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“Family businesses are different.”“Focusing on Business Families,” BDO, November 2009, accessed October 8, 2011, static.staging.bdo.defacto-cms.com/assets/documents/2010/04/Focusing_on _business_families.pdf.
BDO 2009 Report: “Focusing on Business Families”
There is no agreed-on definition of a family business. The percentage of ownership, the strategic control, the involvement of multiple generations, and the intention for the business to remain in the family are among the many criteria that experts use to distinguish family businesses from other types of businesses.Joseph H. Astrachan and Melissa Carey Shanker, “Family business’s Contribution to the U.S. Economy: A Closer Look,” Family Business Review 16, no. 3 (2003): 211–19. For the purposes of this chapter, however, a family businessA business that is actively owned and/or managed by more than one member of the same family. is defined as a business that is actively owned and/or managed by more than one member of the same family.“Family Businesses,” Entrepreneur, 2010, accessed October 8, 2011, www.entrepreneur.com/encyclopedia/term/82060.html. A family business can also be defined as the result of someone’s dream:
The story of every successful family business starts with someone who has the passion, confidence and courage to put his [or her] money where his [or her] mouth is…[These entrepreneurs] work incredibly hard, make things happen, are positive without being unrealistic and possess the resourcefulness to overcome all sorts of hurdles. They are also socially adept, capable of communicating effectively and good at inspiring others…“Making a Difference: The PricewaterhouseCoopers Family Business Survey 2007/08,” PriceWaterhouseCoopers, November 2007, accessed October 8, 2011, www.pwc.com/en_TH/th/publications/assets/pwc_fbs_survey.pdf.
Family business owners know that their roles are different from that of shareholders in companies owned by many public investors. In addition, “employees in family businesses know the difference that family control makes in their work lives, the company culture, and their career. Marketers appreciate the advantage that the image of a family business presents to customers. And families know that being in business together is a powerful part of their lives.”Kelin E. Gersick et al., Generation to Generation: Life Cycles of the Family Business (Cambridge, MA: Owner Managed Business Institute, Harvard Business School Press, 1997), 1.
Because of the private nature of most family businesses, it is difficult to obtain accurate information about them.Joseph H. Astrachan and Shanker, “Family business’s Contribution to the U.S. Economy: A Closer Look,” Family Business Review 16, no. 3 (2003): 211–19. Complicating the situation is that most data sources do not distinguish between small family businesses, such as the local pizza parlor or deli, and large family businesses, such as Walmart, Mars, and Ford. “The reality is that family-based operations are represented across the full spectrum of American companies, from small businesses to large corporations.”“Family Business Statistics,” Gaebler.com: Resources for Entrepreneurs, October 10, 2010, accessed October 8, 2011, www.gaebler.com/Family-Business-Statistics.htm. Within this context, the following has been observed:“Family Business Statistics,” Gaebler.com: Resources for Entrepreneurs, October 10, 2010, accessed October 8, 2011, www.gaebler.com/Family-Business-Statistics.htm; and Stacy Perman, “Taking the Pulse of Family Business,” February 13, 2006, accessed October 8, 2011, www.BusinessWeek.com/smallbiz/content/feb2006/sb20060210_476491.htm.
What this means is that family businesses continue to be a powerful economic force, no matter what their size and no matter how they are defined. “Family firms are the most common form of business structure; they employ many millions of people; and they generate a considerable amount of the world’s wealth.”“Making a Difference: The PricewaterhouseCoopers Family Business Survey 2007/08,” PriceWaterhouseCoopers, November 2007, accessed October 8, 2011, www.pwc.com/en_TH/th/publications/assets/pwc_fbs_survey.pdf.
The focus of this chapter is on the small family business.
Mother and Daughter Partner in Family Business
A mother and daughter partner in a jewelry business.
There are benefits to a family business, but there are disadvantages that must be considered as well. Starting a family business is not for everyone.
A family business offers the following advantages:
Iron Horse Barbecue
A family-owned business that is helping other business fire up businesses of their own.
“If family businesses are so common, how can they also be special? When Freud was asked what he considered to be the secret of a full life, he gave a three-word answer: ‘Lieben und arbeiten [to love and to work].’ For most people, the two most important things in their lives are their families and their work. It is easy to understand the compelling power of organizations that combine both. Being in a family firm affects all the participants. The role of chairman of the board is different when the company was founded by your father and when your mother and siblings sit around the table at board meetings, just as they sat around the dinner table. The job of a CEO is different when the vice president in the next office is also a younger sister. The role of partner is different when the other partner is a spouse or a child. The role of sales representative is different when you cover the same territory that your parent did twenty-five years earlier, and your grandparent twenty-five years before that. Even walking through the door on your first day of work on an assembly line or in a billing office is different if the name over the door is your own.”Kelin E. Gersick et al., Generation to Generation: Life Cycles of the Family Business (Cambridge, MA: Owner Managed Business Institute, Harvard Business School Press, 1997), 2–3.
As attractive as family businesses are on many fronts, they have the following disadvantages:
Not all children of owner-managers may want to join the business. According to one study,Sue Birley, “Attitudes of Owner-Managers’ Children towards Family and Business Issues,” Entrepreneurship Theory and Practice, Spring 2002, 5–19. 80 percent of those who did not work in the family business did not intend to go into the business. This reluctance comes from several directions, such as the following:
Why Some Children of Owner-Managers Do Not Want to Join the BusinessSue Birley, “Attitudes of Owner-Managers’ Children towards Family and Business Issues,” Entrepreneurship Theory and Practice, Spring 2002, 5–19.
I see the pressure my dad is under—this does put me off slightly. I want to enjoy my job as well as enjoying life outside work.
A larger factor when working under a relative is the problem of self-worth. It is hard to feel like you are worth something when your father is an MD.
A business relationship with your father makes your family relationship harder.
I do not look to go into the family business straight away, as I feel this is giving a commitment to work there for the rest of my life.
I would join only because I am genuinely qualified, not because I am the owner’s daughter.
The difference in my father’s education and mine is a factor affecting why I have decided not to go into the business. I have more choice over what I want to do as a career, and my personal interests would not be met by my father’s company. I am sure it would not have been his choice had he had the same educational choices as me.
As much as the route into the family business is seen by outsiders as an “easy route to wealth and inheritance,” in my case it was also a liability. At 17, was I to be the fourth generation after 100 years that could not keep the company going?