Family businesses are a major part of the economy and they are flourishing.
There are a ballpark 20 million family owned businesses in America,80% of all businesses.
And roughly 35,000 family businesses have annual revenue greater than $25 million.
Family businesses account for 65% of gross domestic product, 62% of the workforce and more than half of all new jobs.
Some of our major corporations are family owned,such as Est & #233;e Lauder Inc. and S.C. Johnson & Son Inc.,or at least to some degree family controlled,including Ford Motor Co. and Wal-Mart Stores Inc.
But most family businesses don’t survive. Only 30% make it to the second generation and only 12% to the third.
Some of this is inevitable. A lot of family businesses are restaurants and bars, which always have been easy to start but hard to sustain.
And a huge number of family enterprises were started by soldiers returning home from World War II.
Now these veterans are in their 70s and 80s. Their well-educated, Baby Boomer children have many career choices and are not automatically signing on to carrying on the family business.
This and other factors are triggering interesting trends in family businesses.
A fair number of family firms are bringing in executive management and presidents from the outside.
The Family Firm Institute finds that 39% of family businesses will change leadership in the next five years, and that in a third of these businesses, the new chief executive will be a woman.
That far exceeds the rate of corporate CEOs among the Fortune 500 companies of America.
And 60% of family businesses in a recent study said they were very positive about their business.
But problems exist.
Better succession planning, business practices and decision-making are needed.
Do relatives get the same paycheck as other employees doing the same work? Must family members meet the same job descriptions and receive the same employee evaluations as other workers? If not, they should.
Several owners of family businesses tell me that they are amazed to find that many well-qualified executives are available and interested in becoming outside directors. These experienced hands thrive on being able to pass along their skills and experiences to smaller companies.
And they are seldom looking for big compensation.
They just yearn to be involved and helping others.
One way to attract good outside directors is to make part of the director’s compensation a donation to his or her favorite philanthropy or charity. Several well-known public companies use that policy, including General Electric Co., IBM Corp. and McDonald’s Corp.
Family businesses also should utilize “family” as a “reason why” in their marketing and advertising,on the package, on Web sites, on letterheads, in brochures, on business cards, whatever they use to communicate their products or services.
Research by Northwestern University confirms that family businesses are perceived by consumers as being of high quality and trustworthy.
Note the word “trust.” It is part of what today’s love affair with “Branding” is all about.
American universities and colleges also are a valuable resource for family businesses.
Approximately 100 of these institutions offer programs focused on family businesses, including Loyola University of Chicago, the University of Massachusetts, University of Notre Dame, University of Oregon, University of Southern California and my own school, California State University, Fullerton.
Here are characteristics of a typical college family business program:
Located in the college of business, often as part of an entrepreneurship course.
Annual budget of about $150,000.
Staff of a director doubling as teaching professor, an assistant and one or two student assistants.
Participation from 30 to 40 family businesses.
Annual tuition of roughly $2,000.
Monthly workshops and seminars.
Peer group round tables.
Undergraduate courses and some executive education, especially for the “next generation.”
(Our program at Fullerton is very much like the model, except that we are a little bit larger.)
Family businesses have both intrinsic challenges and opportunities that distinguish them from other companies.
A commitment to values and thoughtful planning are the best ways for family businesses to deal with the challenges and leverage the opportunities, so that they can both survive and thrive.
Trueblood is director of Cal State Fullerton’s Family Business Council. The sixth annual Family Owned Business Awards luncheon, presented by the council and the Business Journal, will be held Nov. 17 at the Hyatt Regency Irvine. J.F. Shea Co. Chief Executive John F. Shea will be the keynote speaker. For information go to www.ocbj.com and click “Events” or call (949) 833-8373, ext. 209.
