Farms are a good example of a family business. Today, about 90% of all U.S. businesses are family-owned or controlled. While the Times concluded that family stocks perform worse in bull markets and better in bear markets, this may not be true for everyone. According to UBS analysts, family-owned mid- and small-cap companies have significantly outperformed their peers over the past decade. Some family businesses may fall into the trap of promoting family members to leadership positions, even though it is clear that the people in these roles do not have enough education, experience or skills to fully assume their responsibilities. In these situations, it would make much more sense to bring more skilled family strangers into these positions – but is this possible without causing friction within the family? While it can be difficult to balance family relationships and expectations with finding the right person for the job, a lack of leadership skills can have a huge impact on a company`s success as well as talent retention. Family businesses are not only good for affected families, but also for the local and global economy. However, many struggle to survive. About one-third of the 100,000 family businesses that are passed on to the next generation each year go bankrupt thereafter, while many small business owners struggle to be financially independent of their business in retirement. The combination of better revenue growth, higher margins, and less reliance on external funding for this growth suggests that family businesses could also earn better cash returns. Indeed, our analysis suggests that this is the case.
In an article published Sunday, the New York Times described in a somewhat self-considered way the trials and tribulations of family businesses after Rupert Murdoch announced he would hand over the reins of 20th Century Fox to his son James. All businesses, including family businesses, need to attract investment partners, but if a business isn`t already large, a family business may need to work harder to get the best investment opportunities. Indeed, investors target companies that come first – and family-owned businesses often miss this optimal positioning. Another reason is that investors, rightly or wrongly, may worry about possible disagreements between family members. However, there is no longer any reason to worry about family members disagreeing with people who are not family members, and a strong and inspiring story positively influences investor and consumer perceptions. And they care because it`s their own community. Family businesses know what you like, what you buy, and remember who you are every time you stop. Family businesses are a complex part of the municipality`s financial cycle. And it`s not just about spending most or all of the revenue locally, they also pay local taxes and support local charities. Family businesses have surpassed non-family businesses since 2006 As consumers, we tend to think that businesses exist to serve us and provide the goods we want and need. But it`s consumers who can make or break a business and help support the economy. Sure, buying large businesses is sometimes a necessity, but if you have the opportunity to shop from small, family-owned businesses, you`re helping that aspect of the economy thrive and providing businesses with the resources to hire more people and increase their influence.
It`s no coincidence that many family businesses are named after their founders – Wal-Mart after Sam Walton, Bang & Olufsen of Denmark after Peter Bang and Svend Olufsen, and Forbes after BC Forbes, to name a few. The choice of name clearly shows the family element of the company. A recent study has shown that this type of naming – the use of the owner or surname in the company`s brand – not only has a positive impact on sales, but also on the company`s performance. Employees at most family brands are generally happier and more productive. They feel better about their work, and it shows. A successful family business must be built on the right structure – and this structure can change from generation to generation or with market development. In general, there are five different business structures from which a family business can choose: What is a family business? It is a business that is defined as any business involving two or more family members. Most of the ownership or control is also within a family.
So how do family businesses achieve resilience? We identified seven differences in their approach: However, the key question remains why family and start-ups generate these better financial indicators, allowing them to outperform larger markets. Last year`s study alluded to the longer-term time horizon that family businesses allow for their decisions. This was confirmed by the company`s own survey, which we conducted on a sample of companies in our universe.