Family businesses need to diversify into more value-added enterprises like financial services and industrial production.
That is the view of Abdulla Al Masaood & Sons chief executive officer Constantin Salameh.
Speaking at the Family Business Retreat Conference yesterday, he said that regionally family businesses had made money through trading.
‘Historically family businesses in the region have concentrated on trading rather than making,’ he said.
‘They have accumulated wealth but now need to expand into other areas like financial services and industrial production which offer higher value-added business.
‘They need to diversify and to do this they need to move towards partnerships.
‘In order to do this there is a need for sound corporate responsibility, more transparency and accountability,’ he said.
‘If you are not transparent you cannot get foreign investors and more and more family businesses need to diversify into new areas where they need regional or foreign partners to add expertise,’ he added.
‘In order to move forward, a family business has to focus on what it does best and then partner with an organisation with shared values that can take it forward through its expertise.’
He said that one of the major problems facing family businesses in the region was separating family matters from business issues.
‘It is important for family businesses to prepare a smooth succession plan and this tends to be a big problem between second and third generation,’ he added.
‘The family business leader has to know when to let go and hand over.
‘The business needs to be able to rationalise portfolio as time moves on and choose which operations are the gems and which to let go.
‘This can be emotional if you have created the operation which is not one of the gems.
‘But by doing this you optimise the capital structure and find the right debt to equity ratio. ‘This is not just an issue with family businesses but also with public companies and it is a challenge that has to be addressed,’ he added
