successful family business
TRANSCRIPT
How Successful are Family Businesses? And what are the Keys to Success?
5 Pillars of a Successful Family Business
1. Human capital
2. Social capital
3. Patient financial capital
4. Survivability capital
5. Lower costs of governance
Human CapitalThe first pillar is the family's human capital, or "inner circle." When the skill sets of different family members are coordinated as a complementary cache of knowledge, with a clear division of labor, the likelihood of future success improves significantly
Social CapitalThe family members bring valuable social capital to the business in the form of networking and ‘word-of-mouth’ which has become very common in modern-day businesses.
Patient Financial CapitalThe family firm typically has patient financial capital in the form of both equity and debt financing from family members. The family relationship between the investors and the managers reduces the threat of liquidation. Faster source than a bank loan
Survivability CapitalThe family company must manage its survivability capital-family members' willingness to provide free labor or emergency loans so the venture doesn't fail.
Lower Costs of Governance
The family business must manage its ability to hold down the costs of governance. In nonfamily firms, these include costs for things such as special accounting systems, security systems, policy manuals, legal documents and other mechanisms to reduce theft and monitor employees' work habits. Trust is key
Balance in daily life
Family PassionRaise kids around the family business
Keep a high synergy and possible family successors close to the businesses
Do not keep secrets
Trust
Biggest Family businesses North AmericaMars ($30 Billion) – 100%
The Washington post ($4.72 Billion) – 70%
Walmart ($419 Billion)- 44.7%
Jean Coutu (Canadian) ($2.54 Billion)- 55%
How it works
Clear understanding of tasks
Clear and Early Communication
Physical Space
Real Names Vs Nicknames
Diverss Opinion
Pros Loyalty
Sacrifices
Flexibility
Communication
Knowledge of Co-worker
ConsSensible topics
Obstacles with family members
Pressure
Socialization
Middle East
Saudi Arabia 6 out of the top 10 highest revenue family businesses in
the Middle East are Located in Saudi Arabia
90% of businesses in Saudi Arabia are wholly family owned as opposed to 70% in the European Union
Israel Andre Messika Diamonds
Makor Capital
Risks of Failure Trap 1 – Automatic Entitlement
Trap 1- Solution
Trap 2 – Business Vs Family Growth
Trap 2 – Solution
Trap 3 – Family Isolation
Trap 3 – Solution