Turning Kerala’s family businesses into business powerhouses

From family conflicts to emotional interferences, biased decision making to hiring family members and succession planning, family businesses in Kerala face a slew of challenges. 

Dhanam Business Media recently spoke to Ullas Kamath, founder and head of family business management consultancy firm UK&Co and his teammates Praveen Sivaramakrishnan and Arya Namboothiripad to understand more about these problems so that family businesses that face these problems can tackle them in a better fashion.

UK&Co, the Bengaluru-based family business consultancy strives "to empower small businesses and family-led enterprises for lasting success."

Q. What are the strengths and weaknesses of small and medium family businesses in Kerala?

A. Most small and medium businesses in Kerala are family-run and have been around for generations. Their strengths lie in trust, loyal customers and employees, and a long-term vision. They also have deep knowledge of the local market and foster strong social bonds.

A key asset is the knowledge passed down through generations. However, these businesses tend to resist change, often due to a lack of professional structure and management, resulting in slow decision-making. This is particularly clear in matters relating to family dynamics, such as succession, which can lead to disputes. Such issues can stifle innovation and hinder growth.

Many prefer to continue traditional business practices, which prevents them from adopting strategies suited to today’s competitive world. In Kerala, businesses tend to be risk-averse, a mindset that must change. Young people should learn about business risks and growth opportunities in schools and colleges. Exposure to success stories and mentorship will inspire them to take bold steps in the future.

Q. What are the main challenges faced by small and medium family businesses?

B. The key challenges are balancing the interests of both the family and the business, deciding on heirs, and introducing professionalism. Management practices are often informal, leading to inefficiencies. Family disputes can delay decision-making, and reluctance to bring in external expertise can limit innovation. Additionally, keeping pace with technological advancements and market changes can be difficult.

Kerala’s family businesses are also highly risk-averse, especially in terms of growth strategies. Many prefer organic growth and shy away from acquisitions, partnerships, or exploring new markets. There is also a reluctance to engage external professionals. This mindset stifles the introduction of fresh ideas into the business.

When it comes to raising funds, family businesses often rely on loans. More flexible approaches like private equity, which can drive growth, are rarely considered. Nevertheless, this is gradually changing, and many businesses are beginning to explore private equity options. We’re hopeful that Kerala’s entrepreneurs will soon overcome these barriers.

Q. What steps should small and medium businesses take to stay relevant and grow?

A. To remain relevant and grow, we always recommend a few essential steps. Firstly, business owners need to understand their financials in detail. This includes revenue growth, net margins, cash flow, the market size of their product segment, their share of the market, and employee satisfaction. These figures are crucial for staying competitive. Surprisingly, many business owners don’t have a clear grasp of these numbers.

Professionalising the business is also essential. This means setting up clear roles and responsibilities and implementing efficient systems and processes. It’s not just about scaling up but scaling smart.
Another vital aspect is embracing technology. We live in a fast-changing world, and businesses that don’t adapt will lose relevance. Continuous innovation and entering new markets are crucial to staying competitive.

Additionally, operating legally and ethically is essential for long-term stability and building a solid foundation.
Succession planning is another key factor in family businesses. Bringing in external professionals alongside family members can strengthen the organisation, creating a balance between in-house expertise and external insights. This approach ensures that businesses can grow and thrive over the long term.

Q. Why is bringing in external professionals sometimes seen as ineffective in family-run businesses?

A. Introducing professionals into strategic roles brings fresh perspectives and valuable experience. However, in family businesses, decisions are often driven by emotion and past experiences, making it difficult for outsiders to push the business forward.

If there isn’t alignment between the family’s values and the professional approach, it can lead to discomfort and reluctance to change. To avoid this, family businesses must not only hire people with the right skills but also ensure that their style complements the family’s culture.

Clarity on the business’s vision, values, and long-term goals will help in selecting the right professionals. Roles and responsibilities should be clearly defined to prevent ambiguity and conflict.Most importantly, the family must be open to change and have faith in the ability of the professionals they bring in.

Q. What inspired the creation of UK&Co, and what are its goals?

A. The UK&Co movement was born out of a passion for supporting small and medium enterprises (SMEs). Our entire team shares this passion. 

SMEs are vital to the economy. The innovation they bring has a profound impact on families, society, and the economy. Experts agree that SMEs are the key drivers of economic growth. However, the sector’s growth has not always reached its full potential. There’s a need for coordinated efforts to drive this growth, and that’s where UK&Co comes in.

We are a consultancy firm with a professional team specialising in family business management. Our focus is on three core areas: family, business, and management. We offer tailored strategies and services to selected SMEs and ensure their successful implementation, helping them grow to the next level.

Each business is unique, so we provide customised services that suit their specific needs. Our expertise spans all strategic areas including technology, finance, marketing, sales, distribution, and HR. We believe that a holistic approach to growth is crucial.

We also take the time to understand the values and culture of the family businesses we work with, ensuring that growth strategies are designed with respect for those values. Our aim is to set up long-term relationships with our clients and help transform family businesses into successful business families.

(This interveiw was earlier published in Dhanam Business Magazine)