POOR succession planning and a lack of effective exit strategies among family businesses in Scotland means the country is failing to make the most of an economic boost worth more than £1.2 billion a year, according to a new report.
A study, involving universities, government bodies, businesses and professional advisers, suggests that more focus needs to be placed on supporting the effective transfer of ownership of family businesss and small and medium-sized enterprises (SMEs) to ensure they survive and continue to grow.
In Scotland, SMEs account for 99.3 per cent of all private sector enterprises and 63 per cent of these are family businesses. Figures show almost three-quarters of Scottish family firms want to keep the business in the family, but, in 2012, only 12 per cent of family-owned businesses in Scotland were passed down to the second generation and just 7 per cent of family-owned SMEs had been in the family for three generations or more.
Separate figures show the survival rate of new businesses after five years is only around 35-50 per cent but for business transfers it is around 90-96 per cent.
According to the study, which was carried out by organisations including learning charity Goodison, Scotland’s Futures Forum, Queen Margaret University, the Scottish Family Business Association and Bank of Scotland, transferred businesses also seem to outperform new start-ups in terms of turnover, profit, innovation and employment.
The report, which estimates growth potential among family firms to be £1.23bn a year, recommends that more focus needs to be placed on supporting successful family business and SME transfer which could help protect jobs, increase employment, widen business ownership and maintain existing local supply chains.
Martin Stepek from the Scottish Family Business Association, said: “The new research confirms everything we have stated for the past eight years, and most importantly the huge potential benefit for Scotland if we address the issues involved.”
Jane Wylie-Roberts, managing director of recruitment firm Stafffinders who took part in the research project, said: “It’s great that people are talking about the challenges faced by family businesses. You can’t look at family businesses as a transaction led deal, a will to be made, a sale to be done or a tax to be saved. This is not going to help family businesses survive and the reason why we have such a high death rate of family businesses.”
David Watt, director of the Goodison Group in Scotland, said: “Scotland has the potential to be a world leader in this field. There is an opportunity for Scotland to lead America and parts of Europe in providing the knowledge, skills and support needed to become a world-wide centre of excellence.
“There is a fantastic opportunity here and the results of the research project will be used to engage with Scotland’s SME and family business policy makers and practitioners.”
The research was carried out to coincide with Scottish Family Business Week which starts on Monday and which will include a conference with speakers from family firms including Kinloch Anderson and the Smith Anderson Group. The week will culminate with the release of the Oldest Scottish Family Business 2014 report. Last year’s report identified the 25 oldest family firms in Scotland. These firms have collectively traded for more than 3,700 years and are household names such as Baxters, Crieff Hydro and Walkers Shortbread.
Scotland’s Futures Forum was created by the Scottish Parliament to help MSPs, policymakers, businesses, academics look at some of the challenges and opportunities the country will face in the future.
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