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Family owned businesses are the heart and soul of America. From our country’s earliest beginnings, families have worked together to create companies that sell goods, services or ideas. From the smallest mom and pop shop functioning out of a room in the house or garage to the largest of corporations with relatives running day-to-day operations, family businesses are the backbone of U.S. economy.
As reported in Inc., the U.S. Bureau of the Census cites that about 90 percent of American businesses are family owned or controlled. The Conway Center, a 501(c)3 nonprofit that provides educational resources and programs for family owned businesses (familybusinesscenter.com), reports that family businesses account for 64 percent of U.S. gross domestic product, generate 62 percent of the country’s employment and account for 78 percent of all new job creation.
Our region has its share of family run businesses as well: Mt. Bachelor was founded more than 50 years ago by Bill Healy with the support of his wife and children and is now owned by POWDR, which was founded by brothers John and David Cumming in 1994. Bend Soap Company was founded by a mom and dad who now have ten kids; Budget Blinds of Central Oregon — which was among Cascade Business News’ Fastest 20 Growing Businesses Awards recipients — is owned by several members of the Hughes family; and your very own Cascade Business News was a family run business for 25 years prior to the passing of founder Pamela Hulse Andrews two years ago, at which time her son, Jeff Martin, assumed ownership and became president and CEO. This is but a tiny sampling of the family businesses in our area.
As with anything, family businesses have unique blessings and unique challenges. Among the benefits of a family business is the valuable trust that builds up over the years with loyal customers and employees. A Harvard Business Review Study shows that family businesses retain talent better than their competitors do, with only nine percent of family business work forces turning over annually, versus 11 percent at non-family-owned firms.
The Conway Center also reports the following interesting data:
- Family owned businesses practice good governance: A Harvard Business Review study showed that 94 percent of surveyed family firms were controlled by supervisory or advisory boards.
- Leaders of family businesses focus on the next generation — not the next quarter — embracing strategies that put customers and employees first and emphasize social responsibility.
- They create a culture of commitment and purpose, avoiding layoffs during downturns, promoting from within and investing in people.
- The tenure of leadership in a family enterprise is four to five times longer than their counterparts.
Family businesses must be strategic in order to succeed: Statistics show that while more than 30 percent of all family owned businesses make the transition into the second generation, only 12 percent will still be viable into the third generation and just three percent will be operating at the fourth-generation level and beyond.
In order to keep the business going into future generations, planning for the future and keeping up with technological evolutions are key. These components may require family members to learn new skills in order to compete in an ever-growing digital economy. Statistics about future planning in family businesses offered by various surveys indicate some of the biggest challenges faced:
- It is estimated that 40.3 percent of family business owners expect to retire, creating a significant transition of ownership in the U.S. Less than half of those expecting to retire in five years have selected a successor.
- Nearly half of family business owners (43 percent) have no succession plan in place.
- Even though nearly 70 percent of family businesses would like to pass their business on to the next generation, only 30 percent will actually be successful at transitioning to the next generation.
- A majority of family businesses (60 percent) believe that their ethical standards are more stringent than those of competing firms. They also report that ethical standards are discussed often or always at meetings with employees, in discussions with customers and during board meetings.
Despite these concerning statistics, if you own or work in a business with one or more family member, take heart; here is encouraging data reported by the Conway Center:
- Family owned businesses have strong entrepreneurial activity across time, often owning more than one firm through spinoffs, mergers and acquisitions and other means.
- Wal-Mart is a family-owned business! Wal-Mart reported in 2016 that it is the largest family owned business in the U.S., with $499.4 billion in net sales and 2.2 million employees worldwide in 2016.
- In the S&P 500 companies, ROI is greater in family businesses, with a 6.65 percent greater return than non-family firms.
- Women are participating in leadership of family businesses in increasing numbers: Currently, 24 percent of family businesses are led by a female CEO or president, and 31.3 percent of family businesses surveyed indicate that the next successor is a female. Nearly 60 percent of all family owned businesses have women in top management team positions. Over the past five years, woman-owned family businesses have increased by 37 percent.
If you are in a family run business, remember that you are not alone. There are resources out there that can help. For more than 30 years, Oregon State University’s Austin Family Business Program has helped family enterprises succeed by addressing challenges, offering solutions and serving as a source of support (business.oregonstate.edu/familybusinessonline). There are also numerous organizations offering memberships designed to help families gain the tools needed to succeed in running the business, from podcasts and workshops to lists of references that help with specific areas of concern. And of course, countless books and articles have been written on the subject.
In this issue of Cascade Business News, we take a look at family businesses in Central Oregon. Our hope is that in doing so, we can help you build a lasting and profitable legacy. Family owned companies can be economic powerhouses that drive economy locally and globally and can also create a sense of connection and identity between the family members and their customers. These businesses can help pass down family values such as philanthropy, charitable giving, good spending habits and a sense of commitment and purpose to younger generations. We love to hear about these multigenerational success stories, and we hope you do too!
