Rob Cockle is keen to use his skills and experience in risk management and insurance to help guide his passion for family business.

Mr Cockle set up the Business Insurance Partnership, to provide what he calls a local broker plus service to the businesses of Gloucestershire.

His own, and many of his clients' businesses are family-owned, and that has given him a clear insight into what's great - and what might not be - about family firms.

"There are nine million plus jobs associated with the sector and it generates more than a trillion pounds of revenue each year.

Characteristically, there is a massive amount of employee loyalty, for obvious reasons, and they have huge passion for the products and services they provide.

There are massive pluses to family-owned businesses, but there are potential pitfalls as well and often these can go unnoticed until they really hit.

So I have created a seven-point list of those potential pitfalls and his advice about how to steer clear of any trouble.

Relationship trouble

Business relationships are complicated enough, but when you add a family dynamic as well there is far more that could go wrong.

In my experience, family-owned businesses believe they are less likely to fall foul of relations souring, but in practice the reverse is true.

The key is to leverage the family dynamic, that passion and togetherness to make it work for the business.

How do you take that positive energy into a successful business?

Family roles and business roles may differ, a son or daughter who is managing director may employ a parent, who is the head of the family.

So, it's important to have clearly defined and communicated business roles and responsibilities.

One of the best ways to mitigate any problems (especially for a growing business) is to bring in independent non-family members for key roles.

Hiring, firing and disciplining your family members can prove to be a problem.

You must be fair, and even-handed, whether dealing with a family member or not.

Informality of business plans and policies

Families aren't highly-regulated by nature, you don't tend to have a written contract for who does the shopping, cleaning or washing the car.

That informality can often carry over to the workplace and prove to be dangerous as, often, families have more assets linked to their businesses than they do their private worlds.

A lack of business plans and solid plans can prove a problem and lead to business failure. It's vital to invest time into proper planning and producing clearly-written policies.

The nirvana is to balance the business and family goals to ensure that the goals are mutually achievable.

Succession planning

It's vital that there is a plan in place in case the worst happens. If there is a serious illness, injury or at worst, a death, is there a plan in place for what happens?

There needs to be some dispassionate thinking here, based on the competence and abilities of the person who takes on the role - not just the heir apparent in the family.

If there is an heir apparent, make sure they are upskilled and ready to take on the responsibility if the worst happens, so you are prepared at all times. Also, think about the cost of having to buy out a shareholder.

If a shareholder dies or becomes unable to work, that person or their dependents may want to realise the value of their equity in a hurry, and that can be a massive burden on the remaining shareholders and the business as a whole.

Directors' and officers' concerns

The same legal liabilities apply to directors of family businesses as in non-family business.

The potential trap is making decisions that are for the family's benefit, but not necessarily the shareholders' benefit.

Whether family or not, shareholders can hold directors responsible if they (the directors) don't look after their investments.

It's also possible to have conflicts of interest.

Take a majority shareholder, for example, benefitting from the selling or buying of assets that he or she controls to the detriment of minority shareholders.

Alternatively, a minority shareholder forced into selling their holding at less than market value may have a right of action.

Duties that apply to a normal private business apply to family businesses too.

Communication problems

Problems can occur in businesses where family members work alongside others and the non-family members aren't kept in the loop in the same way when changes are made.

It's not good for morale or efficiency if that happens.

There is a need to have open, inclusive two-way communication for all members of staff - whether they are relatives or not.

It's also important to communicate professionally at all times.

Families can joke and tease, but it's best not to keep that as your standard communication. Also, family members have been known to pursue each other with harassment claims when the joking and teasing got out of hand!

Conflict resolution 

Family-related conflict can arise from deep seated historic resentments or sudden trauma - such as death, divorce, illness or financial woes and can quickly spread to the workplace from home.

Again, communication is key. Use the clearly defined roles that you have set out to minimise the conflict and try to keep the decision=making logical and business-based.

If there are problems, identify them quickly and use those processes to deal with them.

Employee theft

My experience has taught me that it's family-owned businesses that more often get hit by employee theft and dishonesty, because they are always very trusting of their staff.

They don't have the level of checks and audit that a corporate entity might have and that leaves them vulnerable.

I had several unpleasant conversations with clients over the years where an ongoing repeat pattern of theft has come to light that has been going on for some time.

Quite often, things will be fine - until they aren't.

Because of my passion for family business, I want to help as many family firms prosper as I can - while being ready for any problems that may occur.

I am passionate about family businesses, because they are the core of what my business is about

Family businesses operate for very positive reasons. It's because they want to make a difference, prosper and have fun together.

But, and there is a but, it's vital to make sure that they have all the Is dotted and Ts crossed and that's where I can help." 

Rob Cockle from the Business Insurance Partnership is happy to deal with any questions regarding risk and insurance issues arising from running a family business.

For more information visit www.bip-ltd.co.uk  contact rob.cockle@bip-ltd.co.uk  or call 07910 355948