You could be forgiven for thinking that family businesses were a recent phenomenon. In fact, they are one of the oldest forms of business structure, outdating "Pty Ltd" companies and "corporate structures" by hundreds of years.
What is a family business?
Where two or more family members work in or have a significant influence on the business, share or expect to share ownership, and possibly want to pass ownership on to the next generation.
A South Australian study found that in excess of 60% of businesses are family businesses. This proportion increases as the size of the business diminishes.
Family businesses tend to perform particularly well with a greater return on assets, and additional market value.
Family Businesses are unique because they face some unique challenges, but they also have some inherent advantages.
Some of the challenges to family businesses
- work / life balance
- family / emotional issues
- unrealistic assumptions of all generations
- the work ethics of differing generations
- sibling rivalry
- lack of competence
- the need for Business Development
- funding the business
- transition and succession planning
- internal vs external management
- inheritance vs retirement
- balancing benefits among the family
- determining the future for the business
Inherent advantages
- longer time frames - success is considered in the longer term.
- flexibility – ability to respond quicker without the bureaucracy
- tend to focus on more on customers. acceptance of responsibility for their products and services
- have a reputation in the community for integrity
- care for employees as a family.
Source: South Australian Government study