Built to Last; intergenerational businesses are sustainability on steroids
When it comes to starting and building a business - there're innumerable 'whys' - meaning, the motivation, purpose - the essential raison d'etre for actually doing so.
Furthermore, whatever the drivers may have been at the genesis stage - these imperatives are not in stone and/or can they be guaranteed. They can - and often do, evolve over time, with more information - and of course, in response to ever changing landscapes.
Anyone who authentically and in real terms; makes and takes the decision to leave/reject the familiarity, routine, comfort, nominal risk and with this, some semblance of certainty/security (real or hoped for) proffered by conventional employment - to go it alone - has, by definition, demonstrated a level of self belief and personal agency that is the fuel of every market, economy and society.
Given the 'business death' rate; a strange and jarring term used by the UK ONS (Office for National Statistics) - we can thank the risk taking aspects of human nature and behaviour for any enterprises being 'born' in the first place.
UK, 5 October, 2023: New analysis from Experian reveals the difficulties new businesses have in establishing themselves as successful, ongoing enterprises.
Around 4% of new businesses have ceased trading by the end of the first year of operations, the analysis found. But the failure rate rises significantly to more than a third (34%) by the end of the second and to half (50%) within just three years of opening.
Meanwhile, nearly two-thirds of businesses (60%) found as being in the highest risk categories for accessing new borrowing are firms which can be defined as ‘young’ – ones which have been formed in the last five years.
Experian business insights October 2023
We have the initial 'why, what and how' - but what's the real long term play - and will this a: work and b: work for all?
The initial 'why' drivers are of course what help evolve ideas and concepts - hopefully into actions, reality - and for a minority of new start businesses - success!
However, there is another less often - and arguably more existential question and consideration - that is; 'then what'?
The owner - managers paradox. A 'job and a money box' versus a meaningful, long term life changing legacy?
Many enterprises are technically and legally defined as businesses - but their purpose and the reality of the dynamics maybe those more akin to a 'job' masquerading as something greater and grander.
It can be helpful for business owners to practise and master looking at their own business's - through three distinct lenses/prisms and perspectives:
i) Functional: the 'doing' lens - the functional 'job' what gets done and achieved in the day to day - where one adds/contributes tangible value. Where there is an objective application of skill, expertise, experience and knowhow that affects a positive outcome in the business that ultimately drives the bottom line.
ii) Director/leader lens - the clue's in the name; 'direct' and 'lead' - the business on the chosen strategy towards to stated goals and objectives detailed in the business plan, ambitions and vision.
iii) The Shareholder/investor lens - this discipline can be variously; tricky, revealing and extremely discomforting. From this perspective; you are in full on introspection mode.
As the invested party paying the wages - shouldering the risk - you may assess both yourfunctional and executive performance as follows:
- 'Am I 100% happy with my performance/impact and contribution day to day - is it commensurate with my earnings and title?'
- 'Am I leading by example - doing my part of the heavy lifting/doing?'
- 'Am I focused on shareholder value, competitiveness, optimising return on investment and overheads?'
- 'Do I know what the main risks, barriers to progress, pitfalls and roadblocks are to more and better performance - am I actively mitigating/fixing in the day to day?'
- 'Am I happy with the culture, values and guiding principles that are being nurtured and lived?'
- Would I pay someone else - what I pay myself, for the same level of performance and contribution?
- This is the $ million question; 'Can this business continue to deliver its strategy and numbers without me?' If not - there're very little value beyond cash and assets.
For many - one of the unanswered elephants in many a shareholder meeting/boardroom - can be the question of; 100% clarity, alignment and commitment to the long game/long term mission. The ultimate 'why' for those with skin in the game
Inter-generational businesses are a next level mission for an increasing number of investor and entrepreneurs
There are myriad businesses and organisations that have not only withstood the passage of time - they have constantly worked to reimagine, revitalise and reengineer themselves to remain relevant, competitive and yes, sustainable.
By definition, these businesses outlive their founders and first phase origins.
For these enterprises; there was no race to the proverbial finish line to force a sale, a 'cash out', exit, dispose of - move onto the next new and shinier thing.
That said; be in no doubt - realising maximum value of what will almost certainly have been years of hard slog, sleepless nights and many squeaky bottom moments - is a prize that will light a fire in most right minded people.
But there is another - arguably more traditional strategy and pathway; that is - a return to the idea of a business designed to be owned, managed and yes, 'enjoyed' by multiple generations of people. And why not? The benefits are as compelling as they are many:
- The ability to focus on a long range horizon and to commit a team to a commensurately long term shared vision and purpose.
- An ability to directly connect the business's 'why' (mission) to the 'why' (ambitions) of its people.
- Provide a value/wealth creation and career development vehicle for those that join and have the stamina to continue/complete one of many stages of a whole of career journey.
- The ability to pass over control and with this equity to the next generation of 'custodians' - who in turn, grow, develop and protect the asset to be bequeathed to those that succeed them.
- Shareholder return over many decades and often longer.
- The pride, joy and sense of satisfaction of being able to contribute in a different way to the organisation as the NxTGeN take the reins.
- To provide a place and space for those who can, will and do - to evolve from simply occupying a 'job' - to having an opportunity to take control of their own lives, careers and futures.
Of course the personal circumstances, needs/wants and philosophies of the founders and incumbent shareholders is fundamental to the mission and purpose of any enterprise.
The emotional and psychological imperatives are crucial.
Let's try this: for parents - a very simple question; on Christmas morning - do you (or did) you experience the most deep, deep and visceral joy from opening your Christmas gifts - or those of your children and family?'
Beyond the EBIT, multiples and entrepreneurs relief - building an intergenerational business - is the gift that very much has the potential to keep on giving.
