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Would you start up in business with a family member?

An interesting report, Second Generation Family SMEs in the UK, has been released by Barclays and the CEBR. It shows that the number of businesses being passed down the generations has fallen by almost 140,000 since 2007, but despite this, 40% of under 35’s would start up with a family member.

According to the study, the number of established businesses (those that have been in the same family for at least two generations) that have been passed to the grandchildren of the original founder has shrunk significantly in recent years.

The reports authors estimate that around 570,000 ‘family run’ small businesses have been in the same family for at least one generation, 71% have lasted for two generations, and 29% have been passed on to a third generation.

Despite this finding, the report found that the future remains bright for family-run businesses. Almost two-thirds of respondents said that they’d like to pass on their businesses to future generations, and almost one-third said they’d actively seek a family member to set up a business with.

In terms of a pecking order, siblings are easily the most popular choice to start up a business with (27%), followed by fathers (9%), mothers (7%) and other family members, such as cousins, coming in behind.

Trust is cited as the most important reason to go into business with a family membe (mentioned by 64% of respondents), followed by the importance of being your own boss, and having a say in the direction of the business.

Other practical reasons are also factors – family members may be able to combine their childcare needs with those of the business. They may also find it easier to work from home if working with their families, where this may not be appropriate or possible if employees are taken on.

Interestingly, actually running a family business may not be quite as attractive an idea in reality.

According to the Barclays / CEBR report, older people are less keen to go into business with their families than the young. Whereas 40% of 18-34 year olds would consider starting up a business with a family member, a mere 26% of those aged 55 or more would do so.

So, this would suggest that many people who have tried to work with their families would not do so again!

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