ATTENDEES:
ANDREW ARMSTRONG - Director and co-founder of Carrington-based, Zig Zag Papers
NIGHAT AWAN - Director of Shere Khan Restaurants
REUBEN BERG - Senior partner of law firm Berg Legal
MICHAEL FAHY - Editor, EN(chair)
HOWARD HACKNEY - Partner of special projects at Grant Thornton
DAVID MATKIN - Co-Operative Bank’s Corporate division’s head of business development
COLIN SAMUELS - Director of Salford-based music distributor Global Journey
MARIE WOOD - Business development manager at Co-Operative Bank’s Corporate division
ALLEN YATES - Director of St Helens-based Showers and Eyebaths

Michael Fahy: I’d like to start by asking about people’s perceptions of family businesses, and whether the term has positive or negative connotations. Do those of you who are involved in family businesses introduce yourselves as such?
Andrew Armstrong: We don’t, because it doesn’t really have any relevance to what we do. I might run the business with my father, but we started it together as partners.
Reuben Berg: I think there are still negative connotations....People see family businesses that have passed through the generations and feel they’re just plodding along in the same way they’ve always done. They think they lack professionalism.
Nighat Awan: It depends on how you look at it – family businesses have many advantages over corporates. I once had a florists’ business that was sold to Interflora in 1997. I had to join the board and was the only woman on a board full of men, but what frustrated me was the length of time it took to make decisions. They’d have this huge agenda – point one would be some potential acquisition and then two days later they’d come to point 15, which would be about some big crisis. And I always used to think “Hang on, you’ve got this the wrong way around”...
Armstrong: But that’s the way corporates operate, isn’t it? You’ve got all these systems in place to stop you making rash decisions which leads to the type of environment where the best course of action is to sit at the back and not take any decisions at all. That way, you’re not responsible if things go wrong. In a family business environment you trust your gut feelings much more.
Colin Samuels: We’ve just done a deal with a much bigger company than ourselves which is based in Ireland, and on that occasion the fact that we were a family business worked in our favour. It was also family-owned, and they were happier dealing with us because we have a similar ethos.
Dave Matkin: It always used to be said with family businesses that it takes a generation to earn it and then another to spend it....
Berg: ....And then the third to kill it.
Matkin: But there are really only four routes open for any family business. You can either look to float it off and let a professional management team take it over, you can look for a trade sale, you can keep it in the family for another generation or you can drive it into the ground.

