Family businesses and the key to success in overcoming the crisis

Family businesses and the key to success in overcoming the crisis

More than a year after the spread of coronavirus, it is becoming increasingly clear that the economic crisis is unevenly distributed among companies. The size of a company is not a guarantee of salvation or success. There are global businesses like Hertz or Cirque de Soleil that have announced their bankruptcy this year, while quasi-unknown companies before the crisis, such as Zoom, are growing dramatically and becoming global.

In the complicated economic landscape, one category of companies is marginalized from public attention: family business. The partial explanation for this marginalization is the lack of systematized and detailed data among the family businesses. But existing data suggests that family businesses are facing the current crisis in a fundamentally different way than other types of companies. Their experience is shaped by the long-term outlook, which often leads to less debt, a surprisingly diversified portfolio, and sometimes a non-monetary definition of success.

Long-term meaningful business

The long-term perspective points to family businesses being less willing to take risks and more inclined to reduce their indebtedness to manage difficult situations more easily. Family businesses are also inclined to access new business areas that, on the horizon of the coming years, may not generate profit, but are planting the seeds of success for the next generation.

The ease of thinking of alternatives, deciding on the allocation of investments, and executing quickly is a specific feature of family businesses, which have a particular experience of going through crises. Small businesses do not have the capital for such investments, while the shareholders of large companies are not willing to move investment capital to less profitable divisions. This difference makes family businesses not only more resilient but also more agile.

The challenges of a family business

According to a study conducted by a global consulting company, among the most important challenges for family business owners during this period are innovation (66%), access to employees with the skills and qualifications needed for business development (60%), and digitalization (44 %). Indeed, 80% of respondents see digitalization, innovation, and technology as significant challenges for their businesses. Concerns about threats to digital change range from the emergence of new competitors to vulnerability in cybersecurity and the perception of this threat are higher than the average (which is 30%) in media and entertainment (65%), retail (53%), and financial services (52%).

The same study shows that more than a quarter (26%) of large organizations (with revenues of over $ 100 million) have identified artificial intelligence and robotics as a source of concern for the next two years; the percentage is significantly higher compared to those companies that have revenues of less than $ 20 million (16%). On the other hand, 69% of respondents say they expect and even encourage the next generation of business leaders – including family members – to gain experience and develop skills and qualifications outside the family business to keep up with innovation.

Family businesses tend to be more diversified

Due to the development of several unrelated business areas, family-owned companies tend to be more diversified than corporate companies that invest only in areas that provide them with a short-term competitive advantage and can thus withstand when the crisis affects the business environment. business.

For family business leaders, the success of their mission is beyond short-term profits. In the case of some families, success means providing long-term employment to employees so that they achieve their goals, while for other families, success means handing over the baton to the next generation. The longevity of the construction is the link between the two approaches.

In conclusion

In their multi-generational definition, family businesses experience the experience of going through this pandemic differently. International studies on this subject show that family business leaders are concerned about long-term income losses and liquidity. Unlike most companies, in the family business, few leaders pose the problem only from the perspective of the company’s survival.

Family business contributes to the development of the global economy, having the largest contribution to global GDP and a significant impact on the labor market. In an unstable economic environment, such as the one caused by the pandemic, family business leaders face a multitude of challenges. These circumstantial challenges have highlighted the need for family businesses to diversify their investment portfolio.