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It's a great time to be part of a family business. While other businesses struggled with the difficult economy, family business revenues grew by 50 percent from 1997 to 2002, according to a study released by the Raymond Institute of Family Business and the Mass Mutual Financial Group. What's more, 50 percent of family businesses responding to the study plan to hire new staff in the next year, while 60 percent are "very optimistic" about their companies' futures.
How can nonfamily businesses emulate these successes? "Family businesses are committed to keeping the company going," says Carol Wittmeyer, president of the Raymond Family Business Institute, a nonprofit foundation in Alfred, New York, dedicated to promoting and serving family businesses. "That type of passion is part of the reason [for their success]." Family businesses are in it for the long haul-most have weathered economic storms in the past and, as such, are cash-oriented and very liquid. "Through the bad times, they've got a cushion, and through the good times, they're able to grow," says Wittmeyer.
Since they are so cash-oriented, debt among family businesses remains "comfortably low," according to the survey. Says survey researcher Stephen Spinelli, director of The Arthur M. Blank Center for Entrepreneurship at Babson College, in Babson Park, Massachusetts, "[Family businesses] tend to protect the asset and see debt as increasing risk. There's a natural tendency to be more risk averse." Finally, family-run enterprises have the built-in team vibe going for them. "[Family businesses] do a good job of creating strong business teams," says Spinelli. "This focus on team mentality is something [other businesses] could learn from."
Still, while the family business model has been extremely successful over the past few years, it isn't perfect. Says Spinelli, "When [family businesses] are not willing to change their operational focus or to look for opportunity, they risk shrinking the asset as they try to protect it." Other entrepreneurs, he says, should strive for the best of both worlds-maintaining a balance between operational focus and a keen awareness of the changing marketplace.