Small firms backbone of economy - Geldof

More than three-quarters of all businesses in Ireland are family-owned and account for 50 per cent of employment in the economy. But just 30 per cent of these enterprises survive to the second generation, a conference in University College Cork (UCC) heard yesterday.

Speaking at the second annual Irish Family Business Conference, activist and businessman Bob Geldof described SMEs and family businesses as "the absolute foundation of the economy".

Geldof, who retains shares in a major communications company, said the big question was whether old school type family businesses would survive in the new and thriving Irish economy.

Family businesses, he said, traditionally took on a "squirearchical role" where they considered themselves to be a part of the community and wanted to give something back to society.

Yet he questioned the esteem in which commitment, pride and culture are held today.

Geldof said entrepreneurship in essence was all about "panic over poverty" arguing that a good business idea was as creative as any cultural enterprise.

Senator Feargal Quinn said that, having grown up in a family which owned a holiday camp, he always thought the objective was to attract the customer back.

When he opened the first Superquinn store in 1960, however, accountants tried to impress him with the "sell, sell, sell" model.

He advised family business owners to put customers first ahead of staff, management, specialists and other shareholders.

"This is of course, not to suggest that you should ever ignore all these important people, but remember that their interests should always be subsidiary to the element in the equation who pays everyone's salary at the end of the month - and that is the customer first, last and always."

He claimed that for a family business to survive through the generations there had to be a strict adherence to a policy of what is good for the company not the individual family member.

This view was echoed by Joachim Schwass who is a Professor of Family Business at IMD Business School in Switzerland.

Mr Schwass said family businesses often think of themselves in emotional terms rather than practical ones, struggling against issues such as birthright versus an individual's competence in a particular role.

However, he said in spite of all the challenges facing family owned businesses, US research has indicated that companies of this type continually outperform their peers.

His main advice to entrepreneurs who hope to pass on businesses to their own children was to set up an industry in a field that is considered to be 'fun'.

It seems wine and hotel chains are the way to go for family businesses with Mr Schwass citing the Hoshi Hotel in Japan, which has been in the same family for 46 generations as the model for all business owners to aspire to.