Family businesses thriving, says OSU study

Family-owned businesses are alive and well in 2007, according to a nationwide survey on family businesses conducted by the Austin Family Business Program at Oregon State University in partnership with Seattle University for Laird Norton Tyee.

The report, titled “Laird Norton Tyee Family Business Survey: Family to Family 2007,” concluded that family businesses are thriving. The survey was compiled from about 800 questionnaires completed mostly through phone interviews, with some online responses.

Most respondents were CEO, president, board chair or vice president of a family firm in existence for more than five years.

Starting, owning and operating a family business continues to be the cornerstone of the American dream.

Some of the highlights included:

• More than 96 percent of respondents anticipate that their business will expand or at least remain the same size during the next year.

• Nearly 70 percent of the family businesses included in the survey either started or were purchased by the family before 1980.

• About 80 percent reported payrolls ranging from 20 employees to almost 500 with most businesses having had annual gross sales from $5 million to $30 million.

• Nearly 95 percent of respondents indicated they manage their family-owned enterprises like they would any other business. However, only 56 percent have a written strategic business plan.

• Ninety-three percent of the 800 respondents expect their family businesses to take care of them financially, and reported having few additional assets. There is no income diversification, with all their eggs being in one basket.

Respondents said the key to a successful business is maintaining a strong family relationship inside and outside the business.

One of the greatest concerns reported is succession. And respondents admitted one of the biggest reasons family businesses fail is a lack of a written succession plan.

Overseeing these businesses today are mostly baby boomers. Many of these entrepreneurs who launched family enterprises with gusto are approaching retirement.

Nearly 60 percent of majority shareowners in family businesses are 55 or older. Nearly 30 percent are 65 or older.

Succession of the leadership will be a pivotal point in these companies’ futures, yet fewer than 30 percent have succession plans, and fewer than 40 percent have a successor in line and are preparing for the transition.

The biggest surprise in the survey is that nearly 64 percent of the families included in the report do not require family members entering the business to obtain business qualifications or related experience.

On top of that, 25 percent of the respondents said they don’t think the next generation is competent to take over the leadership. Only one-third shared that they have written employment qualifications that family members must meet to work at the family business.

A complete copy of the survey can be accessed at http://www.familybusinesssurvey.com.