Like all other types of businesses, family-owned enterprises are certainly feeling the pinch of the downturn in the economy. However, there are also certain key advantages family businesses hold in bad times like these.
Howard L. McMillan Jr., dean of the Else School of Management at Millsaps College, which offers the Family Business Institute, said family businesses are mainly feeling the recession at the bank — more specifically at the loan officer’s desk.
“There are some real challenges, namely funding,” McMillan, a former bank executive, said. “As we all know, it is much harder to get loans. Loans are under much more scrutiny than in the past.
“The other major challenge is, depending of what business you are in, you could have really been affected by the economy in terms of sales. Revenues and cash flow could have been severely affected.”
McMillan added that family-owned businesses hold some pluses, too. He said most family-owned businesses are managed very efficiently. The companies are more often than not run by the founder, or by another family member or an outsider who has been hand picked. With higher personal stakes and more accountability, family-owned affairs generally have a good handle on day-to-day operations and the company’s performance.
Another plus is that family members are much more likely to change gears and/or cut costs compared to non-family businesses.
“Family-owned businesses are generally very nimble, and respond much more quickly than other types of businesses,” McMillan said. “And, it’s much easier to cut costs and control expenses. Family members can get together and say, ‘Well, I guess we won’t take that big trip this summer.’ It’s much easier to make changes when it’s among family.”
One thing that is certain is that family-owned businesses are hugely important to the economy, and serve as a good barometer as to how well the business community as a whole is faring.
No hard numbers exist for family-owned businesses in Mississippi. However, surveys of other areas in the nation give something of an indicator. For example. a recent survey of the Chicago business community shows that of the approximately 66,900 business in the city, nearly 23,000 are family-owned enterprises.
And, these companies are not necessarily small or privately held. A little more than a third of the Fortune 500 companies are family businesses. Of the companies traded on the New Stock Exchange, well more than half are family affairs.
The closest thing to hard state numbers for family-owned business comes from the Mississippi Small Business Development Centers (MSBDC). Lee Hendrick with MSBDC public relations emphasized that his organization’s numbers are voluntarily given by clients, and the organization has no way of proving their accuracy. Still, they are interesting — and impressive — figures.
In fiscal year 2008, the MSBDC counseled 2,190 clients that identified themselves as family enterprises. These clients started 226 businesses, created 1,253 and retained another 1,665 jobs. Annual sales of these clients was approximately $224.45 million.
The owner investment by these counseled clients was approximately $14.68 million, and total capital formation (loans obtained, owner investment plus other funding) was approximately $44.66 million.
“If it isn’t part of a chain, it is probably owned by a family,” said Harold D. Miller Jr., of counsel with the Public Law and Finance Group of the law firm of Butler, Snow, O’Mara, Stevens and Cannada, PLLC.
Miller grew up in his family business, Miller Transporters of Jackson, a nationwide tank truck carrier that has seen five generations of ownership.
“I’m not saying we are perfect, but we have done well,” Miller said. He added that family-owned businesses have unique opportunities. “When it works well, it is really nice and you are proud of your family,” he said.
The Taylor Group of Louisville is another successful family-owned enterprise that has been around more than 80 years. Over that time, the company that now encompasses numerous business units has weathered plenty of hard times.
“We are very honored and proud of the role (we have) been able to play in the growth and development of Mississippi in general and Louisville specifically,” said W.A. “Lex” Taylor Jr.
While making difficult decisions may be somewhat easier at a family-owned business, there are still some unique dynamics. A disagreement in the boardroom can continue at the dinner table, or vice versa.
“It is good to have rules and procedures including who is president and that kind of thing so you are not arguing every day about who is running the place,” Miller said.
The Web site “A Family Business,” which the MSBDC recommends as a resource, said, “The downside of running a family business is that it can put a lot of pressure on both working life and family life as the structures through which the two are organized sometimes clash. However, with hard work and patience, problems can usually be avoided, and working with people you already know and trust can give your business a real competitive edge.”
Contact MBJ staff writer Wally Northway at firstname.lastname@example.org.