November 28, 2014

What You Can Learn from Family Businesses

what you can learn from family businesses

For a while, the spread of corporate monopolies seemed destined to wipe out mom-and-pop shops for good. But family businesses demonstrated their resilience during the economic downturn, and now they’re stronger than ever. In fact, family-owned companies make up 90% of U.S. businesses. They are responsible for 80% of new jobs and 60% of all jobs in America.

And while those statistics include large corporations such as Ford and Walmart, small family businesses have also been thriving. According to Forbes, many workers laid off during the recession have established family businesses on the Internet, marketing and selling their products through cheaply purchased websites. And prospects seem good for the coming year. Fifty two percent of family business owners (PDF) foresee that their revenues will increase in 2014.

So what can your small business (or small family business) learn from these successful family-owned companies?

Dedication to the Business

A recent study by the Harvard Business Review found that most family business owners have a heightened level of commitment to their business’s health and longevity. The majority of owners run their family business to secure a livelihood for their children, so this gives them a strong vested interest in the continued success of their company.

This dedication also extends to those who work for family businesses. The 2013 Survey of Family Businesses (PDF) found that family employees tend to stay with the family business for an average of 20.6 years, as compared to the 4.6-year average for employees at non-family companies.

Magda Walczak has been working with her family’s business, W.W. Remodeling, since she was fourteen. She explains:

“When you’re working with your family, the stakes are higher. So you work longer and harder, which breeds success.”

Looking to the Future

Family businesses are also less likely to sacrifice their company’s longevity for short-term gains. As the Handbook of Research on Family Business details, most successful family-controlled companies have a conservative fiscal policy, low debt and high liquidity ratios. Additionally, “they guard against doing anything in the short run that might compromise the future of the business.”

This means less money is spent on unnecessary expenses. As the aforementioned Harvard Business Review says:

“It’s possible to identify [a family business] just by walking into the lobby of its headquarters.”

In addition to forgoing lavish office spaces, family businesses are also less likely to take huge financial risks. While this can make them less successful in boom times, it means they can more easily survive economic downturns.

Customer Service

Family businesses are also especially dedicated to customer service. ExploreB2B.com found that family businesses “are not only working to get new customers but to keep the existing ones.”

This means that family businesses are more likely to go the extra mile to meet customer’s needs and resolve complaints. They are also more likely to provide personalized service and forge relationships with their customers. Walczak says:

“Because we’re all financially and emotionally invested in our business, we take care of our customers with much more care than our non-family competitors. This means that our clients are very loyal and give us a ton of referrals.”

Family Values

Family business owners work to maintain not only a thriving business from one generation to the next but also strong company values. One study found that business owners were most likely to encourage their children to “earn their own money, give to charity and volunteer.”

Another study (PDF) analyzed the websites of the largest family and non-family companies in search of their values. While both types of companies emphasized integrity, respect and customers, only family-owned companies associated their brand with generosity, humility, communication and service. These more community-oriented values can actually give family businesses a competitive edge.

As Lucia Ceja and Josep Tapies explain in a recent Business Spectator article:

“By dedicating energy to achieving the highest quality standards in their products and services, as well as by being humble and generous, [family businesses] are able to establish deep connections with other stakeholders.”

Investing in Workplace Diversity

According to the American Family Business Survey, 25% of CEOs in family businesses are women, and the majority of family businesses have women in top management positions. In comparison, only 3% of non-family Fortune 500 companies are currently led by women.

There has also been a shift in the role of women within family businesses. Whereas traditionally, the mother acted as a mediator between the father and children, now she is more likely to hold an active position within the actual business. This gives family businesses a leg-up over less diversified, non-family companies. A recent study by the U.S. Chamber’s Center for Women in Business found that the Fortune 1000 companies that have committed to diversifying their top positions consistently outperformed their peers.

Whether your small business is family or non-family owned, you can easily apply these strategies. If you dedicate yourself to your work, favor the long-term over short-term, prioritize customer service, instill family values and diversify your top positions – your company will be better prepared to face an uncertain economic future.

Family Business Photo via Shutterstock

9 Comments ▼

Curt Finch


Curt Finch Curt Finch is the CEO of Journyx. Founded in 1996, Journyx automates payroll, billing and cost accounting while easing management of employee time and expenses, and provides confidence that all resources are utilized correctly and completely.

9 Reactions

  1. I agree with the initial points, but the diversity one seems like a stretch. Family owned businesses tend to hire in the family and from their existing pool of contacts, which might be quite similar to themselves. I think the company needs to achieve a certain size before this would start to kick in.

  2. There are some pros and cons to having some family businesses. First, it is good because they care more about the business. But then there may also have some issues because you are dealing with family members. Every quarrel can result to something negative in the business. In the end, it is still up to you if your family can take this.

  3. Having a business that is owned by your family for years or have been passed from one generation to the next really helps in building the foundation of the business. And knowing that it will be passed on to the future family members will really push the family to strive and do good for the business.

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