Northern Ireland Focus

It can be a challenge but the nurturing and appropriate succession plans, family owned businesses can out-perform. FRANCES MCDONNELL REPORTS

When John Henderson beganselling butter, eggs and cheese from a market stall in the centre of Belfast in 1897, every day was a race against time for the fledgling business. Not only did he have to anticipate dayto-day demand, he also had to sell his products – bought from local dairy farmers – at a price that would turn a profit before they perished.

Henderson’s was the original Fast Moving Consumer Goods (FMCG) business model. And, nearly 120 years later, his great grandchildren continue in his footsteps, selling and supplying not only butter, eggs and cheese but hundreds of other products every day throughout Northern Ireland. The Henderson Group, which began life on that market stall, is one of the North’s most successful family businesses encompassing four companies and employing 2,800 people. The County Antrim group includes wholesale, retail, property and food-service companies, all of which operate under the Henderson name.

The group also owns the Spar, Eurospar, Vivo and Vivoxtra franchises in Northern Ireland and distributes food and grocery-related products to hundreds of convenience retailers across the North each day.

Although John Henderson started the business, it was his son-in-law, William Agnew, who coined the phrase "Hendersons Have it All" and expanded the company to create what is the Henderson Group in 2016. In turn his son, John Agnew, who is the group chairman, continued to grow the business while supporting local farmers, suppliers and producers.

Today his sons, Martin and Geoffrey Agnew, are in charge and are proud to be the fourth generation to run the business, which remains committed to supporting and reinvesting in its local communities, according to Martin Agnew. "We may be two or three generations removed from the soil but Northern Ireland is a largely rural, agricultural-based economy. It is somewhat self-contained and that is a big factor because we are part of small communities, we have local knowledge and we have relationships that have been built up over years which deliver mutual support within communities. When we talk about local fresh produce we really mean local – just up the road," Agnew says.

He believes that while some family businesses may face specific challenges when it comes to size or the trading environment and how they are structured, they also possess great strengths such as resilience and the ability to take a long-term view of specific issues.

Agnew says family businesses also have the potential to "be more agile" in responding to both opportunities and potential problems.

But for family businesses to expand and grow, he firmly advocates that they also be properly structured and have the right team and people in place in orderto ensure the business survives through to the next generation.

"Family businesses must invest in people – all of their people – not just family members. Family members should be there because of their ability and what they can contribute to the business."

Although he hopes there will be a fifth generation running the Henderson Group one day, he also believes that in any family business it should be a matter of choice rather than obligation when it comes to joining.

In any family firm there is always an acknowledgement of the hard work that was done before you took over, he says, but he is a firm believer that there is little room for nostalgia when it comes to future-proofing any business, family or not. "Each generation makes its own mark on a business but it is important to constantly look forward; you have to be focused on next week, to be looking tothe long term and that is one of the great strengths that family businesses possess – they have the ability to take a long-term approach rather than having the pressure to produce dividends for shareholders or answer to the city."


BUSINESS FIRST


Francis Martin, partner at BDO Northern Ireland, says there is one key rule that sets successful family firms apart from those who may be facing an uncertain future: those who put the business first and foremost always have a better chance of survival. "Every business must look after their four cornerstones of sales and marketing, finance, people and organisational infrastructure, but in family businesses there is also what I like to call a "fifth dimension" and this comes down to how the family – all of the family members – engage with the business. "Family businesses that are successful put the best interests of the business first – my rule of thumb is look after the business and the business will look after the family."

He says family businesses in the North have "inherent strengths" that set them apart from some non-family businesses. "They share a bond of integrity and trust and, depending on which generation is running the business, they may also have a deep sense of responsibility because they see themselves as custodians, protecting the business to hand it on again.

But a family business also needs structure and there can be emotional issues which can have a strong impact on the business, and these must be addressed," Martin says.

Martin also warns that businesses owned and managed by families face a particular set of challenges which non-family run companies do not and one of themost critical is succession planning.

BDO’s own research suggests that nearly threequarters of all local businesses are currently familyowned, including many of the North’s top-performing businesses in 2016, among them Ballymena bus builders, the Wright Group – established in 1946 – and Newtownabbey-based Ballyvesey Holdings, which is 100 per cent owned by the Montgomery family.

