Family businesses successful

Studies show that over a complete business cycle family businesses outperform other types of businesses.

The truth is that some of the biggest businesses in the world are family businesses, including: BMW, Walmart, LG Group, Carrefour and Samsung.” Family businesses are so popular that they are estimated to account for between 70% and 90% of global GDP. However, family businesses have their flaws, nothing is perfect, but they are built on common values.

Social Capital

Family businesses have lower employee turnover rates. The ‘family-ness’ extends to customers, the community and society too. Clients are business partners that work through business cycles side-by-side.

Patient Capital

Family businesses are built and run for the next generation. Long-term strategic plans go the extra mile. The emphasis is on resilience and this is prioritised over short-term performance. A Harvard Business Review reported that family business debt averages only 37%, versus 47% for other firms. These lower levels of debt are an indication of the conservative management style found at family businesses. The result is in an inherent stability and sustainability.

Human Capital

The success and misconduct of family businesses Business are attributed to both, almost as if the business is a family member. It is one of the reasons why family businesses tend to be more ethical in their approach. Knowledge transfer between generations is also fast tracked in a family business. There is less a sense of protecting your self-interest and a greater willingness to equip the next generation (and the business) with the skills necessary to excel.

Ownership Structure

Family businesses are run by entrepreneurs. In most cases they remain privately owned, in the hands of the family. There is no pressure from external shareholders that might affect the strategic direction of the company. There’s complete alignment of management and ownership, which allows the company to pursue its objectives without interference.

Risks

Family businesses have to avoid the potential pitfalls of nepotism and internal disputes. They need to find the correct balance of competence and responsibility and it is often good practice to bring external skills in to assist the business’ development.

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