Family-owned and family-controlled businesses are a pretty important part of the global economy. McKinsey & Company recently noted:
“In many ways, family businesses are stronger, more vital, and more important than they have ever been.”“Various estimates peg their share of global GDP [gross domestic product] at between 70 and 90 percent. While many family businesses are private, about a third of the Fortune Global 500 companies are founder or family controlled, as are 40 percent of the major listed companies in Europe. Family businesses are especially important in emerging markets accounting for about 60 percent of private-sector companies with revenues of $1 billion or more.”
According to The Economist, the largest family firms in the world span industries ranging from retail to automobiles to electronics to pharmaceuticals. The top 10 include four companies in the United States, along with firms based in Switzerland/United Kingdom, Germany, Italy, Russia, South Korea, and Taiwan.
One of the most important challenges for family firms is succession. McKinsey & Company reported many businesses falter as they transition from the founder to the next generation, and most perish before the third generation can take the reins. Successful succession requires founders to look ahead, formulate a vision, and plan to that vision. In general, family-owned businesses have three basic options. The founder can:
- Give the business away and start a foundation.
- Sell the business and invest or divide the proceeds.
- Keep the business and pass it on to the next generation.
McKinsey & Company predicts family companies are likely to become even more influential over time, especially in emerging markets.