Keeping it in the Family
5 Benefits to Having a Multigenerational Business
If you've been in a family-owned business lately—or are lucky enough to have one yourself— you know that it feels different from a large corporate store, from the personalized service to the warm, friendly environment. You might see multiple generations working side by side. But family businesses aren't just about nostalgia; they are beacons of our community and have profound, positive economic and social implications that set the stage for future generations.
Here are five benefits to having a family business:
1. Unique Perspectives
Different generations provide different perspectives. While older people possess wisdom and skill from experience, younger people are more in tune with the current societal and cultural climate. This creates powerful knowledge and perspective, allowing them to reach a wider audience.
"Those who have operated a business for decades can teach their children or grandchildren the importance of structure, customer service, and workplace etiquette. This sharing of entrepreneurial values is what keeps many family businesses up and running." – Forbes
2. Increased Loyalty
The percentage of annual turnover in most family businesses is just 9%, compared with 11% for non-family corporations (Ernst & Young). When a family-owned business can sustain itself across multiple generations, this framework's consistency and stability are central to the company's success. The decreased turnover rate is a long-term financial benefit since new talent acquisition can be costly.
3. A Sense of Purpose
Going hand in hand with loyalty, family businesses tend to have a profound sense of purpose that acts as a driver for the current generation to see themselves as custodians of the business for future generations, seeking to pass the business on as a 'stronger entity' than the one that they inherited. With a sense of purpose, anything is possible!
"You do not inherit a family business; you borrow it from your grandchildren."
— Hermes family fifth-generation heir
4. Adaptability
Family-run businesses tend to be far more adaptable, changing swiftly and effectively to thrive in various economic climates. They also have the insight to tune into what their current customers want and use younger insights to appeal to new generations, building early customer loyalty.
5. Generational Wealth
Creating a legacy that imparts your family lineage with financial security is a main driver of family businesses. Between the strength of the culture and the ability to navigate difficult economic conditions, family businesses are poised to create wealth that lasts for generations.
Here are 3 ways to plan for a strong financial future:
Establish a process to evaluate the family's next generation for leadership in the business, using an assessment that measures qualifications, skill sets, and interests.
Cultivate interest and a sense of accountability for business decisions and share information about the family business and investments.
Consider how the enterprise might expand into related lines of business to help prolong the longevity of the family enterprise.
While corporations continue their attempts to take over smaller, independent businesses, remember that keeping it in the family is a powerful way to build a strong business that will benefit future generations—and your community!
Sources: Morganstanley.com, Forbes.com