Family firms willing to give up control to net funding

The majority of family firms based in Edinburgh would give up control of their business in a Dragons' Den style deal if that was the only way they could expand or grow, research today suggests.

Ritchie Whyte, corporate partner, Aberdein Considine. Picture: Contributed

Some 52 per cent of family-run companies in and around the capital would consider ceding control of the business in order to attract investment for growth, according to a survey conducted by law firm Aberdein Considine.

This compares to a figure of 75 per cent for Scotland and roughly two thirds (66 per cent) for the rest of the UK.

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The firm said that the result could indicate that access to more traditional forms of funding remains an issue for many businesses when they are looking to grow.

Family businesses in Dundee appeared most likely (73 per cent) to consider selling a controlling share, with a majority in Glasgow (55 per cent) also comfortable with the prospect of losing full ownership in return for growth funding. Firms in Aberdeen bucked this trend however with a comparable figure of just 29 per cent.

Family businesses in Scotland account for about half of all private sector employment and are also responsible for roughly half the GDP created by private enterprise.

Ritchie Whyte, corporate partner, Aberdein Considine, said: “Family firms are critical to the success of the economy and it’s vital they have an environment which allows them to flourish.

“The fact that the majority would consider ceding some control in exchange for growth investment could well be a warning sign that accessing normal high street funding continues to be a challenge.

He added: “There is no doubt that family owners bring a particular passion and skill set to running their own business and it’s critical they have the right support and advice they need to prosper, both when growing the business and when they are considering issues such as ownership, investment, strategy and succession planning.”

Succession remains one of the biggest areas of concern, but firms in Scotland expressed a degree of confidence in the continuation of a family connection with 87 per cent of owners surveyed indicating a preference to pass the businesses down to the next generation.

In Edinburgh, 70 per cent of those quizzed said they would like to pass the business on.

Only 5 per cent of Scottish family firms said they wouldn’t be passing the business on to a family member. The main reason given was that the next generation wasn’t sufficiently qualified (43 per cent), with almost a third (29 per cent) saying their family had different aspirations and the same number saying they were simply not interested in carrying on the business.

Hundreds of family businesses were polled online.