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Olivier de Richoufftz: The time is right for family business growth

If you studied economics in the 1960s and 1970s you might have been told the family business sector would soon die out. It was argued that companies with hundreds of thousands of shareholders were in better positions to raise capital through stockmarkets. The future, it was claimed, belonged to them.

But since then a very different reality has unfolded. Far from dying away, family businesses still make up the majority (at least 60%) of all businesses worldwide. There are good reasons for investors to buy into listed family businesses; positive factors associated with the sector include the ability to think long term, strong culture and values, and entrepreneurial activity.

The ability to think long term comes from the family business sector's interest in building asset value and returns over a long-term cycle. Access to "patient capital" from the family frees family businesses from the fixation on quarterly updates to the stockmarket.

Strong culture and values are often associated with family businesses that have already been passed down several generations. Of course, not every family business claim's strong culture and values, but the probability of having a strong culture and values is increased.

Entrepreneurial activity is encouraged by family businesses, often driven by the next generation. Imagine that you run a business and your sons want to join. It's natural to look for something that allows them to prove themselves and develop their skills.

At this point, more memories from your '70s economics class may come to mind. Didn't the lecturer also talk about particular issues that family businesses face? Risks that family controlled businesses – even when publicly listed – are run only for the benefit of the family?

Family businesses benefit hugely from effective systems of governance, detailed succession plans, and structures to deal with differences between family members. It was for these reasons that the Family Business Network (FBN) was set up as a forum where families could talk in total confidence. The work is "by families, for families" and the FBN is now the world's largest family business organisation.

Supporting effective governance, the FBN shares good practice through education programmes and resources. It's currently building an online library capturing a wealth of experience and a variety of routes that families have tried and recommended. With a Next Generation programme to support families transitioning their business through the generations, its own research into family businesses, and the newly-launched Family Business International monitor, the FBN speaks with an authoritative voice for the family business sector.

FBN's flagship event for 2008 is the Global Summit in New Delhi. The Summit's focus is on the values that characterise family businesses: tradition and innovation; sustainable growth; unity and tolerance; responsibility. The Global Summit is limited to business families and their top managers plus carefully selected guests. The choice of New Delhi as the venue is significant as FBN membership in India is increasing rapidly. The FBN wants to reach out to families in all parts of the world, helping them to build successful businesses for generations to come. So throw away the textbook from the 1970s – the family business sector is alive and well and looking to the future.  

For more details about the FBN Global Summit please visit www.fbn-i.org/summit.

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