2016 1 may

A MarketPoint Whitepaper

America's Family
Businesses

America's Family Businesses

he words American family business

conjure a stereotypical image for many.
For me, its a 1950s, small-town furniture store still managed by the family
patriarch; two middle-aged sons in management,
a daughter in bookkeeping, and a grandson stopping by after school. Because, in that picture, I was
the grandson, eager to learn how grandpa kept it
all running, but more eager to shake his open hand,
always to find a quarter appear in mine.

The real American family business has a much

different profile. From third-generation plumbers to multi-national corporations, American
family businesses are a broad tapestry, as colorful as America herself. But that shouldnt
come as a surprise, considering that 90% of
all U.S. businesses are owned or controlled by
families (Aileron). Fact is, over 60% of the U.S.
workforce is employed by family businesses (Fernandez-Araoz).

Ninety percent of all U.S. businesses are owned

or controlled by families.
Number of Firms,
by Gender of Ownership
485,754

female-owned

15%

35%

50%
1,628,837

equally male-/female-owned

Revenue Generated,
by Gender of Ownership
$415 Billion

13%

female-owned

20%
67%

1,157,291
male-owned

$629 Billion

$2,145 Billion
male-owned

equally male-/female-owned

ollectively, family businesses generate about 64% of U.S. Gross Domestic

Product (GDP), and over 75% in many
other countries (Baka). They are the
largest single generator of new jobs in the U.S.,
accounting for almost four out of five new jobs
in the past two decades. In most countries, they
are the largest source of long-term employment
(Baka). And the reach of families extends well
beyond private firms: Fully one-third of S&P
500 companies and six out of 10 publicly held
U.S. companies are family-controlled (Baka).
The U.S. Census Bureau reports there are more
than 3.2 million family-owned firms in the country. Ownership skews more toward men than
women, with 35% of those companies being

male-owned, 15% female-owned, and the remaining half owned jointly by both males and
females (U.S. Census Bureau). And annual revenues produced by female-owned businesses
represent an even smaller share of the whole,
at 13%. But women are gaining a stronger foothold in key management positions. A study
conducted by Kennesaw State University in cooperation with Ernst & Young showed that 70%
of responding family-owned businesses were
considering a woman as their next CEO (Moran). This is remarkable, especially in contrast
to a 2014 study of the top 2,500 publicly traded
companies, which reported only 5% of all new
CEOs were women (Favaro, Karlsson and Neilson).

The largest (and smallest) pieces of the pie

he Global Family Business Index provides

data on the 500 largest family-owned
firms, globally. [This source classifies a
privately held firm as a family business if
the family controls at least 50% of the voting rights,
and as a public firm if the family holds at least 35%
of the voting rights]. Wal-Mart tops the list, with
revenues approaching half a trillion dollars more
than the next two companies combined (Center for

Family Business at the University of St. Gallen, Switzerland, in cooperation with Ernst & Young). The
company employs 2.2 million people worldwide
more than the next eight companies combined.
Of those employees, 1.4 million work in the U.S.
(Molla), making Wal-Marts domestic workforce almost three times larger than the U.S. Postal Service
(United States Postal Service), or approximately
the size of the U.S. Military (Global Fire Power).

RANK

1
2
3
4
5

COMPANY

Wal-Mart Stores,
Inc.
Volkswagen AG
Berkshire
Hathaway, Inc.
EXOR SpA
Ford Motor
Company
Cargill,
Incorporated

Koch Industries Inc.

Motoren Werke AG

EST

PUBLIC

REVENUE

EMPLOYEES

1962

Public

476.3

2,200,000

1937

Public

261.6

572,800

1955

Public

182.2

330,745

1927

Public

151.1

301,441

1903

Public

146.9

181,000

1865

Private

136.7

143,000

COUNTRY

FAMILY

United

Walton

States

family

Germany
United
States
Italy
United
States
United
States
United

1940

Private

115

100,000

1916

Public

101

110,351

Germany

States

Bayerische
(BMW)
9

Schwarz Group

1930

Private

89.4

335,000

Germany

10

Groupe Auchan

1961

Private

85.5

302,500

France

Porsche
family

SHARE

50.9%
32.2%

Buffet family

34.5%

Agnelli family

51.4%

Ford family

40.0%

Cargill/
MacMillan

90.0%

family
Koch family
Quandt
family
Schwarz
family
Mulliez
family

84.0%

46.7%

100.0%
87.8%

(Center for Family Business at the University of St. Gallen, Switzerland, in cooperation with Ernst & Young)

