Family businesses are a huge part of the UK trade industry and research by IronmongeryDirect found that almost two in five (38%) tradespeople now work for a company they inherited from a relative.
Many of these firms have been passed down by at least two generations (18%), and a third (33%) of owners say they would love their children to carry things on when they retire.
However, handing over a business can come with its challenges, and just one in eight (12%) tradespeople say that it was easy to transfer ownership.
To help tradespeople looking to take the reins of their family business, IronmongeryDirect has partnered with Rick Smith, managing director at Forbes Burton and a business consultancy expert, to share advice on how to ensure things go as smoothly as possible.
1) Decide on the best marketing approach
It’s important to decide whether you want to continue and build on the current business model or look to adapt and evolve. This encompasses all aspects of the company, including marketing.
Rick says: “Is there a marketing system that generates sales or did the previous owner build the business on relationships alone? Is there a legacy built with a marketing agency, and if so, are they performing in the right way?”
If you are making changes, it’s important to communicate these to your customers, using channels like social media.
2) Do your homework
Even though you’re taking over from a relative, you should still do thorough research into the company so you know exactly what you are about to inherit, both the good and the bad. As always with a trade business, whether new or old, it’s crucial you know your costs.
Rick says: “Ensure you do your due diligence and conduct a comprehensive appraisal of the business to see any risks and problems you will be inheriting.
“Make sure that you are able to look at all existing financials. This includes past, present, and future tradings, KPIs and any cashflow forecasts that they might have.”
3) Be certain it’s definitely what you want to do
IronmongeryDirect’s research found that one in eight (12%) of tradespeople always knew they’d work for their family business, and one in ten (10%) felt like they didn’t really have a choice. Remember that it’s your career and you should have a say about where you work.
Rick says: “Consider whether this is what you truly want to do. Do you see yourself enjoying it and can you add value? This is important because this inheritance may not align with you, and therefore, you are not going to give it your best.”
4) Document the process
Make sure that everything is done by the book so you have an official paper trail proving the transfer is complete. The study found that 7% of tradespeople felt nervous about handing their company over to a relative, but documentation will help, ensuring the correct process has been followed and the new owner begins their role on solid ground.
Rick says: “Ensure it is a documented transition and everything is written down. Make sure to include all the uncomfortable points that are not often discussed with relatives. Any pain points should be assessed, agreed upon and then documented accordingly so it’s clear what is being handed over.”
5) Pick up existing relationships
There will undoubtedly be aspects of the business you wish to maintain as you take control. Existing contracts and customer lists will probably fall into this category, helping to get your management off to a flying start, rather than beginning from scratch.
Rick says: “It’s important that there is some continuity, so make sure to have a thorough handover. You should spend time understanding the business’ important and valuable client, customer and supplier relationships and then plan how you can best carry on or renegotiate these once you take over.”
For more expert advice on ensuring a smooth business transition, visit: https://www.ironmongerydirect.co.uk/blog/how-to-take-over-a-family-trade-business
