Gema Consult

Only 13% of Family Owned Business Can Survive – Is It a Curse?

Only 13% of Family Owned Business Can Survive – Is It a Curse?

Only 13% of Family Owned Business Can Survive – Is It a Curse?

Family-owned businesses (family business) are great — they care about their customers, they’re the backbones of local communities, and they operate with integrity. Right? Maybe so, but sadly, research shows that most of them won’t survive.

Only 30% of family businesses make it long enough to be passed on to the next generation — and that number drops down to 13% when we look at those who make it to the third generation. Beyond that, only 3% survive.

If you’re wondering what gives, you’re in the right place. We’ll look at what makes family businesses different from the rest and whether there’s anything they can do to limit the effect of this “curse.”

Passing on the torch

As we’ve seen, one of the main ways to measure the success of family businesses is the number of generations they’re passed down to. That’s because a new generation means sink or swim.

Generally, when the CEO or director of a company has to step down, they’ll choose someone else in the firm to replace them — perhaps an executive or another promising employee. In this case, they’ll choose someone based on their merit and capability.

When it comes to family businesses, this role goes to another member of the family. This can be great, but there’s no guarantee that the next owner will be up to the task, explaining the high failure rate across generations.

Still, failure isn’t inevitable — it just means that families have to ensure they pass the proper knowledge and skills down through their bloodline.

Common issues

Running a company is no easy matter, especially when you’re operating globally and need to deal with international regulations and standards. These compliance issues play a considerable role in explaining the failure of family-owned companies — continuing the right systems and processes is extremely difficult.

Other vital problems include maintaining and recruiting the right talent and implementing long-term strategies. Again, they require serious know-how to get right, and families often struggle to pass it on appropriately (even if they try their best).

A major success story in the world of family businesses is Mars — current chairperson Victoria Mars is part of the fourth generation, putting her company in that tiny minority of long-term successes. Mars recommends implementing policies to “govern” the family, ensuring they stay educated, and having a solid company culture that reflects family values.

While this type of approach isn’t for the faint-hearted, it shows the kinds of sacrifices that are necessary for success in this area.

Join the 3%

If you’re running a family business — or expecting to inherit one sometime soon — then you need to take action to ensure that your firm becomes part of the 3% that continue to operate indefinitely.

What can you do to lower your chance of failure? In addition to nurturing an understanding of the business into the family from a young age, firms can bring in a third party to help them set up their human resources practices the right way — and at Gema Consult, we can do precisely that. Why not contact us to find out more?

Need help with figuring out your first step?

Are you leading by example by showing everyone in your organization how to clean up their operations?

If the honest answer to that question is negative, it’s time to start taking action. At Gema Consult, we help small businesses to clean up their bookkeeping efforts, alongside a variety of other essential admin tasks. To find out more, get in contact with us to schedule your consultation.

The solution isn’t to get rid of all possible stressors — it’s to learn that a little bit of uncertainty is something we can all learn to adapt to.

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Widi Papan

Senior Deputy Director

Successfully Managing a Fleet of Tourism Locations, A Legacy Forged by Mentoring Hundreds of Clients to Obtain Long-term Success
Widi Papan has recently been appointed to Senior Deputy Director at Gema Consult, a hidden gem among gems. A maverick at establishing modern administration styles in an industry relying on largely outdated practices, Widi brings a unique value to Gema’s approach with clients. With clear direction for short and medium-term projects and expert-level knowledge of accounting standards, he is key to establishing successful operations for our clients.

Widi is the operational foundation responsible for Gema’s overwhelming success. His proficiency in executing technology automation, business set-ups, budgeting, cash flow recovery, debt management, capital increase planning, and business process simplification is on another level. This expertise is applied to every one of Gema Consult’s clients.

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