When companies are founded, they are viewed as the product of an entrepreneur’s achievement. The family is a source of social and financial support. Typically, this occurs in one of three ways, that is, selling the business, taking it public or transferring ownership to the family. Usually, an entrepreneur’s interest in family succession is first stimulated when sons and daughters enter their teenage years and start asking questions about the business. Therefore, the children begin to work as a part time employee.
India has become a brand conscious market for apparel and accessories. The trend has slowly influenced the jewellery industry too. On the same lines, Jitender Jain, CEO, Entice, said, “Every typical family jeweler now wants to become a brand and have a more professional work approach than a father-son entity. Hiring a celebrity face as a brand ambassador, a distinctive logo on all marketing collaterals and jewellery items, identifying a look in terms of colour, font, window display etc. and assigning corporate designations are a few steps that are giving them a brand feel.”
Pros & Cons of the Biz
There are many benefits in a family business. Family business provides numerous profits to family members, non-family family members and the communities in which these family businesses operate. The benefits derived from being a family in business will vary depending on the makeup and size of the family as well as its stage of evolution.
“Family based jewellers have gained their popularity mainly through their satisfied customers. We all have the habit of buying jewellery from whom our parents bought. This is because of trust, exclusive designs and most importantly we feel it’s lucky. Family based jewellers’ branding is done by their exclusive customers and they too are stepping into all online and offline marketing activities. Due to higher retail cost, now family based jewellers are expanding their business by entering into e-com industry,” pointed Amarendra Vummidi, Founder, Zaamordiamonds.
A majority of family businesses are transferred to their next generation, and it is estimated that even 70 per cent does not survive into the second generation and 90 per cent will not make it to the third generation. However, it is important to include senior family members in the business as their involvement helps get new ideas, seems to involve too many unknowns and it may expose conflict by initiating discussion on sensitive topics. Their experience and past success also helps the business grow. Similarly, any formal planning process requires that these independent-minded business leaders share decisions and private financial statements with others in the family and company.
In a family based business, the entrepreneur has to be innovative, philanthropist and have some business sense. Despite that, the owners of family businesses cannot be held responsible for the succession or the failure of the business. It is everyone’s job to advise, and family owned and operated businesses need acknowledgement that they are in part responsible for the dismal performance experienced by family businesses at succession. Proper attention should be given to the technical component of succession (e.g., tax minimisation, estate freezes, family trusts, buy-sell agreements, wealth management, etc.) with far too little attention being paid to the people or non-technical component (family communication, family expectations, family values, family competencies, family dynamics, etc.) of the succession process.
Sohel Lalvani, Co-founder, Toniq Retail Brands, said, “We began our journey as Toniq, with our focus on establishing a product, brand and company in the accessories segment. As we grew and had other product lines, we re-branded ourselves as Toniq Retail Brands. It was essential to first set up a strong brand presence in the market before turning the attention on the co-founders. The company and brand was and is of greater significance.”
As concept family businesses are good enough and they view it as their own company. It is more compelling for the business owner. When people are hired and share their core values of the business and its culture together, the business is strengthened. It showcases advantages like economic benefits, the possibility to enjoying family relationships and the opportunity for an entrepreneur to keep his or her hand in the business. Also, this festive season many family jewelers are expecting around 25 per cent growth in sales during Dhanteras as it is considered auspicious to buy precious metal.