When you meet someone new, how do you describe your business? If you’re like most people, you might talk about what you do or how you do it. Maybe you’ll mention how you do it better than your competitors. However, do you talk about the “why” of your business? Can you answer the question: What is the purpose behind my business? While the concept of a purpose-driven business is certainly not new, I recently came across a TEDx Talk from U.S.-based author and speaker Simon Sinek that put an interesting twist on the idea. The video is called “How Great Leaders Inspire Action” and it’s well worth the eighteen minutes out of your day to watch. Sinek’s basic premise is that leaders who “Start With Why” (incidentally, the title of his book,) have better personal, professional, and business outcomes. Why? Understanding why your organisation exists and being able to communicate that purpose to others creates a much more compelling story. Most firms simply focus on the “what” and the “how” of what they do, missing the opportunity to show off the purpose behind the business. There’s a solid business case for starting from why: it differentiates your business from your competitors by showcasing what makes you unique. It helps employees, partners, and customers understand why you do what you do. It focuses your attention on the activities that truly create value and move your business forward. By integrating your purpose into your mission statement and marketing materials, you are able to make a better case for why customers should do business with you. In his talk, Sinek points to Apple as a company that has seen enormous success by putting “why” at the core of its message. Apple isn’t just another company that produces technology products. Their purpose is to change the world through simple, functional, beautiful design. You have only to look at Apple’s share price over time to see the effect this powerful message and brilliant execution have on the company’s bottom line. I think that this is a phenomenally important idea for family businesses because we serve multiple purposes: our organisations exist to help our customers and to create a better future for our families. In order to successfully integrate these dual mandates, family business leaders have to understand the core purpose behind everything they do. Take a moment to think about why you get up every day and go to work. Look past the need to earn a living or turn a profit and go back to the beginning. What’s the ground truth behind your business? Who do you serve and why do you do it better than anyone else? If you’re having trouble visualising your core purpose, think about the problems your company solves for your customers and why they choose to do business with you. It’s also helpful to consider the story behind the founding of your company. Why was your company founded? Your unique history is one of the biggest differentiators between you and corporate competitors and it’s important to integrate that into the way you describe your business to employees, clients, and other key stakeholders. I think that it’s also essential to apply this concept to your personal life. Ask yourself: What drives you as a person? How do you want to be remembered when you’re gone? These are not always easy questions to answer, particularly when you’re caught up in the daily grind of running a company. However, knowing these answers can help you avoid burnout by keeping your focus on the things that matter most in your life. As family business advisers, one of the things we stress to our clients is the importance of a developing a long-term vision for your family. That vision should be centred on a purpose for the human, intellectual, and financial capital of your family. Our experience shows, and research supports, that multi-generational families that develop shared values and a purpose for their capital are more likely to thrive during key family business transitions. It’s a sad reality that many generational transitions fail. Whether it’s lack of planning, unprepared heirs, or disputes between members of the next generation, many families fail to successfully pass their wealth on to their children. I strongly believe that sitting down together and exploring the “why” behind your family is one of the best ways to ensure a successful long-term legacy.

Fracino is the UK’s only manufacturer of cappuccino and espresso machines and associated equipment and was 50 years old in 2013. Managing Director Adrian Maxwell shared his thoughts with Paul Andrews. What does your family business do? Fracino is the UK’s only manufacturer of cappuccino and espresso machines and associated equipment. We are celebrating our 50th anniversary in 2013 and are very proud to have been awarded the title of the UK’s top manufacturer and the UK’s Outstanding Export award from the manufacturer’s association the EEF. How did you get involved? I’ve been involved with the business ever since I was a baby when my dad, Fracino founder Frank Maxwell, took me in a carry cot to our customers in Leicester and Birmingham in the heady 60s before we’d started manufacturing and were repairing machines. After leaving school at 16 I went to Rolls-Royce for four years and completed my technical apprenticeship and HND. I next took on a couple of jobs which included manufacturing and selling agricultural gates and fittings before joining Fracino full time aged 23 as a service engineer. At that time dad could not complete the volume of work on his own and there were just the two of us compared to the 40-strong team we employ today. What did you want to be when you grew up? I always wanted to be an engineer from a toddler. Our house, garden and workshop were always heaving with cars and machines being repaired which would drive my mum to distraction. I loved learning how to take things apart and reassemble them. We must have been the neighbours from hell with all incessant hammering and banging at all hours of the night! What are your first memories of the family business? My first really clear memories are going with dad when I was about five years old to see long standing customer Geoff Rossa at Cafe Bocca in Leicester in our new – well new to us – Morris J4 van. Geoff has been a valued customer and friend for 50 years (as long as we’ve been in business) and I would happily sit on top of his counter changing the steam valve washers. What values are important in your family/family business? Trust, respect, transparency – and openness. My respect for my dad Frank is enormous – and he is my business hero. As a family we value our hard work ethos and quality driven culture – always striving to do everything to the best of our ability. What is the best thing about being a family business? Being united in a common goal