Family businesses are best

A new report entitled ‘Family Business: In Safe Hands?’ suggests that family businesses have particular characteristics which position them well to ride out the economic downturn.

Family businesses are more likely to display a long-term approach, adversity to risk, lower financial leverage and a closely knitted management team, factors which prevent family firms from failing in tough times. Some 2,300 firms, including 300 family businesses, were questioned for the survey.

One of the biggest issues for all concerned was risk. It comes as no surprise that family businesses said that they were less likely to thrive on it. Only 22 per cent said the enjoyment of risk was their most important motivation, compared to 30 per cent for non-family businesses.

They also revealed that their motivations were less driven by financial returns than non-family businesses, suggesting that they take a more holistic view. But one of the strongest themes running throughout the report was the ability of family businesses to take a long-term approach without the pressure of shareholders looking for immediate returns. This was cited by 38 per cent of respondents as being the most important advantage of being a family business, suggesting that family businesses will be well equipped to look beyond the current economic downturn and invest for the future.

This long-term view is compounded by another finding in the report: only 10 per cent of family businesses would consider selling their firms compared with 22 per cent of non-family business owners.

Respondents also identified the strong support network from family members, followed by the shared values and ethos as the two most important advantages of being a family business.

Mark Kibblewhite, MD of Barclays Wealth commented: “This report gives a very interesting insight into the mentality of family businesses and a lot can be learnt from them.

“Businesses can often be forced into knee-jerk reactions when faced with a challenging and unfamiliar environment, but this can sometimes exacerbate problems. A longer term view, less debt and an experienced management team are just a few of the factors which provide stability and minimise vulnerability in testing times.”

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