At least 70 percent of the world’s GDP is attributed to a family-owned business. Some estimates place this as high as 90 percent.
In America, there has been an ongoing trend to support family businesses. The pattern is based on a great idea, but the facts are a little skewed.
The new trend focuses on small local businesses. Small businesses are those family-owned operations most in need of support. But, it’s essential to understand the real facts creating the whole picture.
Continue reading to find out the truth about family-owned businesses in America. Statistics can help you understand how these companies affect the economic landscape.
What’s the Truth About Family-Owned Business?
There’s a common misconception about what the term “family-owned business” really means. In America, the idea brings up an image of a small mom and pop shop. But how accurate is this?
It depends on which business you’re talking about. There are many companies controlled by family units throughout the country. Each of them is unique, coming in varying shapes and sizes.
A movement has begun across the states to start patronizing family-owned businesses. Many family businesses are local operations relying heavily on your ongoing support. But these are only the majority and not representative of the whole.
The movement doesn’t actively distinguish one size of a family business from another.
The campaign should be focused on small to mid-size companies, which most need your support. Most people are already shopping at large corporations and chains operated by family units.
Statistics paint a better story of the real landscape of family-owned businesses in America. These are discussed below.
The Backbone of the American Economy
Family-owned businesses holds the American economy together. If you took all family-controlled companies away, the economy would fall apart.
Around 64 percent of U.S. domestic product is created by family-owned businesses. These companies generate approximately 62 percent of the country’s employment. They account for 78 percent of all new job creation.
It’s Not Just Small Businesses
A common misconception is that the term “family-owned” refers only to small businesses. This is far from accurate. Families control around 35 percent of all Fortune 500 companies.
Companies owned by a family-run the gambit. They exist as giant corporations, tiny local businesses, and everything between.
The Largest Family-Owned Company in America
We mentioned family-owned companies come in all sizes. But the largest one is a very familiar face you may not have realized was family-operated.
Wal Mart is a publicly-traded company still primarily controlled by the Walton family. Sam Walton’s children still own the majority of company shares. His grandchildren are also involved in the company.
Loyalty to Employees
A survey showed that family-controlled businesses are more loyal to their employees. Even in a time of financial distress, they are less likely to start laying people off.
Long Periods of Family Control
The average time of control for family-owned businesses in American is 60.2 years. Many companies stay in control of a single family for significantly longer.
Of American family-owned companies, around 30 percent transition to the second generation. Twelve percent continue to the third generation. But, only three percent transition to the fourth generation and beyond.
Family-Owned Businesses Support Female Leadership
Women play a large roll in family-controlled business leadership. The trend of women appearing in leadership roles has increased in the past few years.
Currently, a little less than a quarter of family businesses are led by a female president or CEO. More than half of companies have stated a woman is next in line to lead their business. Over half of companies have a woman in top management team positions.
The Future of Family-Owned Business Faces a Problem
Family-owned business is the backbone of the economy, but they’re facing a big problem. The difficulty comes when it’s time to transition to the next generation. Several issues stand in the way of success.
Less Interest From Next Generation
Fewer members of the next generation express a desire to take over the family business. In some circumstances, potential future leaders are transforming traditional companies into something different. Others are pursuing different careers and leaving their family’s businesses altogether.
No Succession Plans
Less interest from the next generation isn’t the only issue family businesses face. Almost half of the owners retiring in the next five years haven’t yet chosen a successor. Around 43 percent of all family business owners have no succession plan in place.
Detailed succession plans are vital to continued company success. What happens without one? Family-controlled companies could fall into chaos if something happened to current owners.
An Important Note
It’s important to note this issue doesn’t affect all family-owned business. Some companies (like ours) have plans in place that will protect both the company and customers moving forward.
The Truth About Family-Owned Businesses in America
What everyone imagines as a family-owned business in America is only part of the big picture. These companies run the gambit from small local mom and pop shops to giant corporations.
Family-operated companies are the backbone of the American economy. If you took them away, there would be almost no economy at all.
Do You Have More Questions About the Truth About Family-Owned Business?
The truth about family-owned business is that they support the American economy. Family-controlled companies aren’t only small local operations but also giant corporations.
Do you have more questions about family-owned business? Or, do you want to lend your support to a local family business?
Contact us today. One of our associates would be happy to answer any questions you may still have. Our business is a local family-operated company that appreciates your support.
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