- Family businesses are tricky, but they can succeed if family members separate work and personal relationships.
- As a long-term business goal, family businesses tend to have defensive rather than offensive organizational strategies.
- Examples of highly successful family businesses include Fiat, Walmart, Cargill and Comcast.
When it comes to managing a family business, separating work and personal relationships can be admittedly tricky.
It's not impossible; there's just another layer of difficulty. In fact, successful family businesses are a fairly common thing with more than two-thirds of all the companies in the world being family owned. Not only does this indicate that managing a family business can be done, but that it has a huge impact on the success of the business as well as on the global economy.
What are the secrets of these family businesses? Here are three.
Secret No. 1: Family businesses practice minimalism.
In a world that values innovation, it's tempting to ride along with every trend that takes the industry by storm. But successful family businesses have a common habit of practicing minimalism in running their business – that is, being more mindful of what they invest in and whether or not it adds value to the company in the long run.
That's why you'll rarely see a family business with such a hip and trendy office a la Google or Apple. Instead, they'd rather focus their capital on building lean frameworks and hiring core employees so that when a recession hits, they're less likely to do any layoffs or lose money from unnecessary acquisitions.
The opportunity cost to this philosophy is that family businesses have fewer chances of "winning the jackpot" during good economic times. Hence, a smaller growth rate in the short term for the chance of a higher return on investment in the long term.
Secret No. 2: Family businesses don't prioritize profit maximization.
Family businesses anticipate that they will stick around longer than the average startup, so they have a tendency to have a defensive business strategy.
As mentioned, family businesses are wary of joining the trend bandwagon. Cryptocurrency is one such example of a trend that may be seen by others as highly rewarding but is ultimately risky for the rest of us. Hence, you won't see many family businesses participating in such a business model.
That said, just because family businesses don't focus on maximizing profits doesn't mean they don't earn a profit. Some investments may lose money in the short term but prove to be a solid business model in the long run. Family businesses tend to spot these deals and build on them. Instead of earning profit for the sake of it, most family businesses do it the other way around: focusing on their product, their customers, and their employees, which consequentially leads to a higher profit in the long term.
Secret No. 3: Family businesses draw clear lines to avoid conflict.
Unlike nonfamily businesses, one weakness of family-owned businesses is that there is an increased risk of conflicts when the professional and personal worlds collide. But a common secret in overcoming conflict among successful family businesses is the clear definition of roles of every member of the family.
This is how Jayco, an RV company in the U.S., continues to be the largest family-owned company in the industry 50 years after it was established.
Derald Bontrager, CEO of Jayco and son of founder Lloyd Bontrager, says one of their rules is that they don't allow conversations about work during family gatherings. They leave business at the office.
Successful family businesses
Numerous big-name companies had their launches as family businesses. Here are a few to consider:
- Comcast: Comcast is a prime example of one of the most successful family businesses of all time. Founder Ralph Roberts started the company as a small cable TV business based out of Mississippi. Roberts remained involved with the company as it transformed into a billion-dollar empire. Roberts' son has succeeded his father as chairman of Comcast.
- Fiat: Since its inception, Fiat has been headed by the family members of Gianni Agnelli, the primary stakeholder of the automobile manufacturer since the 1960s. Fiat has annual revenue in excess of 118 billion euros, with value increasing after a successful merger with Chrysler.
- Cargill: Cargill is a privately-owned agricultural company that specializes in crops and livestock. The company was founded in 1865 by William Cargill. Cargill launched the company from a small grain storage silo. Today, the company is one of the top agricultural production companies in the United States. The Cargill family still owns 85% of the company.
- Walmart: Sam Walton, the famed owner of the Walmart empire, passed along his business to his three children. Currently, the Walton family owns more than half of Walmart with a market cap of $241 billion.
You don't have to be a family business to apply these secrets to your organization. If you're having trouble running your business, then you could learn a thing or two from how family-run organizations maintain their momentum and stay successful in the long run.