We spend our time worrying about the morality and business models of tech bros owning companies with trillion-dollar valuations and dominating our world, or so the story goes. But there is another story.
In Britain there is one sector that has combined annual sales of £2.8 trillion and employs over 15 million people, all under the roofs of five million businesses. Unlike the tech bros, these enterprises are the simplest of things. They are family businesses. Author Nigel Cope has written a fascinating study of what they are getting right.
He opens his book The Great Survivors: Can Britain’s Oldest Family Businesses Show Us a New Way Forward? with a quick summary of his breakfast routine. After getting up off his bed’s Harrison Spinks mattress, he has a cuppa (Yorkshire Tea), a plate of porridge (Mornflake) and a slice of toast (Warburtons) with some jam (Wilkin & Sons), then puts on his recently repaired shoes (Timpson) and his sturdy jacket (Barbour). In doing all this, he points out, ‘I’ve used products and services from British family businesses with a combined history of more than 1,000 years. And I haven’t even left the house.’
Outperformance
None of this makes much sense in modern management theory, yet it works. Family businesses, the research says, largely outperform non-family businesses. Barbour has had the same CEO for 25 years and the same chairwoman for 50. And that is part of the overall secret: the long view – none of the unhinged short-term trends falling flat on their face.
It would make little difference to revenue raising if inheritance tax were abolished
Looking through the dozen case studies in The Great Survivors produces a series of general, though not universal, rules: buy the freehold; don’t, largely, go public (the business can remain free to pursue its own strategy); and keep the business safe.
As Nigel Macdonald of Lock & Co (a hatter’s, established in 1676) says: ‘If it is all about money, the chances are that the business will go pear-shaped eventually.’ It helped, though, that Nelson settled his Lock’s bill immediately before perishing in the battle of Trafalgar.
Take the outside world seriously but follow your own internal logic
Occasionally it is good to follow a politician’s advice. The 19th-century prime minister William Gladstone championed the manufacture of soft fruit into jam to boost the rural economy. Wilkin and Sons (1885) of Tiptree obliged. Gladstone congratulated the business but is unlikely to have envisaged its current production of miniature pots of jam for restaurants and hotels at the rate of 450 jars a minute across two eight-hour shifts a day.
Tax’s long shadow
This is cheery stuff, yet the threat of what used to be called death duties but is now called inheritance tax, which sounds superficially better, has always been there. Frankly, from a purely revenue-raising standpoint it wouldn’t matter much were it simply abolished. But family companies always face its threat, and many businesses that appear in The Great Survivors have had to scramble desperately at some point in their history.
But tax can also provide an impetus. The shortbread that keeps Walker’s (1898) happy is said to have come about when a tax was levied on cakes in the 18th century and the business changed the product name to ‘shortbread’ to escape it. As the late Jim Walker, grandson of the founder, once said: ‘Keep it simple, work hard, look after the products, customers and our people.’ And that largely is it.
It’s about taking the outside world seriously but following your own internal logic. And when it comes to the sometimes fraught issue of succession, as John Timpson (Timpson Group, 1865) advises: ‘Keep talking to people and the answer will come.’
Encouraging family businesses would solve a lot of current economic problems. As Cope points out: ‘If just a third of our five million family businesses hired one extra employee, UK unemployment would effectively be eradicated.’
