THE FAMILY ADVANTAGE
According to Family Business Magazine, 60% of consumers say they prefer to buy from a family business.
And in another report, EY found that 67% of the companies surveyed refer to themselves as a family business in their marketing activity to differentiate themselves, establish a strong identity, and create trust with customers and employees.
And we aren’t talking about small businesses here either – they surveyed the 25 largest family businesses in each of the 21 top global markets with on average: sales of $3.48 billion, operating in 15 countries, and with 12,000 employees. We are talking big business.
Jim Lee, an economics professor at a Texas university authored another study, which compared S&P 500 and Fortune 500 companies based on net profit margin, employment, revenue, and gross income growth and found that family businesses outperform non-family businesses.
So it seems, family is an advantage. Let’s dig into some of the factors that contribute towards this success.
AUTHENTICITY AND PASSION
There is nothing more powerful than emotive storytelling to create a sense of trust. Many family businesses have rich, founder stories that show passion, determination and grit. We are in a time where consumers won’t settle for a catchy tagline and a pretty picture, the story and purpose of a business is becoming an essential part of building a brand. Connecting on this deeper level is the way to create loyalty – with both customers and employees.
VISION AND PATIENCE
Family businesses are renowned for having a long term view and ‘patient capital’, something which is challenging for non-family businesses with the pressure of shareholders, and expectations of performance from highly paid executive roles. There is a sense that the company is less likely to be sold off or make radical changes when it is family owned. The saying ‘in family business a quarter is 25 years’ really sums up a lot about these differences.
KNOWLEDGE AND CRAFTSMANSHIP
It’s incredible the amount of knowledge that gets built up within a business over time. Much of it isn’t in an archive, or defined in a process, or captured anywhere at all. In family businesses much of this is retained within family members, and within the long term staff, who seem to stick around. This becomes even more critical in businesses with craftsmanship at their heart such as watchmakers, jewellers and winemakers. The knowledge that remains within a family business across generations that would otherwise be lost is priceless, it’s not something we can measure, but it is definitely an advantage. And with family business this knowledge transfer begins when you are a child, sitting around the dinner table, listening to stories of the day. As Marilynne Paspaley from the Paspaley Group said, “I didn’t realise until I officially joined the family business just how much of it I already knew.”
VALUES DRIVEN CULTURE
Family businesses are relationship driven. The values are intrinsic and embedded in the business from the get go, with both employees and customers building a strong sense of trust and belonging as a result of this. Are these values always defined? No. But are they a factor? Absolutely. In a manic, technology-driven world where it’s a race to the bottom with price wars and commoditisation, slow and steady with a relationship focus wins the race they say (ok we say, but you agree… right?).
SPEED AND AGILITY
Family businesses have the ability to make decisions quickly, and also act on them quickly. Which can be a huge advantage against their corporate counterparts. “In a family business, we can think about something in the morning and begin working on it in the afternoon,” says Schechter, CEO of hugely successful pearl company, Honora. Success which he attributes to the family advantage.
So it’s sounding pretty rosy for family businesses right now… but like everything in life there are challenges as well. Common issues in family businesses are around succession planning, pressure to put family in key roles without the experience, family tensions, and a lack of clear structures and responsibilities.
The good news is they are all avoidable with the right planning, advisors and governance. So make sure you have everything in place you need to keep ‘family’ as an advantage in your business.
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