What’s The Big Deal About Family Business?
What I Didn’t Know As a Family Business Member
Even though I grew up in one, only recently did I learn that family businesses are a big deal. Every day, many of us will buy a cup of coffee and some of us will buy a car, but most of us won’t realize who owns the bakery or dealership where we make our purchase. Surprisingly, odds are it is a family-owned business. Whether that’s a married couple venturing forth as coffee shop “co-preneurs” or a well-established, generational auto showroom, when you pull back the curtain, you’ll likely find a family at its core. In fact, most transactions Americans make on any given day involve a family-owned business. That’s because about 80% of U.S. businesses are owned by families. And, although they tend to be small, they are vital because collectively, they employ nearly half of all workers in the country serving as the backbone of the our economy.
The Surprising News About Family Business
Family businesses are sometimes referred to as “Mom-and-Pops.” It’s a diminutive term that underrates the financial strength of a typical family enterprise. Many families in business make up a demographic that seems to work hard and quietly go about its business without a lot of fanfare. Many tend to be insular and private by nature, preferring to keep a low profile. Yet, despite an often demure existence, they deserve our attention and respect, because what family business does well, benefits us all. Here’s why:
Better Financial Discretion. When money is hard earned, say…over generations, it leads to more conscientious spending both at the family and the family business level. Their frugality in turn helps build cash reserves. Being well funded allows the successive generations to keep their business doors open through long or challenging economic downturns.
More Financially Conservative. When it comes to investing, family businesses are more likely to choose low risk opportunities with long term payouts. They are less leveraged than their publicly traded corporate counterparts. Collectively, their balance sheets show a lower debt to earnings ratio. This greater economic stability benefits us all, because when a business fails to service its debt, the loss is ultimately absorbed by the rest of us.
They Keep Us Employed. The great recession showed us how fragile jobs can be, and that in tough economic times, we want to be employed by stable companies. Because of their financial stability as well as, their relationships with, and appreciation for, their workers employees of family-owned businesses are less likely to face layoffs in an economic downturn. The overall economic impact is significant because nearly two-thirds of the US workforce counts on paychecks from a family business.
More Women Leaders. When it comes to selecting its leaders, family businesses smash the glass ceiling paradigm. Perhaps the environment allows the best leaders to emerge naturally. Among the larger multi-generational family businesses, nearly 60% have women in top management positions. Their leadership contribution tends to further benefit family firms in the form of greater business loyalty, pride and alignment of vision and goals.
Less Turnover. Family businesses tend to create a culture of loyalty. Commitment extended to employees through training and development and by promoting from within, is repaid by employee allegiance. The result is lower turnover rates and longer employee tenure.
Stable Backbone. Most family businesses are either sold or dissolved during the first generation, while about one-third will continue to operate and grow when the next generation takes over. That longevity supports economic stability for the family, for the business, and the economy.
Count Family Business In
Despite all these great things about family business, it’s not unusual for owners and members of family businesses to feel socially discounted, as though their jobs are not as legit as those with corporate titles and star-studded LinkedIn profiles. There’s a certain glamour attached to working for Google, Nike or Deutsche Bank. It lends credibility and status; a cachet that working for your parents can’t seem to rival when rubbing elbows at a cocktail party.
But the world needs to know that your family business is equally important and worthy of your continued time and investment. Give your own family business the focus and attention it deserves and if that is difficult given your family business culture, consider a family business coach. When a family business embraces a culture of learning and growth, it has the potential to achieve a respected legacy and be among the longstanding businesses that are so vital to our American economy.
