Earlier this year, a new nationwide survey on family businesses was conducted by the Austin Family Business Program at Oregon State University in partnership with Seattle University with underwriting by Laird Norton Tyee, a seventh-generation family business made up of almost 400 members. Titled "Laird Norton Tyee Family Business Survey: Family to Family 2007," this comprehensive survey contains results from telephone interviews with approximately 800 senior leaders of family-owned businesses. The survey subjects were asked to discuss the unique challenges that family businesses present, the current health of their family businesses, and their views for the future of their family enterprises.
The major of respondents identified themselves as CEO, president, board chair or vice president and questions ranged from management and governance structures to how multiple generations had impacted their family business.
Almost 70 percent of the family businesses surveyed were either started or purchased by the family before 1980. About 80 percent had payrolls ranging from 20 employees to 499 and the majority had annual gross sales from $5 million to $30 million.
Although the survey was completed before the mid-year credit crunch and present higher gas prices, the leaders of their family businesses were optimistic about the future. More than 50 percent estimated their enterprise would grow in 2008 and 95 percent strongly agreed that growth would continue during the next 5 years. Almost 45 percent did not see any major changes in their employee payrolls, and those with $30 million or more in gross sales tended to pay family employees according to market value for their particular position in the company.
Let's turn to the really important findings from this survey. Almost 60 percent of the majority shareholders in these family businesses were 55 or older, and 30 percent are 65 or older; however, less than 30 percent reported they had succession plans and less than 40 percent have even named a successor. Additionally, the oldest members of "Next Gens" hit their mid-forties this year, emerging as leaders in their family businesses in about 10 percent of the family businesses surveyed. With longer lifespans for the founding and successive generations, complications will arise as members of each generation challenge the planning for the family business, based on their own generational biases.
What may be shocking to anyone reading this survey is that about two-thirds of the families covered in this report don't appear to have entry employment criteria in place for family members, such as business qualifications or related experience before entering the business. Twenty-five percent of the respondents offered that they don't think the "next" generation is competent to take over the leadership. Interesting dichotomy-how can the "next" generation be competent, if no educational or real world work experience is required of them BEFORE they come on board! Only one-third shared that they have written employment qualifications that family members must meet to work at the family business.
What was most disappointing to me -- although not surprising -- is that 93 percent of the 800 respondents expect their family business to take care of them financially. The majority of family business owners who were surveyed reported having few assets, other than the family business, to provide them on-going income or security in their senior years. As the survey reports, "They have their eggs all in one basket".
Some additional findings are that families with businesses reporting more than $6.5 million and above in gross revenues were likely to be run more professionally than their smaller counterparts; they had already experienced a generational transfer of the business and they coordinate their philanthropic efforts through a foundation or another entity. However, only 56 percent have a written strategic business plan, and fewer than 30 percent have a written succession plan for the "next gens."
To see how your family business measures up to the survey results, download a copy of the survey results at familybusinesssurvey.com. Hopefully, you and your family business will be the exception to most of these findings and will be in a class of your own!
Eddy, CFP, is president of San Diego-based Creative Capital Management Inc. and co-founder of the Family Business Forum at USD. She can be reached at peggy.eddy@sddt.com. Comments may be published as Letters to the Editor.
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