Previously, Eu Yan Sang group chief executive officer Richard Eu discussed how he started with the family business and his plans for it. Today, he gives some advice on how to run a family business and take it to greater heights.
KINIBIZ spoke to Eu Yan Sang group chief executive officer Richard Eu recently about his plans for the business. Today, he shares what he learned from running a family business and gives some salient advice to those who want to take their family business to greater heights.
What have he found to work or to not work when working in a family business?
According to Eu, a family business is a bit more complicated because the dynamics are multi-dimensional.
“It’s not just about one manager talking to another manager or series of managers. The people you talk to are sometimes also your relatives. Sometimes they could be of a different generation. How you talk to a cousin might be different from how you talk to those from a younger generation. There’s a different dynamic.
“Thus, you have a business relationship as well as a family or blood relationship. In a way you have try to keep them as separate as possible. We’ve had this discussion before, such as, what would your niece or your son address you as in a meeting. These are some of the issues that would come up. You have to make it clear that business is business and you don’t bring the family into the boardroom,” he said.
In a way, it’s about keeping it separate, isn’t it?
“Yes it is. For example, I could say to you: ‘I want you to do this; look, I’m your manager’. You can say that to anybody. But you can’t say, ‘I want you to do this because I’m your father’. On the other hand, if you say to me, ‘I don’t agree with what you’re saying’, then you have to consider this: I’m hearing this from a colleague or a member of staff, not my child or my family. You’ve got to eliminate the emotional element,” he explained to KINIBIZ over the phone.
Does he have a tough experience that resonates with him, that he has learned from?
“When we started the clinic business in Australia, it was very tough because of the overhead structure – the cost structure. As a result, we had to sell the business but we learned from that experience. As a result we developed a clinic business in Singapore, Malaysia and Hong Kong, which I think is a bit more profitable and more sustainable. A lot of it is in the cost structure, and also the management structure. We’re still learning, but I think it’s a pretty good idea of what works and what doesn’t,” he said.
One interesting thing that KINIBIZ observed is that despite being founded in Malaysia, Eu’s family decided to list Eu Yan Sang in Singapore. Why did they choose to list in Singapore?
According to Eu, the final decision was either Singapore or Hong Kong. “We thought that in Singapore we would get a slightly better pricing. However, I do think Hong Kong is good too when you have a large China-based business,” he explained.
Does he have any regrets in listing in Singapore and not in Hong Kong?
“No, not really. I think it’s useful to have a base in Singapore. Because we get a lot of support from the government compared to in other countries, like in Hong Kong in particular,” he said.
Eu added that their biggest market is Hong Kong, which contributes about 40% of revenue, followed by Malaysia and Singapore. “I think Malaysia and Singapore are about the same size. Because of the currency, it might be Singapore that is slightly ahead.”
What is his strategy for growing his business in the next three to five years?
“We have just released a press statement about China (referring to a recent partnership with HCare Investments Holding Limited, an investment vehicle managed by CareCapital Advisors, a leading investment and business consulting firm with extensive expertise in the healthcare industry in China).”
Under the partnership, EYSI will receive a significant injection of capital and management expertise in China to expand Eu Yan Sang’s brand reputation and heritage and build up a scalable traditional Chinese medicine business in China.
“That (market) would quite difficult. One of our strategies is to find strong partners. We also have made an acquisition in Australia which we have announced previously. We have acquired a business with seven stores. So we’re bringing in the management team for that business as well,” he explained.
If he could turn back time, what is the one thing that he would have done differently?
“I think that some of our so-called failures happened because we were too impatient. And maybe we did things too quickly,” he said adding that he’d have taken a longer time to start it up could he have a do-over.
To what extent has he you encouraged his children to be part of your business? And what kind of succession plan does he have in place?
“Actually my son is working in our business already – my eldest son. He’s part of the Hong Kong management team. He’s also assisting in terms of business strategy,” he said.
In regards to succession planning, Eu said that “Basically, we’re looking at a restructuring in the near future to realign some corporate positions and that would be part of the succession planning. The succession planning is not just for my own position. It’s also for other positions in the company.”
“What I didn’t make clear to you is that the company relies pretty much on professional management. We’re not just looking at my position, but throughout the group. It’s really dependent on profession managers, not family members. It doesn’t matter whether the children are interested or not interested. Even if they’re interested, they have to prove themselves. We also take the view that the company is professionally managed anyway, so to us is all a matter of finding the right family member. The right person in the family or a professional manager.”
When asked how he would advise entrepreneurs who want to take their family business international, Eu said that it’s about finding the right people.
“My advice is actually similar – for family businesses that are SMEs and so on, they want to go international, they have to look at their talent pool. If they don’t have the right talent in-house, they have to hire the right people. It’s easier said than done. Sometimes it’s more of trial and error. Sometimes you’ll be lucky. I think it’s almost entirely depending on you getting the right person to do it. If you don’t have the right person, you have to be very careful, the opportunity might not look good if you don’t have the right person.”
What are some of the do’s and don’ts that an entrepreneur should do in running a family business?
“You see, the dynamics are very different when you are a pure entrepreneur and you’re having a startup. You’re pretty free to do whatever you want. And it’s different. Especially nowadays, a lot of entrepreneurs are getting funded by private equity and special investors, and not just by their families.
“The way we view stakeholders is different. When you’re in a family business and especially if it continues for more than three generations – you have to define the family business as one where it’s been going for more than two, three generations. And you have different generations involved in the business, either as shareholders or in the management, or both. Then it goes back to how is the relationship between each one of them. I think that you have to try, if possible, to take out emotion. You have got to run it like any other businesses. Call it a family business, but I think you have to be very careful.”
“I can’t be more specific, because it’s based on case by case. How many family members, is there a patriarch who is still controlling it, what are the plans for the next generations, is there one in place? If you have many family members in the business and you don’t have a proper succession plan, you’re going to have problems. So these are some of the issues.,” he explained
Eu said that in his case, he was a bit lucky in the sense that because of the buyout, we (he and his cousins) re-started the whole thing. “And so the relatives – my cousins and I who are in the business – and it was a conscious effort by us to get into the business. It’s not something we inherited. We actually had to buy the business back. It might be that when you’re in the family business you might try to think of some way of renewal of generation to generation, it really depends on the circumstances of each family.”
Does he have any additional advice for entrepreneurs?
“I think it is important to try to change beyond your own immediate business problems. A lot of times, entrepreneurs are very much focused on the day-to-day issues of running the business. And you almost get obsessed by it. I see that in myself – all you think about is the business. But I think that it’s good to try and take a step back from time to time. Really cultivate other interests. Because I think that you have to have both the world’s eye view as well as the bird’s eye view,” he said.
He added that a business owner can’t just immerse himself or herself in the business to such an extent that he or she doesn’t see what else is going on around him or her. “I think it’s good to take a short break from time to time just to look at everything else that is going on. I’m sure there are lots of entrepreneurs out there who are doing this already, but I would say that this is something I found quite useful,” he concluded.
Yesterday: Keeping the family dream alive