Originally published in Sunday Independent on January 24 2021, article by Fearghal O’Connor
Experienced family business advisor Paul Keogh has a simple mantra that he repeats to clients in times of stress: family first, business second.
“I’m a great believer that a business should never rule a family,” Keogh told the Sunday Independent. “Business is about profit, but it can’t be at the expense of a family.”
It is advice that doesn’t always go down well, not least at a time like now when many family-owned companies find themselves facing severe stress and challenge.
“I know a fair number of businesses where multiple family units of the same family are dependent on that business. And that causes an added stress. In lots of cases where they have hit a bad patch because of Covid it really has brought financial strain.”
Keogh has worked with family companies throughout his career. He originally worked for Guinness – before it became part of global giant Diageo – and, as marketing director for lagers for the-then still family-controlled company, he brought Budweiser to Ireland. He was chief operating officer at Sean Mulryan’s Ballymore and a senior marketing executive for the Bamford family company, JCB.
He now acts as an independent advisor for a range of Irish family companies, specialising in the delicate issues of governance and succession planning.
It is as difficult a time as he can remember for many companies.
“I think the stress level in a family business is one that really goes under the radar, because it stays within the family,” he said.
There is a huge amount of anxiety and uncertainty, particularly for firms where there has been constant opening and closing over the past year and no clear idea as to when things will return to a type of normality.
“For some, it is a case of ‘Will we ever open again?'” said Keogh.
Despite the strain, there have been positives over the past year, he said.
For example, succession planning has always been a difficult topic for family businesses – not helped by what many see as a taxation environment in Ireland that makes this more difficult.
“Some of the founders I know are absolutely drained mentally and physically and would love to be able to smoothly hand over the business to the next generation, but the environment is not conducive to that in this country. The lawyer will often say to them ‘You know, you’re better off just dying and leaving the business in your will, because it’s more tax efficient’.”
There is also a deep cultural resistance among the founders or current heads to face the issue head on.
“There can be a lot of procrastinating by owners around having the conversation with his or her kids about inheriting the business and the right time for them to take on the business. In some cases the pandemic has forced the issue.”
And some business owners have had reason to have a growing appreciation of those coming behind them, said Keogh.
“A lot of next generation family members have made an important contribution to their family businesses on how to get out of the crisis. It might be part naivety and partly a lack of entrenched fears, but a lot of younger people have been very important to helping their family business to adapt really quickly.
“I’ve been amazed how many really traditional Irish businesses have adopted online trading as a necessity having resisted it for a long time because they previously didn’t really feel the need. But the next generation in a lot of family businesses just came in and said ‘We’re virtually closed unless we use the internet and if we do it right it gives us a global platform’.”
The arrival home of younger family members, perhaps from abroad, due to Covid has also changed the dynamic in some companies, he said.
“They haven’t really had a discussion about joining the company, but they are locked at home and have been throwing out their ideas in an informal way and the message is often ‘We need to think differently’.”
For some businesses though there is no easy way through this crisis. The pub and hospitality sector, which is dominated by family-owned firms, has been particularly hard hit.
Covid will kill off a lot of businesses that were in trouble anyway and those conversations are the toughest part of his job, he said.
“It’s hard to say to business owners ‘I’ve had a look at your business and your turnover and your profit before Covid and it is not viable’. But honesty is the key. Because in some businesses like that people need to be using this current downtime to look at what else they might be able to do after the business is gone rather than hanging around waiting for Covid to go, thinking they are going to be viable when they may not even have been viable before Covid.”
Keogh believes that the real difficulties will only start once Covid subsides.
“When things do open back up and the impact starts to properly become clear and emergency government backing starts to fall away, we will be looking at quite a different landscape and plenty of casualties.”
Ultimately, the number of casualties will come down to the attitudes of the banks, he said.
“At the moment a lot of bank borrowers, particularly in small- to medium-sized companies, are in a sort of limbo because the banks are not being heavy handed. But the banks are there to make a profit and they could suddenly face a tsunami of companies with difficulties.”
Family businesses in particular would need protection in that type of a scenario “rather than rushing straight away into conversations about personal guarantees”, said Keogh.