An economic developer would probably tell you that the ideal business is one that is headquartered in the local community, sells a high-value product or service worldwide and then deposits receipts in a locally-owned bank. A community developer might say that the ideal business is one that meets the previous specifications, but is owned by someone who grew up locally and gives a lot back to the community. And then there are those businesses that meet all of the previous specifications, and are family-owned.
To some economic and community developers, that last characteristic seems to be getting more difficult to find. Nevertheless, there are still some around and more gaining ground in the business world everyday.
After World War II, a generation of business founders took advantage of a growing population and increasing demand for all types of goods and services. They built companies that were at the top of business ladder in their communities. They invested heavily in their communities. In the later part of the 20th century, things began to change. Economic developers and others noticed that it became more difficult to raise money for projects and that the business makeup of the community had changed. And then the lamentations set in. What had happened is that members of that generation, particularly those who did not have children interested in commerce, sold their businesses as they grew older. The time was right. Globalization, mature markets and tougher competition brought in an age of mergers and acquisitions in which it was easier to grow a company by buying another company than stating anew. Top business schools even offered courses in mergers and acquisitions.
Fortunately, many of those business leaders are recognized and celebrated in the Mississippi Business Hall of Fame, a project of Junior Achievement. They can be found on the organization’s web site at www.mississippi.ja.org. Click on “2008 Mississippi Business Hall of Fame” and then scroll to the bottom of the page and click on “Mississippi Business Hall Of Fame Laureates.” There you will find a connection to previously inducted laureates. What you will find are inspiring stories of people who grew successful businesses in the Magnolia State. As I read those accounts, I was somewhat surprised at what I found. Many of the local businesses that were passed on to offspring were later sold by the next or a following generation. This is not just a Mississippi phenomenon. Thomas Friedman, in “The World is Flat,” noted this trend in the United States.
What about the future? It appears that family-owned businesses are alive and well. And they are getting recognition and training as never before. Many business schools have begun offering executive courses in family-run businesses. These courses cover things like identifying and addressing the challenges that come with family-owned and family-managed businesses, maximizing the family business’s strengths and minimizing its weaknesses and developing effective strategies to reach common goals, address conflicts, and plan for a family’s future. One such program points out that having an outside facilitator to work with the family to set goals and strategies, resolve disputes and serve as a listening coach can add immensely to the success of a family-run business. Another aspect of these programs is that they focus on succession planning, something that often causes friction in families.
Many of the new wave of family-run businesses will be in traditional retail settings such as restaurants and small stores. Others will be taking on the opportunities associated with the so-call New Economy. Many will be immigrants. Andrew Yuengert, a professor of economics at Pepperdine University who conducted statistical analysis suggests, “Immigrants from countries with high self-employment rates have higher-than-average self-employment in the U.S. And that immigrants tend to concentrate in states with progressive tax codes, which may act as incentives to pursue self-employment, with its greater opportunities for tax avoidance. Yuengert ‘s research found that these two factors account for 62 percent of immigrant self-employment participation. Other research indicates that the immigrant family, rather than the immigrant community, is the key social connector.
Whatever the case, family-owned businesses are an important part of communities, especially those that are undergoing revitalization. Downtown programs in successful communities are often describing their locales as being filled with family-owned businesses. Indeed, some locales are using the term “family-owned businesses” in their marketing strategies. Mississippi has an ample share of such communities.
So is there a secret to success for family-owned businesses? Family Business magazine pondered that question and came up with the following factors:
1. Stay small;
2. Don’t go public;
3. Avoid big cities;
4. Keep it in the family;
5. Choose a business that won’t go out of style;
6. Be creative; and
Finally, if you have ever wondered about which business is the oldest family-owned business in the United States, we have the answer. According to Family Business magazine, America’s oldest family business is Zildjian Cymbal Co., established in 1623.
Phil Hardwick is coordinator of capacity development at the John C. Stennis Institute of Government. Contact him at email@example.com.