One would expect these giants to skew our perception of the average family-owned business,
but they do not, because the vast majority of
family-owned businesses have annual revenues of less than $1 million. In fact, only 1% of
family-owned businesses have annual revenues

exceeding $25 million (Baka); most are quite

small nearly half have annual revenues under
$50,000; and roughly three in four have annual
revenues under $250,000 (PricewaterhouseCoopers LLP).

The vast majority of family-owned businesses have annual

revenues of less than $1 million.

Almost Half of U.S. Family-Owned Businesses

Have Revenues Under $50,000 (U.S. Census Bureau)

Number of
Businesses

7%

10%

12%
9%

9%
14%
15%
12%

12%

Annual
Revenues

12%

388k

Less than $5,000

9%

280k

$5,000-$9,999

14%

464k

$10,000-$24,999

12%

401k

$25,000-$49,999

12%

400k

$50,000-$99,999

15%

503k

$100,000-$249,999

9%

300k

$250,000-$499,999

7%

221k

$500,000-$999,999

10%

313k

$1,000,000 or more

(U.S. Census Bureau)

The secret sauce of family businesses

eventy percent of family-owned businesses will not pass from the first to the
second generation; only 12% remain
viable into a third; and 3% will reach a
fourth (Family Business Institute). However,
among those family businesses that do achieve
longevity, CEO tenure can be quite long. Forbes
reports that the median CEO tenure of the 100
largest family-owned businesses is more than
seven years, compared to only 4.6 years in other large U.S. companies (Stadler). This longer
tenure, argues the author, gives CEOs of family
businesses more time to implement their ideas

and tends to create loyalty that helps align the

leaders position with the shareholders. It also
alleviates the pressure to scrap new strategies
when they fail to produce immediate results,
giving them more time to succeed than they
would have under the normal pressure to hit
quarterly numbers. And that patience may pay
off, as family businesses show 6.65% greater
return on assets than their non-family counterparts.

The median CEO tenure of the 100 largest family-owned

businesses is more than seven years.
Nicolas Kachaner, senior partner and managing
director in the Paris office of the Boston Consulting Group, has reported other advantages
that seem to be shared among family-owned
businesses. They tend to be more frugal, in both

Few Family-Owned
Businesses Make it to the
Fourth Generation
(Family Business Institute)

30%

12%

3%

last into
a second
generation

remain viable
into a third
generation

operate into
the fourth
generation
or beyond

good times and bad; they set a high bar for capital expenditures; they carry little debt; and they
retain talent longer than competitors (Kachaner, Jr. and Bloch).

Andrew Keyt, executive director of the

Loyola University Chicago Family Business
Center, suggests that successful multi-generational family businesses share four
distinct forces (Keyt):

1. Strong family unity, enabling them to

adapt. Keyt says they maintain that unity by holding regular family meetings,
educating family members about the
business, building conflict-resolution
skills, and learning about the components of good communication.
2. Shared values that extend beyond money.
Their company vision and mission stress
values that encourage family members to
commit to something greater than self.
3. Unified vision, characterized by independent boards, strategic plans aligned
with the familys values, and written succession plans.
4. Commitment to investing in the development of the next generation of family
leaders.

A recipe for gold

ome family businesses have truly stood

the test of time. Cargill, a Minnesota-based food processing company,
employs 143,000 people and generates
over $136 billion in annual revenues. At 151
years of age, the company is still 90% family-owned (Center for Family Business at the
University of St. Gallen, Switzerland, in cooperation with Ernst & Young). For those who operate
family businesses, Cargill stands as a shining
example that longevity and financial success are
clearly attainable.
Yet Cargill is not, by far, the oldest family-owned
business in America. That distinction goes to
Zildjian Cymbal Company. Avedis Zildjian was a

17th-century alchemist living in Constantinople.

