Family business has a very low profile in Australia. Despite this, a 2013 inquiry by the Australian Parliament Senate, reported that approximately 70 per cent of businesses in Australia are family businesses. They are therefore ALREADY a vital component of the Australian economy, and the Australian Government recognises they have even greater potential. In the near future, they will extend the activities of the Australian Small Business Commissioner into the Small Business and Family Enterprise Commissioner. The opportunity is there – but WHAT is a family business and why are they important?
Typically, a family business is one in which the majority ownership and the strategic business decisions are made by ONE family (or representative of one family). However, in today’s world the ‘family’ has many dimensions other than a ‘blood’ relationship. The Lionel Samson Group was founded in 1829 in Fremantle WA and is now in its sixth generation. It is one example of a family business that illustrates the multi-dimensional nature of family business that emerges with time. Whether they are related by ‘blood’ or other social customs (for example, blended families), family businesses offer many highs and lows.
The highs are that family businesses are usually considered entrepreneurial and innovative. In the most recent study conducted by KPMG with Family Business Australia, 70 per cent of the family businesses surveyed indicated that their innovation performance was better than their key competitors. The Queensland company, Bundaberg, is one family business that illustrates this. In business since 1960, Bundaberg now export to over 30 countries, with continual innovation in product lines being a key to their success.
However, having to juggle the family with the business can sometimes create tensions in the family business. This is especially the case when new generations enter the business, and the founders and owners of the business have to plan for succession. WA’s Business News recently profiled some of the oldest family businesses in WA who sent out the message that ‘succession’ is a key factor in family business success and sustainability. One example is Galvin Engineering, which was built up by Roy Galvin from 1930. Now owned and managed by his grandsons Chris and Paul, they have been actively grooming the next generation (their children) to become a part of the business from a young age.
Succession is critical for family business to remain a family business. This is because through succession, a family business retains the family values in the ownership and management of the business. The KPMG survey for instance found that 84 per cent of family businesses believed that family values had a crucial influence on their business.
Sabine Lau, a respected family business academic, describes this as keeping the ‘family gravity’ in a Harvard Business Review article. I call this family business psychological capital in an article for Family Business Review. Whatever we call it, the lesson is clear: for a family business to remain a family business, ensuring succession BY the family is critical.
Family business does business differently to non-family business – but that doesn’t make them any less efficient or well run. LinFox, Coopers Brewery, Kennards and Betts & Betts are some Australian companies who are testimony to this. Family businesses are small, medium and large; they are in every industry sector, in any economy including Australia, and they have LONGEVITY.
Further examples of long-lasting family businesses include Faber-Castell in Europe, operating as a family business since 1660, Mars (Mars confectionary) in the US, operating since 1911; and of course our own Lionel Samson in operation since 1829.
While flying under the radar, family businesses have already contributed to the well-being of Australia. There is a lot of opportunity in establishing your business as a family business, though, doing it well so that it works for BOTH your family and the business needs some careful thought. However, there are many rewards to being a family in family business; seventy per cent of Australian businesses think so.