For a while it seemed like the very concept of ‘family business’ was on the way out. For a time, many of these businesses struggled with issues ranging from controlling expenses to figuring out what to when the next generation was not interested in taking over the company.
However, that it quickly changing as family businesses are making a comeback across the country. These businesses range from small, part-time businesses run by moms to true family affairs that involve the parents and their adult children.
While these moves are welcome as family businesses are not only a key part of the economy but also a source of long-term employment for family members across the country. With that in mind, we will dive into some of the reasons why family businesses are making a comeback.
Just the Facts
Here are some of the facts when it comes to the rise of family businesses across the country. First, and despite of news that the industry was dying, independent bookstores have grown by roughly twenty percent since 2009. Meanwhile, another industry that has seen an explosion of family businesses over the past decade is craft beer.
Note that these data points are not the only evidence about the growth of small businesses including family businesses. While these businesses had been in decline since the 1990’s, they have been making a comeback over the past decade. This has led to the creation of millions of jobs while larger corporations have been aggressively cutting headcounts.
Coming Full Circle
In many ways, this trend is a signal that American business has come full circle. Since World War II, or even before, large department stores and supermarkets killed off small family-owned shops across the country. However, these departments stores were in turned killed off by ‘big box’ retailers. Then there was the rise of online retailers who have left the ashes of entire industries in their wake.
Granted, this is a bit of an exaggeration as some family businesses have been able to survive over the past century. But it does highlight the overarching trends in U.S. business – especially in retail.
While the rise on e-commerce has largely benefited companies such as Amazon and eBay, there are have also been millions of small businesses who have been able to reach new customers thanks to this technology. It is in this way that business in the U.S. has come full-circle as family businesses are no longer tied to their physical location; instead, they can sell to anyone, anywhere in the world.
Besides better access to markets, another factor which sets most family businesses apart is their ability to differentiate themselves from the competition. Some of this is due to being better able to react to the market, while another reason is that the owners can personalize the message of these companies in a way with large, multinational corporations can never hope to achieve.
Ultimately, this means that some industries are better suited for family businesses than others. For example, it is unlikely that we will see small, family-run car companies and time soon – though both Ford and Toyota include members of the founding family on their boards. However, this is not to say that family businesses cannot carve out footholds in manufacturing industries. In fact, quite the opposite is true; with the caveat that key members of the business understand how to make the products they are offering to customers.
While entire cars may no longer be the reality of family businesses. One which focuses on car parts might be well within the realm of possibility – given that the principal knows the cost of catalytic converter and other key parts.
Opportunities for Innovation
Or is it disruption? In fact, there is a fine line between the two. One way to think of the distinction comes Harvard Business School professor Clayton Christensen, ‘disruption displaces an existing market, industry, or technology and produces something new and more efficient and worthwhile. It is at once destructive and creative.’
This is more than relevant when it comes to looking at family business as many of these companies can serve as laboratories for the next big thing. It doesn’t matter if that breakthrough in cupcakes or a mobile app as family businesses have the time to develop on their own without the constant stresses of shareholders and earnings reports.
As such, these businesses provide opportunities for innovation and it is this new way of doing things that is a major reason why family businesses are making a comeback.