Family Business

It is often said that family businesses are the engine room of the economy.

This is because in most countries, including Australia, family businesses:

Account for 60-80% of all businesses in the economy
Represent around 70% of the national Gross Domestic Product (GDP); and
Employ over 60% of the entire workforce

There is also a growing body of evidence which suggests that family businesses enjoy many competitive advantages over non-family organisations (ie public companies, non-family partnerships and government owned/influenced enterprises) including:

Higher returns on investment
More nimble decision making processes
Quicker and more successful product/service innovation
Stronger and more passionate staff engagement and values alignment
Higher levels of consumer trust and respect.

However, family businesses can also face a range of challenges and disadvantages, including:

A tendency for decisions to be based on emotional or family considerations, not commercial grounds
Restraints on the capital and resources needed for growth and innovation
Unstructured decision-making & governance processes

A critical issue that many family businesses grapple with is whether they adopt a Family First philosophy, where the emphasis is on equality, relationships and birthright or a Business First philosophy, where the emphasis is on results, merit and survival of the fittest.

When the right balance between the two powerful ingredients of family and business is struck, a level of passion, engagement and strength is achieved, that non-family businesses simply can’t match.

In my experience, the most successful and sustainable family business are those who consciously strike a sensitive balance between these sometimes conflicting philosophies. Such businesses:

Readily employ family members in key roles, provided they bring valuable skills/experience, or are prepared to develop them.
Make quick and intuitive decisions, but consult with their Family Council or Board before doing so; or
Have emotional and sometimes irrational discussions, but save these for the safety of the Family Council or Retreat.

The formal definition of a family business is “an enterprise involving two or more family members, where there is an expectation of continued family ownership”. However, my preferred definition of a family business is the“volatile, but powerful concoction you get when you mix money with blood.”

When the right balance between these two powerful ingredients is struck, a level of passion, engagement and strength is achieved, that non-family businesses simply can’t match.

Ground Floor
61 Station Street
Malvern Vic 3144
0419 306 271
martin@kininthegame.com.au