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CHAMBER NEWS: Family operations are important
It is an exciting year for the region as we celebrate Armstrong – Home for 100 Years.
We are proud to represent the businesses in Armstrong and Spallumcheen and know that part of our success is the longevity of a number of our small businesses.
All over B.C., family-run businesses are carving a niche in the business community. While many of them rank among the largest companies in the province, with ties to the international business world, there are also many which have provided stability and employment in their individual communities on a smaller scale.
In our community, family-run businesses such as Askews, Shepherd’s Home Hardware, Tolko, The Okanagan Advertiser, Armstrong Machine Shop, Valley Auction, Nelson’s Glass and Rapid Span have been part of our business community for at least 20 (some more than 100) years.
Impressive, isn’t it? But here’s another set of statistics that will show just what an achievement this is and how difficult it is for a family business to succeed. According to Industry Canada, 96 per cent of businesses survive just one year and 70 per cent of family businesses make it to five years. This figure drops even further as the business moves to the second and third generation, hitting single digits by the fourth generation. Only three per cent of all family businesses ever make it to the fourth generation.
Given those facts, it would seem the odds of a family business making it past the century mark are pretty low. However, there are more than 100 family businesses in Canada that have surpassed that milestone.
There appear to be four key traits shared by some of the oldest family businesses in B.C. They may not work for everyone, but could be considered when you are looking at the success of your family businesses.
Remain small – It doesn’t seem like sound business advice, particularly in the light of the quest for expansion and globalization, but the numbers support this. Small family businesses have a greater chance of passing the test of time than large ones.
Looking at some of the oldest family businesses in our community, around half have less than 15 employees and many have less than 10. On the other hand, only a few of our largest companies can be considered large corporations.
Avoid going public – Offering company stocks to the public may be a tried and tested way of raising capital, but it also tempts takeover bids. Keeping ownership of the company strictly within the confines of the family can help the family business stand the test of time.
As an example, only three companies among the 100 oldest family businesses in the U.S. are publicly traded corporations, and all three are at the bottom of the list.
Stay away from major cities – Of the oldest family businesses, only 27 companies were located in large metropolitan areas (a little over 26 per cent). Of the 50 oldest family businesses, only 15 per cent were based in major urban areas. There is a lot to be said for setting up your family-run small business in small rural communities.
Let a family member run the business – In general, family businesses that had a family member at the forefront outlasted those businesses that were run by non-family members.
When it comes to business longevity, it’s not enough to have a professional manager run the family business if you want to reach the century plateau. The family must be hands-on and give the impression that they have a vested interest in the success of the company.
If the goal of your family business is to create a large, formidable business, then your company may eventually pass out of family control, if not in this generation then the next. This may not be a bad thing for the business and your descendants may benefit financially from shares in the company you founded.
However, if you want your business to endure in the community, it may be in your best interest to handle the day-to-day management of your business. With a succession plan in place and committed family members, small maybe beautiful after all.
Patti Noonan is the executive director of the Armstrong Spallumcheen Chamber of Commerce.