Compiled by Savithri Rodrigo


Ranee Ratnayeke outlines the emerging realities for family owned businesses

Q: What role do family owned businesses (FOBs) play?

A: Few FOBs have reached the top in the larger corporate context although many continue to operate past the century mark. They contribute to the economy and are a major employer but have been quiet in the business environment.

It’s only in the last decade that reform has taken place with the realisation that a generation of youth must be trained, exposed and uplifted to instigate change by using new technology, and infuse modern ideas into small businesses.

Q: How would you describe the prevailing biz climate?

A: With new incentives for small businesses, which include a large number of FOBs, lower interest rates for entrepreneur loans and reduced tax thresholds for sole proprietors, the milieu should be thriving.

But many micro homegrown entities are unaware of the financial advantages and what it takes to be more competitive.

Q: What strengths do FOBs have?

A: The common bond involves a level of commitment that’s almost impossible to replicate in non-family businesses.

Family contributions lead to a better understanding of industries, operations and employment of family members, creating stronger customer relationships, and more effective sales and marketing. Another advantage is the comfort factor customers have in dealing with family members.

Q: Is there a focus on improving FOBs in the SME sector?

A: There’s been rhetoric about the ease of access to finance but no financial entity trains SMEs on the benefits of good business plans. Micro enterprises are the most neglected as they’re hidden behind a veil of ignorance and devoid of knowledge on the fundamentals of doing business.

In the lower income household segment, the national census indicates that expenditure is higher than income, which is a substantial share of national output. These neglected householders have small home based incomes to make ends meet. Nevertheless, the succession plans of these minor industries are sustainable and maintained by the second generation compared to more established FOBs.

Q: What are the challenges faced by FOBs?

A: It’s virtually impossible to gain access to finance from conventional entities, which exposes smaller FOBs to loan sharks and long-term debt.

FOBs often lack defined strategies to plan ahead when owners want to retire or transfer responsibility, leading to heated debates and intense family politics. Inherited ownership results in unpleasant issues for employees and families amid a change of culture.

And the lack of written strategies for capital diversification, roles and responsibilities, and communication, cause internal conflict due to poor management practices.

Q: Are new mechanisms available for dispute mediation?

A: Alternate dispute resolution enables internal conflicts to be solved without litigation – a dynamic, structured and interactive process, where an impartial and neutral third party confidentially assists disputing parties, to resolve conflict through specialised communication and negotiation techniques. All involved are encouraged to actively participate in the process.

Community mediation has been successfully practised in Sri Lanka for 35 years, and is an attractive option to find amicable solutions and uphold unity.

 Q: Are FOBs aware of global trends to develop business?

A: According to the Family Firm Institute, FOBs account for two-thirds of entities in the world and an estimated 70 percent of global GDP. This may be even more in our country.

While family entrepreneurship is universal, these organisations wrestle with specific challenges. For example, a small cottage industry in Sri Lanka manufacturing paper bags using family members would contribute to the economy but isn’t recognised, trained or developed.

Q: How can the sustainability of FOBs be ensured?

A: It is imperative to instigate changes in FOBs to stay abreast of the prevailing business climate. The business vision must embrace diversity and change, and this would excite the younger generation, thereby optimising their contribution.

For instance, the confectionery items of a leading local outlet continue to taste the same although it has developed exponentially from being a ‘short eats’ shop at the turn of the last century into a fully fledged catering establishment run by the fourth generation.

Family owned businesses must embrace intelligent automation and climb the e-commerce ladder with technology as an urgent priority, transforming processes, improving the customer experience and creating models to match rapidly emerging businesses.

The interviewee is the Chairman and an Optometrist at A and A International Opticians