It’s easy to dismiss established family businesses as a bit old fashioned and not very exciting. Many have been around for generations and might not, at first glance, seem that innovative.
But it’s worth remembering that their founders are all entrepreneurs, and they still have that attitude and drive. Great family business owners such as Nisbets’ founder Andrew Nisbet, Lesley Wild, Chair of Betty’s and Taylors, and Stephen Rubin, Chair of the Pentland Group can teach us a great deal about building an outstanding company.
There are a whopping 4.8 million family owned businesses in the UK; that’s 85% of all private firms, and they generated close to £2 trillion in revenue in 2017. So before you dismiss what family businesses can teach you, check out these three lessons.
Think and plan for the long term
Probably the most important lesson any entrepreneur can learn from a family business is to think and plan long term. In my experience, founders often think they’re doing just this. But focusing on the next five years is not long term. Family businesses plan for the next generation, so they’re frequently setting reach-goals 20 years ahead.
Family businesses have the confidence to do this because they are as sure as they possibly can be that the business will one day be owned and operated by their children or other younger family members. That means they are focused on creating ‘family capital’, shared business values, and training the next generation to take over and build on their own success.
This also means each successive generation sees themselves as stewards of the business, rather than owners; the company is something to nurture and cared for to ensure it thrives for the next generation.
Entrepreneurs can learn to think like this about their own startup by lifting their vision and thinking about the structure, processes and functions of their business in 10 or 20 years’ time. How many staff will it have, how many offices and in which locations, will they float the company or would they keep it private. This is not dreaming, it’s sensible planning.
Invest in your local community and employees
Family businesses tend to be rooted in their local community. When they were founded, no matter how many generations back that was, they were supported by local people. That gives family owned businesses a very real sense of identity and firm foundations in a local area of the country.
This breeds a belief in the need to give back locally. Many family businesses feel a deep responsibility for their communities, and because they are private businesses and do not have to bow to the needs of remote shareholders, they are free to concentrate on their charitable activities. Many start philanthropic initiatives focused on supporting the disadvantaged in their community, some operate generous benefits packages to support the families of employees and others have work schemes for local youngsters.
All entrepreneurs today can see the value of helping others, and family business offer an inspiring example. In fact, according to a 2015 study by accountancy firm EY, more than 80% of the largest family businesses in the world undertake some form of philanthropy; half is charitable giving and half is serving their community.
Diversify quickly and acquire the skills your business needs
What’s particularly interesting about family businesses is that they are such a clear example of the power of diversification. No family business remains in exactly the same market with exactly the same products for very long. It might not seem this way, but in reality they are quick to evolve and branch out when they see new opportunities.
Take just two family firms, one old, and one more recent. German household appliance manufacturer Miele has diversified over and over again. Down the decades it has manufactured everything from butter churns to motorcars, ovens to motorcycles. In just one generation, James Dyson has gone from vacuum cleaners through air purifiers, hand dryers, hairdryers, fan heaters and lighting.
Often this need to diversify drives them to acquire other businesses to bring in the skills they need quickly, and because they’re private businesses, and largely out of the media spotlight, these acquisitions often go underreported. Family businesses will spend billions if they need to. For example, in 2015, Cargill the American agri-food giant, and the US’s largest privately owned business, bought EWOS for $1.5bn.
Family businesses don’t stand still. They’re prepared to take calculated risks, invest in innovation and philanthropy, build family capital and acquire other businesses to ensure they remain at the top. Today’s entrepreneurs can learn a great deal from their attitude to long-term growth.