Small Business: It's All in the Family
Recently, SCORE — a resource partner of the U.S. Small Business Administration that provides free one-on-one business counseling and advice to small businesses — released some statistics they put together regarding family-owned businesses.
It runs in the family
For the purposes of their study, they defined “family-owned” as any business in which two more family members operate the company, and the majority of ownership or control lies within the family.
Family-owned businesses of all sizes contribute considerably to the U.S. economy. They employ 60% of the workforce and create 78% of all net new jobs. Additionally, family-owned businesses generate 64% of our gross domestic product.
From a small business standpoint, family-owned businesses account for 19 percent of the 28.8 million total small businesses in the U.S. That’s about 5.5 million family-owned small businesses. Of these, 1.2 million family-owned small businesses are “mom and pop shops” — run by a husband and wife.
There are several factors involved in the long-term success of a family-owned business, regardless of size:
- Good Governance — 94% of family-owned businesses are controlled by a board.
- Focus on succession — More than 40% of family-owned businesses include younger family members on company boards and committee to encourage and nurture the skills necessary to one day manage to the business.
- Employee/customer relations — 74% of family-owned businesses report stronger values and culture. Employees want to work for family-owned businesses and customers feel more confident in purchasing from family-owned businesses.
But family-owned businesses face some unique challenges. Only 30% of all family owned businesses survive the transition from first generation ownership to second generation ownership. Only 12% survive the transition from second to third. Almost half of family-owned businesses whose owners expect to retire in the next five years don’t have a succession plan in place.
For family-owned small businesses, succession planning is one of the top concerns. SBA resource partners such as SCORE, America’s Small Business Development Centers (SBDCs), the Women’s Business Centers and the Veterans Business Outreach Centers can provide free, one-on-one counseling and mentoring for small business succession planning.
Find more tips on starting and growing your business at sba.gov.
Learn about other Succession Planning resources in The Partnership’s Small Business Resources Hub or sign up for the Small Business Resources newsletter and stay connected for information about upcoming events, other resources and the latest announcements in the small business community in Greater Des Moines (DSM).