Family-owned businesses continue to dominate our economy, but they also continue to struggle with issues of succession. SCORE, a nationwide non-profit organization that provides business mentoring, just completed a survey to assess the role of family-owned businesses on our national economy and published an infographic with the results. (The SCORE survey defines “family-owned businesses” as those U.S. businesses operated by two or more family members, with majority ownership held within the family.) According to the new survey:
Family-owned businesses are dominant:
- Family-owned businesses are the single biggest job creator in our economy. Family-owned businesses employ 60 percent of the U.S. workforce and are responsible for 78 percent of all new jobs created in the United States.
- Family-owned businesses are larger than you think. Walmart, Ford Motor Company and Cargill are just three of the largest corporations in the country that also happen to be family-owned businesses. On the other end of the spectrum, of the 28.8 million small businesses in the United States, only 19 percent are family-owned. The thinking that all family-owned businesses are little “mom and pop” shops is clearly misguided.
Family-owned businesses continue to struggle with issues of succession:
- The first generational transfer is hard. Only 30 percent of family-owned businesses successfully pass from the first generation to the second generation.
- The second generational transfer is even harder. Only 12 percent of family-owned businesses successfully pass from the second generation to the third generation.
- Overwhelmingly, family-owned businesses are not setting themselves up for success in transitioning to the next generation. Forty-seven percent of current family business owners expect to retire in the next five years but do not have a succession plan in place.
These statistics will not be shocking to those in the family business community. It is not hard to see how the combination of family and business might create a platform that motivates, promotes hard work and encourages long-term thinking, all of which contribute to the disproportionate success of family-owned businesses. To keep these attributes alive, however, both the family and the business have to navigate the issues of succession, which prove to be a challenge generation after generation.
View the SCORE infographic here.