Impressive, isn't it? But here's another set of statistics that will show you how difficult it is for a family business to succeed in the USA -- only 30% of family businesses transition successfully to the second generation, this figure drops to 12% from the second generation to the third generation and to a low of 3% from the third generation to the fourth generation. In a nutshell, only 3% of all family businesses ever make it to the fourth generation. That figure is absolutely startling.
Given those facts, what do you think are the odds of a family business making it past the 350-year mark? Near impossible, don't you think? That's almost true. But believe it or not, over 100 family businesses in the US have surpassed the 100-year mark, many of them dating back to the 17th and 18th century.
In 2003, Family Business magazine conducted a study on 102 of the oldest family businesses in the US, including 43 manufacturing firms, 25 service companies, 21 farms, 10 retailers and others. They businesses include the likes of Zildjian Cymbal Co. (founded in 1623), Shirley Plantation (1638), Barker Farm (1642) and Miller Farm (1684). The list is diverse and spread over 36 different states. But one thing they have in common is that all of them have been around for over 100 years.
After careful study, the magazine identified four key traits shared by many of the oldest family businesses in America. They can be considered vital lessons of success for family businesses that also desire to pass the test of time. They are as follows:
1. Remain small
It doesn’t seem like sound business advice, particularly in the light of modern-day expansion and globalization, but the numbers bear this lesson out: small family businesses have a greater chance of passing the test of time than large ones. Of the 102 oldest family businesses in the US, around half have less than 15 employees and many have less than 10. On the other hand, only seven of the 102 oldest companies can be considered large corporations, with revenues of over $3 billion. As Family Business magazine notes, there is sound long-range business sense in the Biblical saying, “The meek shall inherit the Earth.”
It doesn’t seem like sound business advice, particularly in the light of modern-day expansion and globalization, but the numbers bear this lesson out: small family businesses have a greater chance of passing the test of time than large ones. Of the 102 oldest family businesses in the US, around half have less than 15 employees and many have less than 10. On the other hand, only seven of the 102 oldest companies can be considered large corporations, with revenues of over $3 billion. As Family Business magazine notes, there is sound long-range business sense in the Biblical saying, “The meek shall inherit the Earth.”
2. Avoid going public
Offering the company’s stocks to the public may be a tried and tested way of raising capital, but it also tempts takeover artists into pouncing on the business. On the other hand, keeping ownership of the company strictly within the confines of the family can help the family business last for over 100 years. To illustrate, only three companies among the 102 oldest family businesses are publicly traded corporations, and all three are at the bottom of the list – R.R. Donnelley at number 94, Anheuser-Busch at number 88 and Corning at number 65.
Offering the company’s stocks to the public may be a tried and tested way of raising capital, but it also tempts takeover artists into pouncing on the business. On the other hand, keeping ownership of the company strictly within the confines of the family can help the family business last for over 100 years. To illustrate, only three companies among the 102 oldest family businesses are publicly traded corporations, and all three are at the bottom of the list – R.R. Donnelley at number 94, Anheuser-Busch at number 88 and Corning at number 65.
3. Stay away from major cities
Of the 102 oldest family businesses, only 27 companies were located in large metropolitan areas that had at least one major professional sports team. That’s just a little over 26%. Meanwhile, of the 50 oldest family businesses, only seven were based in major urban areas (14%).
Of the 102 oldest family businesses, only 27 companies were located in large metropolitan areas that had at least one major professional sports team. That’s just a little over 26%. Meanwhile, of the 50 oldest family businesses, only seven were based in major urban areas (14%).
4. Let a family member run the business
In general, family businesses that had a family member at the helm outlasted those businesses that were run by non-family members. Apparently, when it comes to business longevity, it’s not enough to tap a professional manager to run the family corporation if you want the business to be around for over a century. The family must be hands on. As the old cliché goes, “Blood is thicker than water.”
In general, family businesses that had a family member at the helm outlasted those businesses that were run by non-family members. Apparently, when it comes to business longevity, it’s not enough to tap a professional manager to run the family corporation if you want the business to be around for over a century. The family must be hands on. As the old cliché goes, “Blood is thicker than water.”
It seems then that if the goal of your family business is to create a leviathan then most probably your company will eventually pass out of family control, if not in your generation then like as not in the next. This may not be a bad thing for the business, and indeed your descendants may continue to benefit financially from their shareholding in the company you founded.
If, however, it is your desire for your business to remain totally within the control, and day to day management, of family members then small maybe beautiful after all!
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