Historically, Mom and Pop stores have been the backbone of the American economy.
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Yet conventional wisdom says that family businesses are out and big corporations are in. Is that really accurate? Are family businesses a dying breed?
Despite the rising influence of big corporations, family operations continue to be a powerful economic force. In fact, many of the corporations themselves are family companies. But don't take our word for it. To get a truly accurate snapshot of family businesses in the U.S., take a look at the statistics . . . because numbers don't lie.
Family businesses account for a staggering 50% of the gross domestic product. It's tempting to believe that the majority of family business GDP is attributable to thousands of small operations, but that simply isn't the case. Here's why: 35% of Fortune 500 companies are family companies. That means family-based operations are represented across the full spectrum of American companies, from small businesses to large corporations.
Employment & Job Creation
If you still aren't convinced that family-based companies are a major contributor to the U.S. economy, consider the role they play in employment and job creation. Family companies are responsible for 60% of the nation's employment and 78% of new jobs created. The gap between the employment and job creation figures may indicate that family businesses are one of the fastest growing sectors of the economy because their new job requirements outpace their current employment rates when compared to other businesses.
Despite the rosy economic picture the statistics paint, family businesses face some difficult challenges and hurdles. Topping the list of challenges is the tricky issue of generational transition. Only a third of all family businesses successfully make the transition to the second generation largely because succeeding generations either aren't interested in running the business or make drastic changes when they take the helm. The significant failure rate of family transitions highlights a number of concerns about family businesses in general, including the ability of these organizations to maintain a consistent value system and business philosophy. This issue will come into even sharper focus in the coming years as baby boomers prepare to hand off their companies to their children.
A recent trend worth noting is the increasing number of family businesses that are being passed down to daughters. Over the past five years, woman-owned family businesses have increased by 37%. There is also evidence to indicate that women-owned family businesses are better prepared for transition scenarios and have higher success rates than businesses controlled by their male counterparts.