As gourmet bangers from a third generation local butcher
get Dragon backing, Make It Cheaper managing director Jonathan
Elliott notices that the meaning of the term 'family business' is
constantly evolving.
One of Dragons' Den's consistently fascinating points of
interest is the insight it offers into the dynamics of family
businesses. According to the Forum of Private Business, around
three million of the UK's 4.6 million SMEs are family businesses -
a ratio of around two to one. By my reckoning, the ratio of
family businesses that pitch for investment on Dragons' Den is
pretty similar.
In many cases, a younger family member is the key figure in a
new family business - or the driving force of a new direction for
an existing one.
A few weeks ago, we learned how Henry Blake had transformed the
fortunes of his father's invention Wood BlocX by developing a new
website to sell the company's build-it-yourself landscaping
product. The introduction of the younger man's skills and expertise
had helped increase the company's revenue from £80,000 to £480,000
over two years.
Elsewhere, we've seen a trio of sisters secure investment for a
sauce endorsed by their family's award-winning Chinese restaurant,
and a young man's poise offset his father's self-confessed
cantankerousness to receive an offer for a device that increases
the capacity of wheelbarrows.
The traditional notion of a British family business is
male-dominated and involves the passing on of skills and knowledge
to members of the next generation. The younger family members
eventually graduate from apprenticeship positions to take leading
roles in the company and begin the cycle again.
This isn't the type of business that tends to seek or receive
investment from multi-millionaire Dragons, but strangely enough
that's what happened in last night's episode. Peter Jones, a man
who has made his personal fortune in multinational telecoms
businesses, is now the part owner of a family butcher shop on North
Lane, Aldershot.
Paul Turner, a third generation butcher and co-owner of the
shop, pitched for investment in a new business that draws on his
family's sausage-making heritage to turn A. Turner & Sons from
a local institution into a household brand. Turner presented some
tasty-looking gourmet bangers called 'Pickled Pig' and 'Hair of the
Hog', which came packaged with a seal of approval from Turner's
grandfather Alf, who established the business and started
developing the sausages in 1956.
Despite Turner's evident pride in his grandfather and the fact
that he had already had some success selling the sausages in
supermarkets as part of the Help for Heroes campaign, the Dragons
were wary of entering a busy, noisy marketplace with a product that
yields relatively small profit margins.
Peter Jones discovered that the butcher shop shows annual
profits of around £50,000 after salaries have been paid, so
proposed that he also take a share in the existing company to
offset the risk involved in investing in the new one. Turner's
natural instinct was to protect the family business - but he made a
counter offer to Jones in which the Dragon returns his equity in
the butcher shop while retaining it in the sausage business once
his £80,000 investment has been repaid. Both parties were happy
with that, and Jones looked pleased as punch as he walked towards
Turner saying the unlikely words "I'm in the sausage business."
The family theme continued throughout the episode. A young woman
led a presentation for a theatre production in which her father
took a peripheral role in a mentoring and support capacity, while
in the final pitch, a matriarchal figure in a family of 'grafters'
sought investment for a business that imports and redistributes a
new kind of ground de-icer.
Dragons' Den regularly demonstrates that the modern family
business takes a range of different shapes and sizes. My own
experience throws up yet another model - and I'd be interested to
read about others in the comments section at the end of this blog.
Not long after setting up Make It Cheaper in 2007, I headhunted my
own brother to join our busy IT department. Since then we have
backed him to take Make It Cheaper overseas by co-founding our
operation in Sydney, where he now employs 120 staff and helps 8,600
Australian homeowners and businesses to lower their bills every
week
It's clear that family businesses have an important role to play
in the UK's economic recovery, so one final thing to mention is
that the Institute for Family Business (IFB) is on hand to provide
advice, support and advocacy that help member businesses to grow.
Their challenge is significant: family businesses currently
contribute to around 31% of Gross Domestic Product, whereas the
equivalent figure in Germany, for example, is just under 50%.
Furthermore, statistics suggest that only 30% of family firms
succeed to the second generation, while only 13% hand over to a
third generation member like Paul Turner. Since the meaning of the
term 'family business' is now much more open and fluid than it once
was, the complexity of the IFB's work is perhaps more pronounced
than ever.
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