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If you are planning to grab a latte or buy a car today, you’re likely not thinking much about who owns the coffee shop or car dealership from which you purchase. Interestingly, the odds are it’s owned by a family. Whether a married couple venturing forth as coffee shop copreneurs or a grand auto showroom, held by multiple generations, when you pull back the curtain, you’ll likely find a family at its core. In fact, most transactions people in America make on any given day involve a family-owned business. That’s because most U.S. businesses are family owned. And, although they tend to be small, they are vital because collectively, they employ nearly half of all workers in the country and serve as the backbone of the U.S. economy.
Family businesses are sometimes referred to as “Mom and Pops.” I consider that a diminutive term that underrates the financial strength of a typical family enterprise. Families in business make up a demographic that seems to work hard and quietly go about its business without a lot of fanfare. Often, they tend to be insular and private by nature, preferring to keep a low profile. Yet, despite an often-demure existence, they deserve our attention and respect, because what family business does well, is a benefit to us all. Here’s why:
Better Financial Discretion. When money is hard earned, maybe over generations, it leads to more conscientious spending both at the family and the family business level. Their frugality in turn helps build cash reserves. Being well funded allows the successive generations to keep their business doors open through long or challenging economic downturns.
More Financially Conservative. When it comes to investing, family businesses are more likely to choose low risk opportunities with long term payouts over flashier high-risk options. They are less leveraged than their publicly traded corporate counterparts. Collectively, their balance sheets show a lower debt to earnings ratio. Their greater economic stability benefits us all, because when a business fails to service its debt, the loss is ultimately absorbed by the rest of us.
They Keep Us Employed. The global pandemic reminded us how fragile jobs can be, and that in tough economic times, we want to be employed by stable companies. Because of their financial stability, their relationships with and appreciation for their workers, employees of family-owned businesses are less likely to face layoffs in an economic downturn. The overall economic impact is significant because nearly two-thirds of the U.S. workforce counts on paychecks from a family business.
More Women Leaders. When it comes to selecting its leaders, family businesses smash the glass ceiling paradigm. Perhaps the environment allows the best leaders to emerge naturally. Among the larger multi-generational family businesses, nearly 60 percent have women in top management positions. Their leadership contribution tends to further benefit family firms in the form of greater business loyalty, pride and alignment of both vision and goals.
Less Turnover. Family businesses tend to create a culture of loyalty. Commitment extended to employees through training and development and by promoting from within, is repaid by employee allegiance. The result is lower turnover rates and longer employee tenure.
Stable Backbone. Most family businesses are either sold by or dissolve during their original generation. About one-third will continue to operate and even grow when the next generation takes over. That longevity supports economic stability for the family, for the business and the overall economy.
Despite all these great things about family business, it’s not unusual for owners and members of family businesses to feel socially discounted, as though their jobs are not as legit as those with corporate titles and star-studded LinkedIn profiles. There’s a certain glamour attached to working for Google, Nike or Goldman Sachs. It’s a cachet of credibility and elite status that working for mom and dad doesn’t match.
But your family business is important and worth your continued time and investment. Give your own family business the focus and attention it deserves. If you’re not sure where to start, consider working with a coach or consultant. When a family business embraces a culture of learning and growth, it has the potential to achieve a respected legacy and be among the longstanding businesses that are so vital to our American economy.
For more information on how my customized coaching program can help your family business, contact me through my website at AngelikaOlsen.com.