Findings from a nationwide survey offer
a fresh look at family business* in the US today.
Finding 1. Only one
quarter (24%) of family business owners do not want their ownership
position in the business passed on to a relative. The majority (65%)
wish to see the family ownership continue; of these, about half
foresee doing so within the next ten years.
Finding 2. There
is a lack of preparation for ensuring the continuance of family
ownership.
Almost three-quarters (74%) of business owners intending
to pass on the family business to a relative do not have a written
succession plan; only 54% have chosen a successor. Age increases the likelihood
of a written succession plan. Two-fifths of those 65 or older have a plan, compared
to one-fourth of those 50-64 years of age.
Finding 3. Management
practices of family businesses point to an informal approach. Of
businesses surveyed, less than half (42%) have written business
plans or hold regular board meetings. The management practice most
commonly implemented is a formal and regular employee review process
(59%).
Finding 4. Six out
of seven family businesses that have chosen a successor have named
a family member. The successor (in the case of 65% of family businesses
surveyed) will be prepared/educated for the role by on-the-job-training.
Finding 5. Thirty
percent report having no trusted business advisor outside of the
family. Accountants are the outside advisors relied on most frequently.
The type of advisor used with least frequency (3% or less) is the
category of "family member not in the business."
Finding 6. Increasing
profitability of the business is a key goal for 89% of family business
owners; expanding the size of the business is key for 37%. Near
the middle (63%) is the goal of reducing the debt level of the business.
Finding 7. Thirty-five
percent of businesses were started by a previous generation, and
17% go back two or more generations. The wealthier respondents (with
household incomes of $250,000 or more) are more likely than other
family business owners to report a long entrepreneurial family history.
Finding 8. In 49%
of family firms, the spouse is involved in day-to-day operations.
The son of the business owner is twice as likely as a daughter to
be involved in this capacity. Also associated with gender is this
finding: female family business owners are more likely than their
male counterparts to have their spouse involved in the active management
of the business.
Finding 9. Over 21%
of businesses rate operating cash flow among their most important
sources of capital, and another 63% consider it very important.
Most family business owners say they have either excellent (44%)
or good (35%) access to capital. Ratings improve as household income
increases.
Finding 10. Eighty-three
percent of the owners of the larger family businesses (those with
more than 250 employees) intend to pass on their stake in the business,
but only 10% of businesses in this size range have a written succession
plan.
*For this survey,
a family business is defined as one wherein the family members
are employed in the daily operation of the business; the owner
intends to pass on his or her ownership position to a close relative
or relatives; the owner considers the operation to be a family
business.
Research provided by Massachusetts Mutual
Life Insurance Company, Springfield, MA 01111.
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