It’s hard to overstate how important family-owned businesses are to the U.S. economy.
According to statistics collected by the Conway Center for Family Business, 90% of all business enterprises are family-owned. Family-owned businesses range from the very large (think Walmart) to the very small, but all together represent 62% of U.S. employment and 78% of new job creation.
In the broader spectrum, small businesses, including many family-owned businesses, employ over 50% of U.S. workers. And in times of downturn, family-owned businesses are less likely to lay off employees regardless of their financial performance.
These same family businesses represent continuity. Thirty percent will make the transition to the second generation, and the average duration of leadership in a family business will be four to five times longer than their counterparts.
Additionally, family businesses will generally be more focused on transferring foundational values—not just the financial assets—to succeeding generations. Some of those values include the emphasis on philanthropy and volunteering.
Many family businesses extend their entrepreneurial activity beyond their core firm—in one study of entrepreneurial families, 90% of survey respondents indicated they control more than a single business entity. Over the long term in their family history, these families controlled an average of 6.1 enterprises, created 5.4 new enterprises, and added 2.7 new firms through acquisition and merger. Return on investment (ROI) is greater in family businesses—a 6.65% greater return than non-family businesses.
As we head into the next season of American life, economy and leadership, we should evaluate new tax and economic policies in view of their impact on family-owned businesses. To the extent those policies encourage and develop those businesses we have great reason for optimism. To do otherwise will come at our own peril, weakening the backbone of our economy.
Photo by Charles Forerunner on Unsplash
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Published January 15, 2021