and supporting each other while sharing our business experiences as a close knit family unit which is always travelling in the same direction. And the worst? The fact that we never escape from our work and find it nigh on impossible to switch off when we’re at home. I’m the biggest culprit by far! What is the best thing about your working day? Getting up for work – every day I’m excited about what the day will bring even though many of them are hijacked before they get off the ground. No one day is the same and I relish the opportunities and challenges each one brings. What is your proudest family business achievement? Being awarded the EEF’s UK’s Winner of Winners Award this January this year. It’s the highest honour the EEF can bestow on a British manufacturer and reflects how, in four years, we built a global export business which now exports to over 50 countries. Is there a next generation waiting in the wings to take over? Definitely – outside of Frank our founder and Marion my wife who is our credit controller, our daughters Rebecca and Katrina work as service coordinator and purchase ledger respectively. Our son David is currently training to be an engineer at Leeds University and works with us during his holidays. What do you see as the biggest challenge facing family businesses? Succession planning is critical – as is keeping things on an even keel and identifying and managing any potential sibling rivalry. We wholeheartedly believe in the adage that ‘the whole is greater than the sum of its parts’. What words do you associate with family businesses? Unity, trust, hard work, stability, reliability, tenacity, transparency and quality driven for starters. We’re all in this together which has proved a powerful formula for our success. Words of wisdom – What piece of advice would you pass on to someone thinking about joining the family business? Join it for the right reasons, not because you feel obligated – the worst possible reason. Also, if you do believe its right and it does not work out then bow out gracefully and move on as opposed to being miserable. We only have one life so it’s vital to be fulfilled by what we do for a living.

Fracino is the UK’s only manufacturer of cappuccino and espresso machines and associated equipment and was 50 years old in 2013. Managing Director Adrian Maxwell shared his thoughts with Paul Andrews. What does your family business do? Fracino is the UK’s only manufacturer of cappuccino and espresso machines and associated equipment. We are celebrating our 50th anniversary in 2013 and are very proud to have been awarded the title of the UK’s top manufacturer and the UK’s Outstanding Export award from the manufacturer’s association the EEF. How did you get involved? I’ve been involved with the business ever since I was a baby when my dad, Fracino founder Frank Maxwell, took me in a carry cot to our customers in Leicester and Birmingham in the heady 60s before we’d started manufacturing and were repairing machines. After leaving school at 16 I went to Rolls-Royce for four years and completed my technical apprenticeship and HND. I next took on a couple of jobs which included manufacturing and selling agricultural gates and fittings before joining Fracino full time aged 23 as a service engineer. At that time dad could not complete the volume of work on his own and there were just the two of us compared to the 40-strong team we employ today. What did you want to be when you grew up? I always wanted to be an engineer from a toddler. Our house, garden and workshop were always heaving with cars and machines being repaired which would drive my mum to distraction. I loved learning how to take things apart and reassemble them. We must have been the neighbours from hell with all incessant hammering and banging at all hours of the night! What are your first memories of the family business? My first really clear memories are going with dad when I was about five years old to see long standing customer Geoff Rossa at Cafe Bocca in Leicester in our new – well new to us – Morris J4 van. Geoff has been a valued customer and friend for 50 years (as long as we’ve been in business) and I would happily sit on top of his counter changing the steam valve washers. What values are important in your family/family business? Trust, respect, transparency – and openness. My respect for my dad Frank is enormous – and he is my business hero. As a family we value our hard work ethos and quality driven culture – always striving to do everything to the best of our ability. What is the best thing about being a family business? Being united in a common goal and supporting each other while sharing our business experiences as a close knit family unit which is always travelling in the same direction. And the worst? The fact that we never escape from our work and find it nigh on impossible to switch off when we’re at home. I’m the biggest culprit by far! What is the best thing about your working day? Getting up for work – every day I’m excited about what the day will bring even though many of them are hijacked before they get off the ground. No one day is the same and I relish the opportunities and challenges each one brings. What is your proudest family business achievement? Being awarded the EEF’s UK’s Winner of Winners Award this January this year. It’s the highest honour the EEF can bestow on a British manufacturer and reflects how, in four years, we built a global export business which now exports to over 50 countries. Is there a next generation waiting in the wings to take over? Definitely – outside of Frank our founder and Marion my wife who is our credit controller, our daughters Rebecca and Katrina work as service coordinator and purchase ledger respectively. Our son David is currently training to be an engineer at Leeds University and works with us during his holidays. What do you see as the biggest challenge facing family businesses? Succession planning is critical – as is keeping things on an even keel and identifying and managing any potential sibling rivalry. We wholeheartedly believe in the adage that ‘the whole is greater than the sum of its parts’. What words do you associate with family businesses? Unity, trust, hard work, stability, reliability, tenacity, transparency and quality driven for starters. We’re all in this together which has proved a powerful formula for our success. Words of wisdom – What piece of advice would you pass on to someone thinking about joining the family business? Join it for the right reasons, not because you feel obligated – the worst possible reason. Also, if you do believe its right and it does not work out then bow out gracefully and move on as opposed to being miserable. We only have one life so it’s vital to be fulfilled by what we do for a living.

