The Family Enterprise Legacy Institute has been featuring select parts from the book, Enabling Next Generation Legacies: 35 Questions That Next Generation Members in Enterprising Families Ask.
The result of years of international research and practical experience, Enabling Next Generation Legacies delves into the unique challenges that confront family enterprises.
Telfer professors Peter Jaskiewicz and Sabine Rau have brought together the world’s leading academics, practitioners, and enterprising families to answer the most pressing questions faced by Next Generation members in a short and concise, yet meaningful way.
The book consists of best practices, real-life examples, and additional critical questions for reflection from nearly 100 contributors from 27 different countries. Expert commentaries come from members of the world’s leading family businesses including Auchan (France), Saputo (Canada), and Sabra (Israel), as well as from various academic experts from business schools around the globe like Kellogg, IMD, and INSEAD.
Below, read a commentary from a next generation member of a family enterprise.
I Want to Start My Own Business. Can I Ask Our Firm or Family for Help?
Commentary by Charles Wates, United Kingdom
I am a fourth-generation governing owner of Wates Group and founder and managing director of Needspace? Limited—a wholly owned subsidiary of the Wates Group.
The Wates Group, established in 1897, is one of the leading privately owned construction, development, and property services businesses in the UK. We employ approximately 4,000 people and together, we inspire better ways of creating the places, communities, and businesses of tomorrow. The third generation of ownership oversaw a process through which family members stepped back from executive roles and moved towards a model of engaged ownership. The fourth-generation owners are closely involved in the company, all adding value in different ways according to their unique and complementary interests and skills.
Needspace? Limited was founded in 2006 and provides quality managed workspace to the growing number of small businesses in Greater London and the South East. We offer a range of office, workshop, and studio units on flexible licence arrangements to small businesses looking to grow in an entrepreneurial environment.
For four generations, the Wates Family has encouraged family entrepreneurship broadly aligned to the property and construction sectors. Examples include Wates City of London, a publicly listed office developer, Pinnacle, a leisure complex operator and developer, Gambado, a children’s play center operator, and Myriad, a renewable energy installation and service contractor. The family has picked up several key learnings from our entrepreneurial pursuits.
The core of our family enterprise is construction and development, reflected in the Wates Group. Family entrepreneurialism is seen as a non-core but an important part of keeping the entrepreneurial flame alive. This is especially relevant in the fourth generation as the day-to-day management of the Wates Group is handled by nonfamily executives, allowing the family members the freedom to explore opportunities. Our preference is to support entrepreneurialism outside of the group so it does not become a distraction for group executives; accordingly, these entrepreneurial activities report directly to the family office.
Our preference is to seed fund family entrepreneurs through co-investment by other family members. Each business should have its own governance structure, and our expectation is that the director of the family office be on the board. We believe that it is important for the family entrepreneur to have skin in the game through personal investment, and ideally the family would wish to have a majority shareholding in the venture (51 percent).
Given the change in role of family members from owner-managers to governing owners, family entrepreneurialism has become an important activity for family members alongside the governance of the Group. In addition, we have been able to use third-party capital either through funds or co-investment to leverage and grow the ventures. Some of the learnings from these professional investors have also been useful in driving greater performance from the Group.
Challenges and Conclusion
Given the reputation of the core business and its robust policies, procedures, and governance, there is a real temptation to smother small business dynamism in a large business bureaucracy in order to try to de-risk the investment. The trouble with this is that it dampens the entrepreneurial flame and removes entrepreneurial agility. I was asked to comment on the question: “I want to start my own business. Can I ask my family for help?” In short, my answer to this is a resounding “yes.” The family is a great resource of knowledge and business experience. A well-run family office can be a good source of seed capital, knowledge, and useful support to help you build a business. It can help you to turn an inspired business idea into a fabulous and sustainable business.
Questions for Further Reflection
- If you did not have a family business background, what steps would you have to take to ask your family for financing for your start-up?
- If you ask your family for financial investment in your start-up and it goes bust, what would be the worst possible consequences? What could you do to prevent them?
- If you ask your family to become co-investors of your start-up, which would make them co-owners? If it is highly successful, what could be some conflicts down the road? How could you prevent them in the first place?
- Are there any non-financial resources like networks, advice, or access to experts that your family could offer you? What could be an upside and/or a downside of asking for them?
Enabling Next Generation Legacies: 35 Questions That Next Generation Members in Enterprising Families Ask is now available in eBook and hardcopy. All royalties from Enabling Next Generation Legacies go towards the University of Ottawa’s Telfer Fund, helping students in need.