One of the biggest — and simplest — reasons for keeping a business “in the family” is money. A family business can give the owner(s) and employees a sense of control that a publicly held company cannot. Also, a family-run business can ensure a certain degree of trust that other types of companies cannot achieve.
Naturally, family businesses have problems, too, but for the ones that succeed, keeping it in the family is a winning strategy. Here’s why:
- Family-business owners win with tax benefits. Under the American Jobs Creation Act of 2004, S corporation (the majority of family business are classified as S corporations) business owners pay less in federal taxes, since income is generally taxed just once.
- Family-run businesses connect well with customers. Family-owned firms are known for making deep connections with their customers. Suppliers and the community benefit, too. Every day the family name is tested, which is often the best incentive for doing a good job every time.
- The long-term is at stake. A family-run business depends on today’s success for tomorrow’s security. To survive and grow, everyone needs to be committed. Family members feel a responsibility every day and, instead of worrying about this week’s profits and a disparate group of investors, they can — and want — to plan for benefits that will help not just today’s owners but generations to come.
- Family-owned businesses are often grounded in love, respect, and trust. Of course this isn’t always the case, but many family businesses thrive because of these bonds. For many business owners, having trustworthy family members as colleagues is an asset and an essential component for success.
- Family members tend to see the business through downturns. Because family members have a vested interest in the business and a sense of responsibility and commitment, they tend to stick by the company during rough times. While a downturn might cause a non-family worker to seek other employment, a son or daughter is more likely to stay put.
- Family members are more inclined to make sacrifices. In a family-run business, people are more likely to make sacrifices to ensure long-term success. Instead of succumbing to immediate gratification, family-run businesses are often more patient, since long-term financial security is at stake.
- Advertising campaigns can play up the family advantage. Family businesses can create advertising campaigns that stress the company’s longstanding role in the local community and its strong values. For many customers, a family-owned business if preferable over one that is run by a group of investors thousands of miles away.
- Family-run companies understand business and family. For many businesses, the notion of balancing work and family is simply a normal way of running things. In a family business, emergencies can be managed more easily. If someone’s child is sick, for instance, taking time off to visit the pediatrician is not a source of stress. Sometimes colleagues — who also happen to be siblings — can step in to handle either a little extra work or a toddler whose regular sitter simply didn’t show up. Covering for each other is simply part of getting things done.
- Family-owned businesses have high retention rates. Successful family businesses tend to avoid high turnover by motivating not just their family members but other employees, too. Rewarding all employees helps the business as a whole and creates a culture that emphasizes everyone’s contributions, not just family members. In some ways, family-owned companies — especially the truly successful ones — don’t make distinctions: non-family employees are just as valuable as family members. Everyone’s needs are considered, allowing the company to combine and then benefit from outside help and family values.