Family firms 'misunderstood by governments'

Associate Professor Justin Craig says changes to laws around family trusts could have a serious impact on fmaily firms. Photo / Sarah Ivey

Government policy makers don't understand family firms, says a visiting Australian expert.

Justin Craig, an associate professor of entrepreneurship and family business at Queensland's Bond University, is in New Zealand conducting a seminar tour.

Speaking to the Business Herald after a lecture in Auckland, he said governments often had a misconception that family businesses were always small businesses.

Some of New Zealand's best known companies are family-owned firms, including chocolate maker Whittaker's and Hamilton's Gallagher Group, best known for its electric fence technology.

Gallagher reported a revenue of $160 million in 2010.

According to accountancy and advisory firm BDO, which organised Craig's tour, family and owner-managed businesses make up more than 60 per cent of New Zealand companies.

Craig said this country's competitive advantage in the global marketplace depended on the sustainability of such firms.

"The country survives because of what family businesses do," he said.

Craig said the question had to be asked: were family firms being helped by the Government, or were barriers being put up that threatened their survival?

Changes to laws around family trusts could have a serious impact on family firms, he said.

Craig said New Zealand family businesses needed a voice in Government,

"We're starting to get [a voice] in Australia," he said. "(Governments) need to understand the consequences of their decision making and how it's going to effect the family business sector."

Christine Woods, a senior lecturer at the University of Auckland's Business School, said Labour may not have talked to family businesses to gauge what impact its capital gains tax policy could have on such companies.

The head of BDO's Family Business and Succession Sector Group, Jeff Roberts, said a major issue facing owner-managed businesses was the transition of leadership from one generation to the next.

"Over the next decade we'll see the biggest ever inter-generational transfer of wealth in our history take place as the baby boomers retire," he said.

"Transfer of wealth is potentially the most life-threatening stage of the family business, and regrettably many businesses do not survive to the second and subsequent generations."

Craig said one way of enticing younger generations into the firm was to give them the opportunity to become entrepreneurs and start another business that could later be acquired by the family company.

"You don't want a leader of your business who hasn't had profit responsibility," he said. "And what better [way] is there to get that than to start your own business, grow that business, exit that business and fold that business in [to the family firm]."

Woods said conversations needed to take place early about the future of the family company. "Sometimes the family business gets sold, when actually the second generation might have come in [and taken over]."

Dynasty

New Zealand family-owned firms:

* Gallagher Group - Agricultural and security products.
* Whittaker's - Chocolate.
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