, you need to make sure that in that time, you’ve done everything you want to do, everything you’d like for your family to have happened – no loose ends to tie up. Make sure that the family is set for the future and have got good values. They can make a difference to the world and that the business can go on. I think you have to be brave to look at that as there is such a lot to be done. So, I think that a good family business will have looked at that because I’ve met so many family businesses that have lost the next generation when they were teenagers or their parents drop down dead when they were in their 50s. You never know what can happen so it is about planning ‘what if’… ‘what if’ And, do you know, when you talk about things like that, they are less painful.

Lynn
Thank you Anita, it’s been absolutely fascinating talking to you today! If you are running a family business and want to talk to you, where do they go?

Anita
Well, if they want to talk to me and want to be involve in Family Business Place – our organisation is called Family Business Place and that’s the name of our website. I also have my own personal website for family business advisory services which is global so quite separate from our other business because I’m often introduced to people from different countries where I’m having to explore different cultures etc. So… familybusiness.com and anitabrightleyhodges.com.

Lynn
Thank you Anita – we look forward to seeing you again.

Anita
Thank you Lynn, it’s been a real pleasure!

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