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. Only 3 to 5% of small businesses succeed to last till 10 years; the family business tends to have a success rate of 20%, which means that every 2 out of 10 family business makes it to the high level. It is not a big number, but it certainly represents a higher success rate than that of non-family business.
Why is the success rate of family-owned businesses much higher than the of non-family businesses? This is an interesting topic to look into because a 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 a specific family or bloodline influences decision making in any commercial firm or organization. The related family can influence the business, its vision and have the will to achieve certain business goals. The involvement of different and successive generations of a family in making decisions and altering the business makes any business a family business.
The family business is the oldest and most common model of commercial organization. A majority of businesses worldwide are family businesses or can be considered one because of their working and owners’ decision-making power. According to a magazine, almost 44% of the top 400 richest Americans are family business members. The statistics say so, then let’s look at the points that help in marking family businesses’ success.
- 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 an essential part of any business which cannot be bettered than that in a family business.
- Stability: In the family business, one person remains in a higher position and is supported by the other family members, which is impossible to achieve in a non-family business. There is no fight for who will lead because the family’s position typically determines the business leader. 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 paid. In such businesses, the employee can deny work other than the one he is paid for based on the work not being in their job description. No such argument is heard in family business because family members understand the importance of the business’s success more than anyone else. They will work outside their formal job to do any other work for the betterment of the 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 quarterly or half-yearly. The patience and long term strategy allow the business to grow to higher levels without being at risk of collapsing. One more advantage of a long-term strategy is that you don’t have to force the employees to work hard and motivate them every once a year because they understand the family business’s goals.
- Commitment: In a family business, the members understand what is at risk if the business goes down. 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 act 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 for many generations. You can learn at about the company’s succession to the third generation starting in 1941.
- Decreased cost for the employee: Opposite to non-family businesses or other firms, family members can contribute all their assets to ensure the family business’s long-term success, which means more chance of succeeding than the non-family organizations. In challenging times like recession or financial downs, the family members can help the business’s survival. The family members with different skill sets can benefit from finance, legal advisor, accounting, management development, investment, communication, business relations, advertisements, insurance, etc.
The ambitions for success can surely play a part in the 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 the 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 new heights because the work-family members ensure the family business’s long-term success. The understanding the family members create for the business goes from generation to generation, making the one family control all that aspects of the business. Some family businesses have operated for almost 20 to 30 generations, making it a truth that family businesses can be successful.