Are family businesses under threat?

The number of family businesses in the region has declined in recent years following a trend seen among the younger generations to pursue careers and livelihoods of their choice. The new generation has a preference for jobs in large governmental and commercial institutions, investing in the stock exchange, trading in commodities or venturing into finance or other businesses. These young people see their futures in business opportunities of their own choosing, independent of the companies owned by their families over generations. In pursuing their own career paths, they see the opportunity to earn substantially more than what may be gained from staying in the family business, due to regulatory constraints or other limitations. As is well-known, many family businesses in the region predate the advent of the hydrocarbon industry. Some of them continue to thrive in their respective sectors. However, the number of new family-owned companies in the region is shrinking. Commercial records indicate that most family businesses are registered under the name of one person — even if the founder may have since been deceased. It is not unusual to find, in some instances, members of the family moving away from the business and relinquishing their stakes in the company. The outlook for family-owned businesses was shared by a Gulf expert participating in an online forum hosted as part of the Majlis Al khonji series recently. According to the expert, family-owned companies will continue to thrive in the region because of a favourable business environment that is conducive for the start-up of such companies. Furthermore, family owned companies can be set up with minimal upfront investments or costs. Decision-making is relatively quick and most such businesses are set up in the close proximity of the family home. The real challenge for family-owned companies is business continuity, and the adoption of professional expertise and modern business practices. Such companies operate today in several fields, including food stores, real estate, restaurants, warehousing, entertainment, basic transportation, building management, small enterprises, and so on. These companies are distinguished by their tendency not to borrow, but in all cases their members must show professionalism, dedication and diligence. Today, there are many challenges facing these companies, according to the expert. Larger businesses risk being stunted if they fail to employ professionals or formulate appropriate operational strategies. In-fighting within the family, stemming from envy and rivalry, can also threaten its growth. Disharmony between family members, poor communication and monopolisation of control can also sound the death knell for such businesses. There are several things that family businesses need to keep in mind to ensure their viability and success. In addition to a sound business strategy, it is advisable for such companies to recruit qualified professionals from outside the family to provide prudent guidance and unbiased advice on key matters.   Haider Al Lawati haiderdawood@hotmail.com