Oxfords Bakery was established by Frank Oxford in 1911 at Alweston, near Sherborne in Dorset. Today, fourth generation Steven is at the helm, a far cry from the DJ lifestyle in Ibiza he did before! What does your family business do? Oxfords Bakery is a 4th generation bakers, still making Traditional English bread and cakes using the same methods (and ovens) as Great Grandfather Frank Oxford in 1911. How did you get involved? I was always expected to join the family business, not by my family, but by all of our customers, suppliers and friends! Naturally this deterred me even more. I turned from music loving teenager in to a professional Nightclub and event DJ and, by my early 20’s had even established a name as an agent for other music acts. During a tour of New Zealand and, actually, right in the middle of a set I was playing during a street festival for Red Bull at the ‘Americas Cup’ yacht race in Auckland, I made up my mind that I wanted to not just work for the family business, but to develop it and make it in to what I believe it should be – the most popular bakery in our county, Dorset. So next time you see a ‘DJ’ at work, wondering what’s on his or her mind, it may not be quite what you’d expect!! What did you want to be when you grew up? An exact replica of my father! What are your first memories of the family business? The first memory of the family business for me was being allowed behind ‘the table’ to mould cottage rolls with my Dad at the Royal Bath and West Show when I was about 5 years old, and then while he was pre-occupied, one of the bakers lifting me up and out of the way to sit on the flour sacks as I was probably slowing up the works. This was the first feeling of burning desire to show what I could do for the business. Needless to say, next year as a great big six year old I was very visibly shadowing my father and helping bake whilst wearing a rather fetching t shirt my mum had provided saying :Get fresh with your local baker’ on it! The other memory that my brother and sister share with me though is the smell and clatter of the tins as we walked into the bake house when we would stay there with our grandparents. Its still the same sounds sights and smells today, but you don’t appreciate them until you’ve been away from baking for a couple of weeks. Good excuse for a holiday I suppose!! What values are important in your family/family business? Our motto has always been ‘quality and tradition’ I think if we maintain these two things then the actual boring business side of things are much the same as most other businesses. It is those two things that keep us unique. There are a few good bakeries I can think of that only have one of these attributes, and no matter how hard our competition try, it is impossible to emulate what we do. (Unless you also have an original Victorian/Edwardian bakery to work from!) What is the best thing about being a family business? The support framework when things get , inevitably, tight or don’t go as planned. We don’t set ourselves many targets for success as a family business, we do , however, know how to celebrate our achievements though. An invite to ‘Oxfest’ would prove that to anyone!! And the worst? Imagine putting in the best financial year in 100 years, exceeding all expectations, growing and developing at a faster rate than you could ever have expected… and then find a post it note with a complaint from your own Mum because you’ve lost a petrol receipt or because your office looks a bit messy! For me, that is about as bad as it gets though – I’m afraid, there are no horror stories here! What is the best thing about your working day? Seeing somebody walking down the street clearly enjoying a product from an ‘Oxford bag’. Also, hearing a tale from a customer who says that one of your products is their ‘favourite food’. I only need to hear that once a year to get me out of bed in the mornings. A real pleasure. What is your proudest family business achievement? Our centenary year has to be up there. Shared by all of us proudly, as you can imagine. My father decide that he wanted to take the business to 100 years, come hell or high water. This doesn’t sound like a great ambition until you realise he decided that 51 years ago!! I had the good fortune to meet Richard Branson last year and even he said: “ now that is a real achievement” You can’t argue with that really! Is there a next generation waiting in the wings to take over? Ha Ha, there is now but only just as they have only just been born but there is absolutely no way on earth that I would ever pressure or even suggest my children be involved in the business though. Look forward to teaching the values of hard work, finance and reward, but they are way down the list after things like messing about, laughing, running around with your arms out like an aeroplane for 3 hours solid etc as life is there to be enjoyed first and foremost. What do you see as the biggest challenge facing family businesses? Copy cat businesses is a real threat to our sector as there isn’t much legislation as to what real bread actually is. Despite the Real Bread Campaign doing a good job of promoting small and honest bakery businesses, they are dwindling. In fact, there were approximately 20,000 small bakeries in the UK 25 years ago and there are now only about 3,000 left. Supermarkets can use words like ‘fresh,’ ‘craft’ and ‘wholesome’ at will! We have some local competition that even has a sign in the window saying ‘traditional artisan breads’ yet they are made on a plant/production line!! It does grate a bit when you have given up nearly every Friday night of your life to actually do it properly! Rant over! What words do you associate with family businesses? Passion. Values. Ethics. Tradition. Words Of wisdom – What piece of advice would you pass on to someone thinking about joining the family business? DADS ARE ALWAYS RIGHT!!! Knowing when they are not, and being able to make subtle changes, is the key to success.

