Over the past several years, we have witnessed an increased demand for ownership transition and M&A consulting for family-owned A/E and environmental consulting firms. These inquiries have cut across the gamut of family ties – husband/wife, siblings, and parent/child owned organizations. They have also come to us across a range of firm size, disciplines, and geographic locations.
When many think of family-run businesses associated with our industry, it’s traditionally been with our friends at general contractor firms (think of how many companies end with “& Sons” or “Brothers” as it relates to family construction dynasties). Most A/E firms are not family owned and have disparate individual backgrounds in terms of professional ownership, management, and overall day-to-day operations.
We think the severe design recession changed this to some degree. Hungry entrepreneurs itching for their own business as well as numerous displaced A/E professionals reluctantly started their own small boutiques. These individuals often initiate the business out of their home and may even tap into the assistance of a spouse to “do the books”, create a website, or utilize family savings and credit cards for seed capital. In addition, as building and infrastructure demand waned starting in 2007, some shrewd firms brought a licensed spouse to the ownership fold as a 51% WBE (woman business enterprise) or other similar maneuvers to attract new clients and project types.
Maybe we shouldn’t be surprised after all. Family businesses are “the most common type of business on the earth, particularly in developing countries,” says Professor Wesley Sine, faculty director of the Cornell University Johnson Graduate School of Management’s Entrepreneurship and Innovation Institute. In addition, The Family Firm Institute (FFI), a nonprofit, has reported that family firms create an estimated 70 to 90 % of global GDP annually as well as 50 to 80% of jobs in the majority of countries worldwide. Many owners and entrepreneurs start out with financial and emotional support from family; in fact, the FFI reports that a whopping 85% of startups are established with family money!
Many family-owned A/E firms have wonderful characteristics. They can often possess a close “paternal/ maternal” company culture where treating and protecting employees just like family members guides their decision making and interactions. These organizations can be slow to fire dedicated team members purely for bottom line results and oftentimes have a “we’re all in this together” family mentality when times are good or bad for organizational resiliency. As a result, family-run A/E organizations may exhibit higher employee loyalty and retention rates and their staff may cultivate a deeper commitment to the firm’s mission and values.
However, we can all admit family dynamics and relationships can be complicated. Issues such as rivalries, resentment, drama, jealousy and entitlement can be found among relatives in professional organizations. And in the context of family businesses and pursuing sound ownership transition, these problems can frequently be exacerbated. Below are four typical challenges we find with family-owned A/E firms:
Is your A/E firm feeling a bit like “All in the Family” in terms of organizational and transition challenges and achieving your long-term goals? Let us know. ROG+ Partners brings years of seasoned financial and business experience in navigating A/E and environmental clients of all backgrounds through strategic and ownership alternatives in an ever changing landscape.