Understand nature of business to succeed

Entrepreneurs who understand the nature of their family business are able to quickly grow their empires through strategic acquisitions of entire trade. Fotosearch 

By PETER MUTUA

In Summary

• Understanding the nature of a family business allows entrepreneurs, both within and outside the family to recognise its excellent potential.

Statistics worldwide show that 80 per cent of all businesses are family- owned and/or operated; this number is even greater for developing countries like Kenya.

Statements of this fact always elicit surprise, especially from leaders of family business who seem to imagine that their kind of venture is unique rather than being the business norm.

A family business is defined as an enterprise that is owned, managed or controlled by individuals who are related to one another by blood or marriage.

Family businesses may be family- owned and family managed – a good example being listed companies that are known to be owned by prominent families, or family managed but not family owned –like the McDonald’s restaurant.

Family business can be hereditary i.e. established by a founder who has since passed it on to a successor(s) or new i.e. has recently been established by an entrepreneur determined to make their mark in the world.

Hereditary family businesses are disturbingly few (less than 20 per cent of all family business successfully transition to the second generation), mainly because their founders do not understand the factors that govern family business success.

Of those that are new, they are either completely new such as the sole proprietor who decides to go it alone or arises from the acquisition of one family business by another e.g. the acquisition of the Hillcrest Schools from the Matiba family by Fanisi Venture Capital.

Family businesses are unique in that they resemble kingdoms more than they do other organisations.

They are often in silent, bars competition with one another and with external governing authorities for the allegiance of their “citizens”, power and control of resources.

The true worth of the business is often underestimated mainly on account because a great amount of their value is non-tangible, often in the form of existing relationships, extensive business / social networks, institutional memory and long serving staff members.

Established family businesses, even after experiencing self-inflicted setbacks such as vicious succession battles often can, if purposefully directed by an able leader, quickly bounce back to life as a result of the deep roots they have in the society.

Thus, resurrecting a previously established family business such as Akamba Bus is infinitely easier and cheaper than starting a similar company from scratch.

One of the quickest ways to grow a business empire is through the strategic acquisition of family businesses in their entirety. This strategy has been brilliantly executed by Comcraft Industries under the leadership of Manu Chandaria resulting in a conglomerate with a presence on 45 countries on all five continents.

Because there are many types of family businesses, astute leaders ought to understand the specific nature of their ventures in order to govern them well and take the most advantage of their nature / circumstances of their operation.

Those who do not understand family business are likely to underestimate its true strength and value. Outsiders are often unable to distinguish between the family business and its assets