Kinloch Anderson, an Edinburgh family company since 1868 are renowned experts in kilts, tartans and all aspects of Highland Dress. Deirdre Kinloch Anderson married into the family firm and shares her thoughts. What does your family business do? Scottish Clothing and textiles, renowned for kilts and Highland Dress, also wholesale and skirt production, tartan design and Brand Development in Japan, Korea, Taiwan and China. How did you get involved? Married into the 5th generation What did you want to be when you grew up? Initially the first ever lady mounted Policewoman! Then social worker. Then working with publication of Children’s school books in foreign languages. What are your first memories of the family business? My husband was dedicated to making it ever more successful and wanted me to be interested and involved when appropriate. What values are important in your family/family business? To be a role model for Scotland, upholding the highest principles of integrity and service. What is the best thing about being a family business? For us, personally, the lifestyle that goes with it, the places we go to and the people we meet. Commercially, when we have made a decision we can go ahead and do it. And the worst? The demands and pressure of the ultimate responsibility. What is the best thing about your working day? Working with a great team of people in our Company. There’s always a new challenge. What is your proudest family business achievement? There have been so many over the 145 years: Queen’s Award for Export in 1979, Douglas Kinloch Anderson OBE in 1983, Award for Business Excellence Scotland 1999, Deirdre Kinloch Anderson OBE 2010, but most important is always thinking ahead. Is there a next generation waiting in the wings to take over? 2 sons: 6th generation in the Company in their early 40’s. One is Chief Executive and the other is Director of Brand Development. What do you see as the biggest challenge facing family businesses? Same as for other companies, the challenge and competition of the workplace. What words do you associate with family businesses? For us: Scottish, Authentic, Creative, Experienced, Enterprising, Discerning, Dependable, Global Words of wisdom – What piece of advice would you pass on to someone thinking about joining the family business? First take time to learn as much as you can about our Company. Then always look for new opportunities, new developments so that we can remain world leaders in our niche market.