Fahy: So when it comes to funding proposals or new customers, does a bank like The Co-Operative look on family businesses any more or less favourably, or does it simply boil down to the numbers?
Wood: Of course, the numbers play a huge part and we judge each of the businesses we deal with on their merits, but one of the positives with family businesses is that there is this a greater sense of security if a company has been trading for some time and is likely to continue to do so.
Awan: From our point of view, we’re actually looking to move away from identifying as a family business and we’ve put in more of a corporate structure. We’ve split the business into different divisions and we’ve brought in a managing director to oversee our restaurants business, which we’re developing into a franchise-based operation.
Howard Hackney: Ah, but have you given him a piece of the action? In order to get the people you really want, you sometimes have to offer a stake in the business. If you don’t, you may not get the type of person with the entrepreneurial skill, drive and the desire to understand the underlying business that you need. If you just hire an administrator, that’s all they’ll do – they won’t drive the business forwards.
Awan: We have, actually. We recruited Steve Garrity, who previously worked for City Centre Restaurants (now The Restaurant Group) and played a huge part in rolling out the Est Est Est concept alongside Derek and Edwina Lilley. He’s been given an equity stake in our franchise business and so as our operations director.
Hackney: That is an unusually brave step because so many families fail to recognise and reward talent from outside the business. Yours is still quite a young operation in family terms, but when they get to the third or fourth generation it becomes very difficult to reward outsiders because the equity split has already been diluted to such a degree that they risk losing control of the business.
Berg: Another of the problems with family businesses is that when you do get disputes, they can be quite fierce. There’s one that I’ve been working on which started way back in 1988 and it was only resolved last year.
Hackney: I suppose it’s an achievement that they carried on trading for so long while the dispute rumbled on. A lot of businesses end up in a situation where one branch of the family won’t speak to another and every bit of communication is carried out through lawyers.
Samuels: I consider myself to be lucky to be in business with my two brothers. We all have totally different characteristics – one of us is the headstrong one, another of us (me, actually) is the pacifier who’s always in the middle smoothing things over. But the fact that we all grew up together and know each other so well means that we interact really easily and we can sense when to back off...
Awan: I wish we were like that. My husband Rafique and I are both quite fiery, and our children are a mix of us both. I’m a great admirer of the Booths (The Preston-based family-owned supermarket chain). They’re all very level-headed and nothing seems to faze them.
Fahy: Advisors recommend that when you get a business as established as Booth’s, though, that you have a ‘family council’ structure allowing you to thrash out disputes and to keep family and business issues separate...
Awan: They do, but you still need someone to lead that group and Edwin [Booth] has been very good at that. It’s the same with us, I suppose. We might all sit around arguing about the best way forward but in the end it’s usually Rafique that makes most sense. I’ll sit back and think “He’s right again”.
Hackney: I’m interested in something that Colin said earlier, about working with his brothers. Presumably you are all shareholders in the business?
Samuels: We each own a third, and my wife has the remaining one per cent. There are four of us in the family, but only three are involved in the business. Also, we have an American business where the family owns 80 per cent and our American partners own 20 per cent. And then the in-laws get involved, and my brother’s girlfriend, too. They all work in the business and all have their own opinions, but we handle it very well. We have quite well-defined roles – Ian looks after the sales which I know nothing about and wouldn’t dream of getting involved in, and Peter’s the creative one.
Fahy: How do you stop that obvious close bond slipping over into such an extent that non-family members feel excluded – where ‘dinner table’ conversations on a Saturday night lead to decisions that non-family members feel have been made behind their backs?
Awan: I’ve learned to be really strict about this. Steve has been employed as our MD to run the business so if subjects come up concerning that I won’t talk about it. As a rule, we won’t take any decisions without consulting him first.
Samuels: It’s natural in a way for non-family members to feel that they’re not as close to certain things simply because they’re not family. But as for taking decisions behind people’s backs, well...we’ve been working with our American partners for years now and they’ve never once complained that they’ve been kept out of the loop.
Yates: My son, Craig, has just rejoined our business after a long absence where he ended up running engineering divisions in international companies. He learned more elsewhere than he would had he stayed with me and has come back on merit, but I’ve had to be very careful in how I introduced him. I had to take our team leader – who has been with me since leaving school 15 years ago and is like another son to me – to one side and explain that we’d reached a stage where we needed someone with more experience. We’re now dealing in multimillion pound contracts for the likes of United Utilities, and we sell a lot of equipment to petrochemical firms overseas. One of the reasons for bringing Craig in is to introduce new technologies, working practices and lean manufacturing techniques so we can move the business to the next level.

Fahy: Finally, what are the long-term ambitions for your business? Do you intend to keep it in the family, or do you look at it more practically as a vehicle for making money which could be sold at the right price?
Armstrong: I suppose that it’s a vehicle to us. My children are still both very young and, at the same time, my father is getting to a stage where he might want to retire soon. But we started this business together and unless something drastic happens I can’t see me staying on if he goes. I could probably see a situation where either we acquire another business, or we get acquired ourselves.
Matkin: You are still quite young, though, and if you did sell you might make yourself financially secure, but you would face the problem of what you’re going to do for the next 40 years of your life.
Awan: We have a strategy worked out that will allow us to leave the business eventually, which is why we’ve started franchising. Rafique’s been doing this for 40 years now, so it’s understandable that he’s looking to get out. My eldest son, Tikki, would have been brilliant and would have really made the business boom but he’s done his own thing in property and so has my daughter. We’ve offered them the benefit of our experience and wisdom, and the financial support where they’ve needed it, but they’ve all worked hard to create opportunities for themselves.
Yates: Until last year, I was selling the business. I had two people who had agreed to buy me out and I had something agreed with one, but it was at that point that Craig mentioned he’d be interested in coming back. To cap it all, the person who was going to be buying me dropped out because the deal was based on our turnover and profitability. We’d started doing very well and he couldn’t afford us anymore! I’ll still be drawing my salary because I’ve put my life into this business and have no pension – it’s all gone into the company. This is my pension now. It either keeps paying me or if Craig wants to take over lock, stock and barrel, he’ll have to buy it.
Samuels: We don’t really have any plans to sell. Like Andrew, our children are all very young, but we all enjoy what we’re doing. We bought out another of our brothers when he decided to retire at the age of 32. I think he just got sick of us poking him to wake him up every time he fell asleep at his desk! But I think the rest of us feel it would be nice to be able to pass something on.

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