Family businesses: models of agility and sustainability

Published on 31/12/2014

Assets for innovation

Family-owned SMEs are like any other company: to gain market share in their industry, they have to innovate. Fortunately, they benefit from several unique advantages.

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Taking the international leap

While exporting is a difficult and lengthy process, team spirit and a long-term perspective can be a great help. Here is some advice for making the leap.

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An ambitious and well-managed strategy

Family businesses favour an investment approach that looks at the long term. However, when conditions are right and opportunities arise, their management knows how to respond.

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Family businesses: models of agility and sustainability

All of the studies confirm it: family-owned businesses are better able to withstand crisis and can weather a storm without serious struggle. According to a study by PricewaterhouseCoopers and the Family Business Network published in September of this year, 32% of family businesses saw revenue growth of over 5% in 2013. These positive results should finally put to rest the stereotype of family businesses, some of which are centuries old, as paternalistic, outdated and staid. Their performance is not due to luck but to a combination of praiseworthy practices. The first is their long-term focus: family businesses think in terms of generations rather than months, unlike many listed companies. Their development strategies, human resource management and financing policies reflect a long-term perspective. This relationship to time also allows them to better prepare for change. When they innovate, they give themselves several years to fully see their projects through, dedicating between 1% and 5% of their revenues to this end. They are similarly prudent in their approach to international business, which the majority of them see as an indispensable driver of growth. They take small steps, starting with commercial partnerships before creating subsidiaries. Their priority is to preserve their identity, even half a world away.

Family businesses also owe their resilience to the agile way they handle their financial resources. Diluting their capital through external investment is simply out of the question, unless it is a temporary solution. A large majority of these businesses wish to maintain a stable family shareholding structure and make it a point to finance their projects by reinvesting retained earnings or by borrowing from the bank. This independence gives family businesses significant leeway, meaning they can act more rapidly. With small governance structures consisting of a few family members and occasionally external administrators or employees, the decision-making process is more efficient.

Focusing on human capital

When it comes to management, family businesses also hold their own. Principled and humanistic, they see employees as true “human capital”. In their most recent study, Asmep-ETI and Institut Montaigne revealed that training and human resources were priority investments for 70% of family business managers. As a result, employees are committed and turnover does not exceed 4.5% on average. In view of the current environment, this is an additional asset that allows family businesses to continue to move forward, come what may.

Report published in the "Supplément Partenaire Les Echos" on 21 october 2014

Increasing revenue and a long-term vision

  • 32% of family businesses posted revenue growth of over 5% in 2013

  • 70% of family business managers believe that training and human resources are priority investments