Companies like these, and others including Cookstown-headquartered Lissan Coal Company, owned by the Loughran family, as well as the longestablished Dromore group, Graham, which operates throughout the UK and Ireland, are privately-owned, family-managed businesses which make a key contribution not only to their local communities but to the economy in general.

But it is not just the challenges outside the four walls of a family-owned and managed business that can be the most difficult obstacle for it to overcome; sometimes the biggest threat to its future can come from within.

According to BDO, research shows that few – less than four per cent of all – family businesses in the North survive past the third generation.

According to Martin, and BDO’s Centre for Family Business, there is no such thing as a "typical family business" in the North. That means there is no typicalplan a family business can adopt to guarantee its future from one generation to the next.

"Family firms don’t like to talk about succession planning and some leave it until the worst possible time, such as when there is a crisis. Some senior family members may not want to relinquish control or it may be that more than one member of the next generation wants to head the company. "It can be very difficult for one generation to step aside and let the next generation take over."

In Martin’s experience, family members often feel obliged to come into the business and while some naturally love it, others may resent it and not have the same connection or commitment to keeping the company in family ownership.

In the North it is also very often the case that a family business goes from initially supporting Mum and Dad who may have set it up, to then supporting their children who become the second generation of co-owner/ managers. As time goes on, they in turn have children and suddenly one family firm is supporting everyone.

Martin maintains this can be fundamentally avoided if family businesses take the right decisions at the right time and acknowledge they strike the right balance between the "best interests of the business and the well being of the family".

"At BDO, we always advocate that family businesses should draw up a family constitution to help establish ground rules and principles. As one family business leader told me, the objective is to create an organisation "with the principles of a family business and the professionalism of a plc".

"Family firms need to ask themselves, ‘what does this business need to grow, to be successful and to be sustainable?’ It always comes down to putting the needs of the business first and the family second," Martin says.




CASE STUDY: Mash Direct

Ask Jack Hamilton the exact moment when he realised his family’s business idea would be a winner and he will tell you it was when "we had to move it from the kitchen table to the dining table".

Jack’s father Martin had come up with the idea late one night while sitting around another table with a friend, discussing ways he could inject new life into the family farm. At the time, Martin Hamilton was a fifth generation farmer struggling to make farming financially rewarding. He and his wife Tracy had grown and sold vegetables on the family farm in County Down for more than 25 years. However, by 2003 it was becoming more and more difficult to make a profit no matter how hard they worked.

Then, inspired by that late-night dinner table discussion with his friend Tony Reid, Martin came up the idea that instead of just selling the family’s potato crop, they could use it to produce one of Northern Ireland’s favourite dishes: champ.

He and Tracy set about producing champ the way generations of mothers and grandmothers had done across the North: mashed potatoes with spring onions, milk, butter and salt and pepper, and nothing else.

It proved to be a recipe for success. Martin and Tracy developed a small production plant on their Comber farm, again with help from Tony Reid, who built a number of pieces of equipment for them - and started selling their mash directly to local butchers before launching it at Belfast’s St George’s Market.

Soon it attracted the attention of major retailers and today the Hamilton’s family business - Mash Direct - sells not only its famous champ but more than 40 different product lines, embracing family favourites from humble carrot and parsnip mash to vegetable burgers with kale and mash pots with sliced pork sausages. Mash Direct products are now listed in 6,000 stores across the UK and Ireland and the proudly independent family business continues to be run by Martin, Tracy and their two sons, Lance and Jack. Last year it posted a turnover of more than £15m (€18.7m). According to Jack, although the business "was born out of necessity", it is the family’s passion and commitment to "staying true" to the quality of the product that has been the key ingredient in its success to date.

He believes one of the strengths of a family business is the fact that they can have "open and frank discussions" because there is no agenda other than what is in the best interest of the business. "You have to be yourself because you are working with the people who know you best - your family. We never stand still; we are constantly innovating and developing new products while at the same time continuing to support local farmers because we want them to grow with us as the business grows."

Jack says all of the extended Hamilton family involved in the business, which today employs 180 people, have a common purpose.

"I believe trust is what sets family businesses aside from any other kind - we’re not rushing to the bottom line, we’re not interested in price wars. We are focused on sustainability, on creating a long-term strategy and on producing a quality product that is true to our ethos. And that is what our customers are buying - they are buying a product they can trust."