We recently posted a blog series on Succession planning (July/August). Some of the questions we asked (Who is the best candidate to succeed you? What are you doing to prepare the next leader? etc.) caused me to start thinking about family businesses. There are varying definitions of “family business” out there, but the one I like best is any business where multiple family members work together and at least one of them is the owner.
There isn’t a lot of statistical data out there for family business, due largely I’m sure to the difficulty in defining what a “family business” is. The normal governmental data compilations don’t include family business as a category. There are estimates that there are 6 million family businesses in the United States, while other estimates put the number closer to 12 million. Other estimates state anywhere from 70-95% of U.S. businesses are in this category. A number of GDP estimates put family businesses’ contribution to the economy at 50% of GDP, give or take. I’ve seen estimates that say the 67% of businesses worldwide are family businesses.
The scariest estimates out there are that only 30% of family businesses will survive to the second generation, while 10% survive to the third generation. Yikes! Not only that, but in the next 5-15 years, approximately one third of family businesses will be transitioned from one generation to the next – thanks to the size and scope of the Baby Boom generation.
Regardless of the stats, the point is that family businesses are a big deal. Given that most of the businesses we with work with at Growth & Profit Solutions are family businesses, it makes sense to spend a little time discussing them.
There are a lot of concerns and difficulties faced by family businesses, and we’ll talk about those down the road. But what are some of the good things about family business? Why do so many people get and stay involved in a family business?
For one thing, if you’re a family member, it’s part of who you are. Some families are defined by the family business. Kids start working in it when they’re little & they never stop. Family members feel like it’s their duty to keep the thing going. People also feel like they have more freedom working in a family business than they would at some other large corporation, and they’re right. They think there’s a better chance for them to have responsibility, authority, learning opportunities, etc. Finally, some families actually enjoy being together all day every day (probably hard for some people to believe!). If life is going to be difficult, why not deal with it surrounded by the people who matter most to you in the world. These people feel like the family business provides an opportunity for them to be closer as a family. And they’re right too.
Why is your family business important to you? What do you think are the biggest issues facing family businesses? What causes family businesses to fail? Or better yet, to succeed?