In association with Yolanda Gibb, Dinah Bennett has developed a series of blogs specifically geared to providing insights into family enterprise and entrepreneurship. This first post provides some context for the series, explaining why supporting family business is so vital.
The scale and contribution of Family Business
Family Business represents a huge opportunity which is already making a major contribution to the global economy, and that, if effectively supported, will continue to grow both in significance and in strength. According to the best available research, it is estimated that in most countries around the world family-owned businesses actually make up at least 60%, and sometimes as much as 90%, of non-governmental GDP (and between 70% and 95% of total business entities), and they collectively contribute between 50% and 80% of all private sector jobs.
Family also has a significant stake in the prevalence of new start businesses, with an estimated 85% of all business start-ups being financed through family investments. Alongside this, many studies show that family businesses can be more financially sound over the long term than their non-family counterparts. This manifests itself in many ways. Family businesses can be more reticent to lay-off staff as well as being more likely to hire, possibly a symptom of their propensity to balance short-term rewards against a longer term view of sustainability and prosperity; they tend to invest heavily in their local community, both through their business activities and philanthropically; and family business owners have been recognised as using less debt than non-family businesses, leading to improved stability, especially in more difficult economic times.
Challenges facing Family Business
To fully realise the potential of family businesses, economically and socially, however, we collectively need to address some challenges, the first being the closed nature of many family businesses which can lead to a reluctance to engage with external advice and support. ‘Keeping it in the family’ can lead to stifled innovation which can restrain the evolution of businesses as the environment in which they are operating continues to change. Added to that, the challenges associated with family dynamics can be significant – questions such as whether the business or the family comes first, and managing changes in control and leadership through the generations, can have major implications for business sustainability and growth.
For more on this topic, read Family Strategy is key to family business support.
A strategic approach to Family Business Support
It is clear that to fulfil the potential of family business in the long-term, for society and the economy, and for the family business owners themselves, a strategic approach to embedding and delivering support is required. Getting over the natural reticence of family owners to allow the ‘outsider’ in to provide advice and support is a challenge that needs to be faced head-on. Whilst doing so, however, we must also recognise that the nature, attitudes and approaches adopted within family business need to be better understood, to enable a transfer of knowledge and best practice for the benefit of the global business community at large.
To read other posts on the topic of Family Business go to ice Family Business Series
ICE Founder Dinah Bennett in association with Yolanda Gibb