Family Business Facts
From sports stats to TV ratings, political polls to weather forecasts, people just seem to love statistics. They’re easy to digest, encourage debate and can turn us on to things we may never have thought of before. From the oft-quoted “What percentage of family businesses survive into the third generation?” to the obscure, “How does compensation for CEOs in family companies compare to CEOs in non-family companies?” — here are a few of our favorite facts and stats about family business, by topic. Nine out of 10 readers may find them interesting and thought-provoking!
Accounting/Finance
The most trusted advisors for family businesses include: 1.) Spouse; 2.) Accountant; 3.) Lawyer; 4.) Parent; 5.) Business Peer; 6.) Financial advisor.
MassMutual, FamilyPreneurship Study, 2010
Forty three percent of respondents indicated they don’t have a plan or do not know if they have a plan to deal with estate taxes.
MassMutual, FamilyPreneurship Study, 2010
Succession Planning
More than 30% of all family-owned businesses survive into the second generation. Twelve percent will still be viable into the third generation, with 3% of all family businesses operating at the fourth-generation level and beyond.
-Joseph Astrachan, Ph.D., editor, Family Business Review
While 76% of US family business leaders intend to pass ownership to the next generation, one-quarter plan to enlist outside management to oversee the actual running of the company.
PwC, Playing their hand. US family businesses make their bid for the future, 2012/2013
90% of owners agree on the importance of exit planning, yet just 33% have a business succession plan.
Wells Fargo, “Your Family Business Succession Plan: Take Action Now,” May 7, 2012
Most business owners surveyed say they have chosen their successor – in most cases it’s a family member. Over 80% of those who have chosen a successor claim that this individual knows he or she has been chosen.
MassMutual, Business Owners Perspectives Study, 2011
Only three-fifths of proprietors think they have enough resources to divide assets fairly between all heirs, including relatives who don’t work for the company.
The older a company, the more likely the leadership is to anticipate that the business will remain in the family after a change in ownership; 66% of proprietors running firms that have been trading for more than 50 years plan to pass the wheel to their offspring, compared to just 25% of those running firms that have been trading less than 20 years.
Over two-thirds of business owners believe their successors have as much passion or more passion for the business as they do; survey respondents indicate that person is more often a non-related key employee, as opposed to a family member.
MassMutual, FamilyPreneurship Study, 2010
Family Business and The Economy
Nearly all US family businesses are confident about growth in the next five years.
PwC, Playing their hand. US family businesses make their bid for the future, 2012/2013
The level of concern over the country’s debt and deficit increases with company longevity: 60% of respondents from businesses with over 100 years of operation ranked it as their number one or two concern.
Family Enterprise USA, Annual Survey of Firms, 2013
One-third of all companies in the S&P 500 index are defined as family businesses.
McKinsey Quarterly, “The five attributes of enduring family businesses,” January 2010
Family-owned businesses account for 90% of all businesses in the U.S. (large and small).
U.S. Small Business Administration
Management
The three major challenges identified by family businesses include tough competition, still-uncertain market conditions, and the challenge of finding skilled workers. The need to continually innovate is a top long-term concern for family businesses.
PwC, Playing their hand. US family businesses make their bid for the future, 2012/2013
62% of family businesses haven’t made any provision for dealing with family and business issues, such as if a key manager or shareholder gets seriously sick or dies.
A large amount of family-owned businesses (73%) discuss their issues among stakeholders prior to making a final decision.
MassMutual, FamilyPreneurship Study, 2010
Nearly half of surveyed family-run businesses had given thought to putting a plan in place for the possibility of a temporary disability of key workers, but had done nothing.
MassMutual, FamilyPreneurship Study, 2010
Between 10% and 15% of U.S. family firms are now managed by non-family executives.
Relationships
79% of Family Businesses have some sort of mechanism in place to deal with potential conflict, ranging from shareholders’ agreements (49%), entry and exit provisions (28%), and provision for a third party mediator (24%).
PwC, Family firm: A resilient model for the 21st century, 2012
About one-third of all family businesses are husband-and-wife teams.
Wall Street Journal, “Married to the Job (And Each Other),” February 13, 2011.
In terms of conflict, forty-four percent of family businesses surveyed said they quarreled about the future direction of the business; 36% about the performance of family members employed within the firm; 31% have disagreed about who should be allowed to work for the business and whether family members who are actively involved in the business are consulting the wider family sufficiently.
Fifteen percent of the family businesses surveyed reported experiencing a divorce. Among those, 44% reported that it had a negative effect on the business.
MassMutual, FamilyPreneurship Study, 2010
A strong support network from family members and values and ethics shared between family members were cited by respondents as the most important advantages of the family business model.