Advisers can help clients better secure their family business by asking them to address four key areas: legal structure, governance structure, policies and processes. Many traditional professional advisers and trustees are familiar with legal structure, but it is critical to address all four areas to help clients build a solid business foundation for the future. In this article, Christian Stewart explores the topic in more detail. Legal Structure The first question to ask is: what is the right kind of legal structure to secure the long-term protection of the family business? Should it be owned by a trust, a charity, a foundation or a holding company? Should there be a mechanism, such as voting and non-voting shares or a partnership structure, to separate control from the economic interest in the business? If it is going to be a trust structure, what kind of trust and what kind of trustee? In Asia, for example, trust ownership is not uncommon, but where the asset is the shares in a family business, an institutional trustee will want a trust structure that completely carves out and allocates responsibility for control of the shares in the family business to the settlor of the trust and their family. Alternatively, an institutional trustee may recommend a private trust company structure to be run by the settlor and their family, with the institutional trustee providing only administrative support. One reason for needing a legal structure to own the business is to consolidate ownership and prevent fragmentation of the shares. A legal structure is about allocating the benefits of ownership, and control. It should provide an ownership transition plan for the business, and the right one can also help to protect shares from creditor, divorce and illegitimate heir claims. A legal structure such as a trust can potentially allow the shares in the business to be owned by the family for multiple generations. Family meetings to explain the terms of the family trust or other legal structures will ensure there are no surprises in store. Governance Structure The legal structure is not sufficient by itself, so the next point to address is what governance structure would best suit the goals and objectives of the founder and their family. As a minimum, periodic family meetings between the business owners enable them to talk about the relationship between the family and the business. Family meetings should follow an agenda and rules, with someone chairing and another facilitating. These key roles can be rotated among family members, but a family new to formal meetings is likely to use a non-family facilitator. These meetings are not necessarily about decision-making but about ensuring that the family has a voice and creates a fair process. More formal governance structures are a family assembly comprising all family members; a family council, a smaller group that represents the family assembly; and possibly one or more committees of the family council, for example education and development, or career planning. If there’s a family office that manages the liquidity the business generates, it should be a structure separate from the family business, with its own organisation, officers and staff. The family office can help organise the governance structure, and support the activities and initiatives of the family council, which is responsible for ensuring control and overseeing the office. Part of planning the governance structure is reviewing the manner in which the family business has been governed: looking at the composition and the role of the board of directors of the business. There is often a link between the governance structure for the family and the board of directors. In practice, this may be achieved by having overlapping memberships or through arranging occasional meetings between the board and family council. Governance structures provide leadership and direction for the family and its business. They help ensure continued support and commitment to the business, and enable harmony because family members have worked out their differences behind closed doors. And if the founder or family’s goal is to continue the business for generations, there needs to be an organised structure and processes for the owners to make decisions together. Choosing Policies Policies regulate the relationship between the family and the business, but what kind do you need? A family employment policy, a dividend policy or a policy for compensating family members who work in the business? And do you need policies relating to the qualifications for acting as a director? Is there an exit policy governing how shares can be sold? Having the right policies helps avoid predictable conflicts and establishes boundaries between family issues and business matters. Policies make things clear, so everyone is on the same page. "Governance structures provide leadership and direction for the family and its business. They help ensure continued support and commitment to the business" It’s common for the family council to develop the terms of the policies, but it cannot make policies or decisions about the management or operation of the business. In these cases, it can develop and propose the policy to the board of directors, which approves it as necessary. Process Options Finally, there are processes, and which ones are needed to bring the family and business governance system to life. Consider the following example: a business founder sets up a family trust to own the shares in the family business. The trust is structured so the founder controls all the voting rights on the shares. It provides that if the founder dies or becomes incapacitated, control of the voting rights on the shares will pass to their surviving spouse. But what if the spouse does not know anything about being a controlling shareholder in the business? What if the spouse does not understand the trust structure and their potential role in it? What if there is a board but the spouse does not understand its role – that the members of the board could be their representatives in the future and that they have the power to change them? What if the spouse does not understand the strategy of the business or the risk profile of the business? In practice, this is a common scenario. The trust structure in this example may be a good legal structure and it may help the founder keep control and pass legal control to their spouse. It provides an ownership succession plan, but you can see this trust structure is not by itself going to teach the spouse how to be a good owner and business steward. You cannot rely on structure alone to guarantee future success. The types of ongoing processes that business-owning families implement can include education and development of shareholders and owners (whether that ownership is direct, or indirect through a trust), career planning and developing the next generation of family managers and leaders. As the future business will be a more complex environment than the business of today, the next generation need skills in important areas such as communication and conflict resolution, strategic planning and leadership. Different Approaches The traditional approach to selecting and setting up a legal structure for the family business has been to work only with the business founder. In Asia, for example, it is not uncommon to find cases where the legal structure is not fully revealed to the rest of the family members until the founder has died or become incapacitated. In practice, a different kind of approach is taken to design the right governance structures, policies and processes. The most common is either to form a family task force, which may consider options and give proposals to the founder, or to install a series of family meetings, which include the founder, their spouse and adult children, to discuss and design their own governance structure, etc. The founder can control these meetings, but by involving their spouse and children, the rest of the family can get a clear understanding of their goals, wishes and thoughts and they can all work together to develop an approach that has family buy-in and support. The most common approach is to combine the agreed governance structure, policies and processes into a written document known as a family constitution or a family charter. These agreements can be made legally binding but often they are not. The family constitution’s value and effectiveness come from the process of the family members working on it together, considering alternatives, and coming up with their shared understandings of how things should be done. If the legal structure is handled in the same way as the family constitution, the same benefits will be achieved: increased family buy-in, understanding and the ability to get feedback on the basic question of whether or not the proposed legal structure will be workable when the founder is no longer around.