Entrepreneurship as a family, the key to performance?

Entrepreneurship as a family is at the origin of many debates in families, but also in investor circles who do not necessarily know where they are setting foot. Yet, at the global level, it is clearly the most represented entrepreneurial model. For example, family businesses generate 70% of global GDP. They are also responsible for 50 to 80% of jobs in many countries (1). Sometimes arousing admiration and sometimes mistrust, it is nonetheless that they demonstrate remarkable performance and resilience. For good reason, entrepreneurship as a family implies a strong commitment of stakeholders, which is not necessarily found in other companies.

inter-generational family business

Entrepreneurship as a family, the emotional lift

If entrepreneurship in the family is not unanimous, it is because it also crystallizes passions. Thus, while the family members involved enjoy strong mutual support and total trust, encouraging self-denial, it is also the place of explosive family conflicts (2). Thus, 65% of family business managers readily admit that the approach of entrepreneurship as a family is a potential source of conflict. (3)

However, this does not prevent family businesses from enjoying a strong identity and greater stability. This is probably one of the reasons why more than a third of French SMEs are family-owned. This is also the case for large groups whose reputation is well known. France also has centuries-old international family businesses. Lactalis (Besnier family since the beginning of the 20th century); SEB (Lescure family since the mid-19th century); Hermès (Hermès family, then Dumas for nearly 200 years)… In total, France has more than 1500 century-old family businesses.

One of the reasons that family businesses continue so well is the nature of the project. For good reason, the company is then often a real life project, carried by the whole family. Cases of failure are mainly observed in cases where the motivations for setting up a business and the objectives of each diverge. Also, it is recommended to take the time to discuss the expectations of stakeholders and the distribution of roles, before embarking on the entrepreneurial adventure as a family. (2)

The experts also recommend avoiding informality, including on organization and governance. This is often the preferred format for small family businesses, but it is also a source of problems and disagreements. Pact of partners, rules of governance… Different possibilities exist to formalize and clarify the rules of life of the company.

entrepreneurship with the family

Family businesses, queens of performance

Less subject to investor pressure, family businesses can afford to deploy long-term development strategies. Thus, they are often 3 times less indebted than the others, in addition to building on solid foundations. Unlike other companies that lose their superb as management changes, family businesses emerge thanks to the value of the family heritage, the preservation of brand identity, the transmission of know-how and vision.

Also, this strong personal commitment of the family members is reflected in the performance of the company. For example, in 2015, 83% of family businesses saw their turnover increase. For the other enterprises, the average was %. 63%. Moreover, it would seem that family entrepreneurship in Europe and the United States is more successful than creating other types of companies. Thus, over the past 15 years, European family businesses have outperformed non-family businesses by more than %. In the United States, more %. than 40%.

Even on the capitalization side, family businesses show three times greater growth than others. The resilience and solidity of these companies have also been observed during the Covid-19 crisis. Which ones overcame obstacles with more agility and even continued to improve their performance.

transfer family business

Innovation and competitiveness at the heart of family businesses

Generally, family businesses are created in areas such as accommodation, catering, food processing, crafts, local shops, or franchises for their reassuring format. However, others choose to undertake as a family on atypical, innovative, industrial themes…

This is for example the case of the French optical brand, Nooz Optics, created in 2015 (4). From the outset, innovation has been at the heart of the company. Which uses quality materials, screwless assemblies, for lightweight, unbreakable and stylish frames. Innovations that, combined with the image of France and luxury,have allowed the brand to deploy in 35 countries. The United States accounts for a quarter of the market. Thus, Nooz Optics posted growth of +70% in 2020 compared to 2019. The year 2021 should not break the curve, especially as the brand develops new products. By 2022, it plans to knock on the door of the Asian market, which will open up prospects.

In general, family businesses are primarily well established locally. However, many also have international economic activity. 87% of them export and 90% have planned to do so in the near future.

Thus, innovation is at the heart of the projects of many of them, aware that it directly affects the competitiveness of the company at home and abroad. 64% of them think that innovation is a major challenge for their company in the short and medium term.

Sources

  1. The family business: a sustainable model away from caricatures, Carmignac,February 4, 2021
  2. Is it risky to undertake as a family?, BPI France,March 2019
  3. Entrepreneurship with the family: good idea?, Alizée Potier, LegalStart,September 5, 2017
  4. Entrepreneurship and innovation as a family: key to success in times of crisis?, Nooz Optic, press release of April 15, 2021
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