KEY POINTS:
Your grandfather started a small business as an immigrant to New Zealand.
The enterprise prospered and was handed down to your father.
When the time came you took over from him, further growing the business and taking it in new directions.
Now you are in your late 50s; your children are busy travelling the world and showing no signs of wanting to come home and take their place in the family firm.
How do you design a retirement for yourself while at the same time ensuring the future of the business? Who do you turn to for advice?
It is these kinds of questions that the newly established Family Business Research Group at the University of Auckland hopes to find some answers to.
Through their work with business incubator The Icehouse, academics Chris Woods and Deb Shepherd discovered that despite the proliferation of family firms among New Zealand small business, there was virtually no research on the subject.
"One family business in particular was saying, 'where's the research on this, where do we go for help and assistance?"' Woods said.
The Employers and Manufacturers Association (Northern) chipped in some funding, allowing honours, masters and PhD students to start studying the subject, and the group was formed.
Woods said about 50 to 80 per cent of Kiwi SMEs (small to medium enterprises) were family firms, and aside from succession one of the big issues they faced was governance.
"It's not about having a formal board of directors, it's about where they go for advice."
Ben Ridler runs business coaching company The Results Group and is well versed in the unique needs of family businesses.
He's had people storm out of coaching sessions. "We had a couple of brothers who were in business have a punch-up in the boardroom once. But hey, they actually needed to get it all off their chests, and they're still going. They're still clients, too."
One of the challenges was to create a non-emotive space for family members in business together to have logical conversations.
Often the rules hadn't been established, Ridler said.
In a normal business with shareholders, directors, managers and employees the hierarchy was well defined. With a family quite often the most dominant member ended up making the decisions, regardless of whether that was best for the business.
"When there are difficult decisions to make, the process being defined takes a lot of the emotion out.
"It's not inventing a new way because it's a family business, there's generally already a way that it should be done and everyone can see that makes sense, and it's just getting buy-in for a process."
Family firms also came with great advantages, Ridler said. It meant working with people you could absolutely trust, and having a source of management talent that had the business in their blood.
Andy Hamilton, chief executive of The Icehouse, said succession was an issue for most Kiwi SMEs, but it was a particularly complex problem in a family firm.
"How do you give second and third generations the best chance to be able to continue to build that family business?
"You can't just apply a business lens [to the problem], it just doesn't work. There's a level of complexity and sensitivity, because it's interpersonal relationships."
Hamilton said it was similar in a way to triple line reporting - when environmental and social factors are taken into account alongside financial ones - because of all the different stakeholders.
He believed the dearth of knowledge about how to run effective family businesses had led to some selling out.
"I think that's a loss of wealth for New Zealand."
While in some cases it was the best thing for a business, in others it was the result of a lack of expertise about how to continue.
STAYING CLOSE-KNIT
Euan Sparrow is the fourth generation of his family to run an apparel business in Ashburton.
His Scottish great-grandfather William opened a men's clothing store in the South Island town in 1887.
His son, W.J, took over from him. W.J.'s five sons subsequently bought their father out.
Eventually one of the brothers, Cip, ended up owning 100 per cent of Sparrow Brothers. Later Cip's son Euan came into the business with him.
In 1980, Cip and Euan bought a small hosiery company. A short time later large knitwear manufacturer Mosgiel Ltd went into receivership, and the Sparrows bought their machines. The New Zealand Sock Company was born.
The company has faced the removal of import duties, competition from cheap overseas manufacturers and a high New Zealand dollar, but has continued to grow.
Euan told the University of Auckland Business Review the next stage for the New Zealand Sock Company is to move overseas, developing direct relationships with retailers and cutting out the middle men.
"The problem I have is who is up for this? I don't think I have got all the right people on the bus. I can do some of it myself, until I get the right people. In fact, this morning, I was going to sit down with the kids and say: 'This is what I am thinking. If you guys want to come along for the ride, you can'."
