Category: Family Business

Are We More Likely To Succeed When We Start As A Family?

Several studies have answered this question in the affirmative. Family businesses are more sustainable and tend to resist crises better. Let’s see how a family business is more likely to be successful than an independent business enterprise.

According to KPMG, in a report published in March 2021, family businesses have weathered the various waves of Covid-19 well. Yet like the others, they were put to the test.

The consulting firm mainly describes the long-term vision of family businesses, structures where the notion of transmission matters a lot. “The commitment of family businesses to supporting entrepreneurship from generation to generation is at the root of an instinct for resilience that is deeply rooted in their DNA . ” KPMG recalls in passing the weight of family businesses in the French economy: it is estimated that they represent 60% of the 6,000 mid-size companies (ETI) which themselves represent 39% of French GDP for 3.3 million euros. jobs.

In-depth study and statistics

In January 2013, the renowned consulting firm Ernst & Young published the results of a study on the success of family businesses. This had been carried out in 33 countries, with 280 people working in a family business (in a wide variety of fields). The result was clear: 60% of them had a growth rate of 5% per year, even in the event of an economic crisis. In one in six cases, this growth reached a rate of at least 15%. Three quarters of the companies surveyed were located in Europe and America, continents where the economic recession is clearly being felt. The other quarter concerned countries in Asia and Africa. Most of these unlisted family companies had over 1,000 employees and 60% of them have been around for three generations.

The strengths of the success of the family business

It would seem that if a family business manages to progress despite variations in the economic climate, certain assets would be responsible for this success:

  1. A motivation supported by the desire to strengthen the family business and ensure its heritage means that its members are more motivated than employees in an independent company. They are also willing to compromise more.
  2. Family businesses tend to reinvest the profits made to finance their development. Financially independent, they can focus more on innovation to set themselves apart from the competition. They don’t hesitate to launch new services and products.
  3. It seems that the members of a family business have a better ability to adapt , regardless of the economic environment. At least 50% of these companies look to the opportunities created by opening up to new markets.
  4. A better management of human resources explain the favorable profitability of family businesses. Family work promotes a more human approach among its members and more awareness of the responsibility of each.
  5. When a family business has managed to remain active for several years, experience is another advantage favorable to its development. With a well-established reputation, a large part of its loyal customers and a proven method of organization, it can more easily envision its existence in the long term.

Common values ​​among heads of family businesses

The manager-owners of family companies are often more prudent and daring in their decisions than those of independent companies. They act while taking into account the hierarchy of values ​​and favor the sustainability of the company well beyond performance.

Generally, they make sure that their expenses do not exceed their profits and favor a moderate dividend distribution policy. They make decisions faster because they don’t have to be accountable to shareholders or under the stress of financial markets.

Their economic independence often explains their resilience, especially in a crisis situation . Open to ambition at the international level, they favor anchoring in local roots.

In short, the family business, while looking to the future, promotes increased income, the creation of new jobs and benefits the development of its region.

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