We explain what a family business is, its characteristics and the advantages it has. Also, its possible disadvantages and examples.
What is a family business?
A family business is a commercial or corporate organization whose decisions are controlled or influenced by a family group whose successive generations usually dedicate themselves to the company. In this way, among the expectations and strategic vision of this type of organizations is that the successors take the reins, giving continuity to the organization.
This term does not apply to those companies that have a single owner and administrator. In fact, family businesses are the oldest type of economic organization and many of the large companies listed on the countries' respective stock exchanges are family-owned.
This is undoubtedly due to the fact that in ancient times the trades were transmitted from father to son and the workshops were generally housed in the house. The kings and the aristocracy, in the same way, inherited their possessions and their privileged position within the feudal order to their descendants, thus forming socioeconomic castes.
Later, the great bourgeois families of the Renaissance, whose economic power also gave them political influence, relied only on their family lineage as method to keep business always in favor of particular interests. This is precisely the criterion adopted by the Italian mafias of the “cosa nostra”, behind which there was always a family fiefdom.
Characteristics of a family business
For a company to be considered family-owned, the family or one of its members must have at least 20% voting rights and a higher percentage of shares than the rest of the investors. Thus, family decisions would have the greatest possible weight in the company, and the general tendency would be to incorporate family members in key control and decision-making positions.
On the other hand, a family business bequeaths the leadership of the company to the descendants, through a succession mechanism that usually occurred in patriarchal terms, that is, from parents to male children. That pattern has been changing, fortunately, and more and more women are taking charge of family businesses.
Advantages of a family business
The advantages of any family business point to control that is had over the company and the continuity that is given to it throughout the generations. A family business will rarely cease to be a family business, except in cases of economic crisis that forces it to be sold or bankrupt or similar situations.
Another virtue lies in the generational accumulation of assets throughout history, which allows subsequent generations to train more and better regarding the trade and to have a niche in which to apply their expertise.
Disadvantages of a family business
The most common disadvantages of a family business have to do with conflicts of interest within the family in question. Given the emotional bond that necessarily exists between the members of a family, it is common for there to be quarrels, family myths or additional pressures (that relate business success to the emotional place within the family) whose impact on business performance can be considerable. .
Similarly, the business and private circuits tend to overlap in this type of companies, which point towards the fusion between family, company and property. It should be considered that although the family's business actions will be in charge of one or more of its members, there will be many other family members who will never have anything to do with the company and who will have different agendas and interests.
Examples of a family business
Below are some examples of successful family businesses:
- Walmart. This colossal American discount store chain was founded in the 1960s by Sam Walton, and to this day the Walton family controls around 48% of the company's shares.
- Ford. The mythical automotive company of Henry Ford, the genius creator of the mass production model, is still managed by his descendants, who manage 40% of the company's total shares.
- Comcast This cable television service provider company is among the largest in the world. It was founded in 1963 by Ralph J. Roberts, and his son, Brian Roberts, is currently its leader.
- BMW Although this German automobile company was not founded by the family that runs it today, it is true that after the Second World War Gunther Quandt bought a strong stake in it and has since bequeathed it to his descendants, who They still own 48% of its shares.
- Toyota. This Japanese automotive company belongs to the Toyoda family, and for decades they held all of its shares. This has not been the case since 1993, but its current president and CEO is Akio Toyoda, a descendant of the founder.
