If one looks at the statistics of family business success then one will find that almost 30% of family businesses succeed to pass onto the second generation and 12% of them succeed to pass onto the third generation. Where only 3 to 5% small business succeed to last till 10 years the family business tend to have a success rate of 20% which means that every 2 out of 10 family business make it to the big level. It is not a big number but it certainly represents a higher success rate than that of non-family business.
Why the success rate of family owned businesses is much higher than the non-family businesses? This is an interesting topic to look into because recent census suggests that almost 90% of American businesses are family owned or family controlled.
Any business is called a family business or family controlled when decision making in any commercial firm or organization is influenced by the members of a specific family or bloodline. And the related family has the ability to influence the business, its vision and have the will to achieve certain business goals. Involvement of different and successive generation of a family in making decisions and altering the business is what makes any business a family business.
The family business is the oldest and most common model of commercial organization. A majority of businesses around the globe are family businesses or can be considered one because of their working and owners decision making power. According to a magazine, almost 44% of top 400 richest Americans are a member of a family business. Well the statistics say so then let’s have a look at the points which help in marking the success of family businesses.
- Trust: There is a high level of trust among the family members which rules out the talk about trade secrets’ make or break. Also the family members can talk to each other freely and openly without worrying about the possibility of being rude. And everyone knows that trust is a very essential part of any business which cannot be bettered than that in family business.
- Stability: In family business, one person remains at the higher position and is supported by the other family members which is not possible to achieve in a non-family business. There is no fight for who is going to lead because the position in family typically determines the leader in business also this results in long lasting leadership by the same person which stabilizes the business. The change in leadership is considered when there is any illness or retirement or death.
- Flexibility: In a non-family business, everyone is an employee and no one works more than what they are paid. In such businesses, the employee can deny to work other than the one he is paid for on the basis of the work not being in his or her job description. No such argument is heard in a family business because family members understand the importance of success of the business more than anyone else and they will work outside their formal job to do any other work for the betterment of business. Successful family business stories have stated that the members have done almost every type of work their business required them to do.
- Long term strategy: While non-family businesses think about achieving the goals decided early and tend to acquire fast results, the family businesses look for a long term perspective. They plan for five years or decades unlike the non-family businesses that plan on a quarterly or half yearly basis. The patience and long term strategy allows the business to grow to higher levels without being at a risk of collapsing. One more advantage of long term strategy is that in family business you don’t have to force the employees to work hard and motivate them every once in a year because the members understand the goals.
- Commitment: In a family business, the members understand what is at risk if the business goes down and so there is always a sense of commitment & accountability and that too to a level where the employees of a non-family business could never reach. The long term devotion, commitment and accountability acts as a rocket launcher to the business. There develops a better understanding of the industry, job, goals to achieve, marketing and sales etc. Some very renowned names in business have operated the business to many generations. You can learn at about the succession of company to the third generation starting in 1941.
- Decreased cost for employee: Opposite to the workers of non-family businesses or other firms, family members can contribute their all assets to ensure the long term success of the family business which means more chance of succeeding than the non-family organizations. In challenging times like recession or financial downs, the family members can be a great help in survival of business. Like the family members with different skill sets can benefit in different areas like finance, legal advisor, accounting, management development, investment, communication, business relations, advertisements, insurance etc.
The ambitions for the success can surely play a part in success of any organization, the leader can motivate its workers to work harder to get the financial graphs higher and higher, the advertisements can give business a boost because of increased popularity but the success rates of family business will be unmatched because of the blood a family shares which makes them work harder, smarter, explicitly, and unstoppably.
The business can reach to new heights because of the work family members do to ensure a long term success of the family business. The understanding the family members create for the business which goes from generation to generation making the one family control all that aspects of the business. Some family businesses have operated to almost 20 to 30 generations making it a truth that family businesses do have a potential to be a successful organization.