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20 February 2015

Many small towns in Ireland today are scarred by whitewashed windows and locked doors that once housed successful family-run businesses. Clothes shops, grocers, shoe shops, pubs, butchers, all manner of businesses have gone to the wall since the crash of 2007.

Family-run companies play a big role in Ireland’s economy. According to Kieran McCarthy, partner at Hughes Blake Chartered Accountants and author of Family Business: A Survival Guide, 75% of all SMEs in Ireland are family-owned and contribute 50% of GDP. “They are central to the success of the economy – now and in the future,” he states. “As the economy continues to improve, the condition of family businesses will have a role in determining the fate of the economy at large.”

He stresses that not all family-run companies are small operations. “Worldwide, family firms continue to have an impact and include firms of all sizes such as household names like Mars, Samsung and BMW. In fact, family controlled firms now make up 19% of the companies on the Fortune Global 500, which tracks the world’s largest firms by sales.”

Nevertheless, the recession has had a marked effect on family-run companies, McCarthy says: “The impacts of the recession have left a lasting impression on high streets across Ireland, where SMEs, including family businesses, were shuttered in a reflection of high unemployment rates and low consumer sentiment.”

They weren’t helped by the arrival of large chains drawing customers to newly built shopping centres, and away from the rural villages and small towns. McCarthy believes this trend has “left many communities without their heart. The social aspect of retail businesses, particularly family-owned ones – as well as the goods they provided – is now absent.”

Patricia Callan, director at the small firms association (SFA) agrees that regional town centres have been hit in the recessions but adds: “Those businesses that continue to thrive and indeed that have established during the recession, differentiate themselves in the marketplace by offering exceptional customer service at a local level.”

Durability
JJ O’Connell is director at Family Business Ireland, an information and support service for the founders, owners, next generation managers and professional advisors of family businesses. The organisation has helped hundreds of family-run businesses in Ireland successfully manage the issues of succession, legacy, transference and continuity over the past 15 years. He argues that family-run businesses may have been more durable during the recession because people in their own companies would be more willing to trade through the bad times by cutting their own wages or making other sacrifices that other businesses would not.

But this can also be a negative factor. Once family-run companies get into difficulty, they often feel there is “no option but to see things through,” O’Connell says. “If they can’t see a light at the end of the tunnel, they order more tunnel. They keep digging because they think sooner or later they’ll find a gold seam and if they stop digging the enormity of the hole they’re in becomes obvious”.

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