Family Business

What is the secret of growth for family owned and operated business?

The number of family owned and operated companies in the world is growing and the challenge they face is to stay in this growth spree in a sustainable way.

In the end of 2016, The Boston Consulting Group published a study on family business showing a 21% increase in size and 5% increase in rentability in the same period of time. Standard (not family owned) business showed a 18% size increase and 8% rentability increase in the giving time.

This data can represent, among other factors, that although family companies are constantly growing, their growth needs to strategically coordinate with their management and financial control. Even though family owned companies are becoming more professional, their management still need to be trained accordingly. An example would be a better financial control over the costs and budget, followed by better understanding of the acting market and its risks.

Improving on these factors would lead to a sustainable growth with even more rentability.

Statistics show that 80% of companies in the world are family owned, putting them at the top of the global economy. In Brazil, we see a very similar scenario. According to studies by The Brazilian Institute of Geography and Statistics – IBGE, approximately 90% of Brazilian companies are family owned and operated. And even though they represent 65% of the country’s PIB and 75% of their work force, the study also shows that for every 100 family owned companies open and in business, only 30 of them survive the first management, and about 5 of them actually get passed down to generations.

This is the reason why a successful planning allied with corporate management would be a change on this negative scenario and could possibly decrease this number.

 

This successful planning is projected to manage risks and identify the required type of leadership necessary for success, whether it’s from the inheretants or hired executives.

To support the structured and promising growth of family companies there are also a few steps to be followed, such as management diagnosis with through understanding of the company financial needs. It’s important to offer business counseling for all family members along with different departments (Financial, Human Resources, IT, among others) all with the purpose of giving support and business advice.

Another step of this process is the proper updating and formatting of all company documents, following the Social Statute and Shareholders Agreement.

It is also safe to say that to establish a good company management an important step is to apply a risk management analysis, implementing boundaries that would prevent future negative impacts.

In this case not only is it necessary to establish what the risks are, but to follow the ethics code so new risks are not in the near future. 

And as a final step, it is recommended to hire an outside auditor to assist the business into becoming more professional and credible.

The steps mentioned above are essential for any companies’ good leadership and in the case of family owned companies, it will allow the succession to be achieved in the best way possible, so their business growth can be stable and passed down to generations.