While attempting to make gold out of base metals, Zildjian stumbled onto an alloy of copper, tin
and silver that had unique sound qualities, and
with that alloy, he made cymbals of such quality
that the Sultan invited him to live at court. Today,
almost four centuries later, the 15th generation
of Zildjians makes cymbals in Norwood, MA
(Zildjian Cymbals).
All family businesses have humble beginnings.
Perhaps yours is one. If so, whether youre a
third-generation plumber or a high-tech entrepreneur, financial success and longevity are
within your reach. May your recipe be one for
gold.

About the Author

ichael Zimmerman is the Senior Marketing Strategist at MarketPoint

LLC, a business consulting firm specializing in strategic communications, brand management and outsourced marketing. Calling on 36
years of management experience, including two CEO positions and
several marketing leadership roles, Michael is a regular contributor to SmartCEO
Magazine (New York, Philadelphia, Baltimore, and DC editions); he has been published in Social Media Today, Technorati, The Social Customer, and Sales and Marketing
Management Magazine, and speaks frequently at area universities.

Jenna George contributed research for this whitepaper.

Works Cited
Aileron. The Facts Of Family Business. Forbes 31 July 2013. 10 February 2016.
http://www.forbes.com/sites/aileron/2013/07/31/the-facts-of-family-business/#758b19e646e7
Baka, Jim. Protecting the Family Business Legacy. 24 September 2015. Blog. 26 February 2016. <http://tecmidwest.com/2015/09/
protecting-the-family-business-legacy/>.
Center for Family Business at the University of St. Gallen, Switzerland, in cooperation with Ernst & Young. Global Family Business
Index. 4 February 2016. Table. 21 March 2016. <http://familybusinessindex.com/>.
Family Business Institute. Succession Planning. 2015. Blog. 21 March 2016. <https://www.familybusinessinstitute.com/consulting/
succession-planning/>.
Favaro, Ken, Per-Ola Karlsson and Gary L. Neilson. 2014 study of CEOs, governance, and success: The value of getting CEO succession
right. 2015. Report. 21 March 2016. <http://www.strategyand.pwc.com/media/file/2014-Study-of-CEOs-Governance-and-Success.
pdf>.
Fernandez-Araoz, C., Iqbal, S., and Ritter, J. Leadership Lessons from Great Family Businesses. April 2015. 2 2 2016. <https://hbr.
org/2015/04/leadership-lessons-from-great-family-businesses>.
Global Fire Power. United States of America Military Strength. 2015. List. 21 March 2016.
http://www.globalfirepower.com/country-military-strength-detail.asp?country_id=united-states-of-america
Kachaner, Nicolas, George Stalk Jr. and Alain Bloch. What You Can Learn from Family Business. Harvard Business Review November 2012. Article. 21 March 2016. <https://hbr.org/2012/11/what-you-can-learn-from-family-business>.
Keyt, Andrew. The 4 Forces That Drive Family Business Success. Entrepreneur 9 September 2015. Article. 21 March 2016. <http://
www.entrepreneur.com/article/250416>.
Molla, Rani. The Numbers. 7 October 2014. Table. 21 March 2016. <http://blogs.wsj.com/numbers/top-employers-in-the-u-s-bynumber-of-employees-1815/>.
Moran, Gwen. Exclusive: This is the type of business most likely to promote women leaders. 18 June 2015. 21 March 2016. <http://
fortune.com/2015/06/18/family-business-women-leaders/>.
PricewaterhouseCoopers LLP. Professionalize to optomize: US family firms are no longer winging it. 2015. Report. 21 March 2016.
<http://www.pwc.com/us/en/private-company-services/publications/assets/pwc-family-business-survey-us-2015.pdf>.
Stadler, Christian. Four Lessons Firms Can Learn From Family Businesses. 30 April 2015. Article. 21 March 2016. <http://www.
forbes.com/sites/christianstadler/2015/04/30/four-lessons-firms-can-learn-from-family-businesses/#6ca7cfd4669e>.
U.S. Census Bureau. Survey of Business Owners. 2012. Report. 21 March 2016. <https://www.census.gov/econ/sbo/getdata.html>.
United States Postal Service. Number of Postal Employees Since 1926. February 2016. Table. 21 March 2016. <https://about.usps.
com/who-we-are/postal-history/employees-since-1926.pdf>.
Zildjian Cymbals. About Zildjian: Zildjians Historical Background. n.d. 21 March 2016. <https://zildjian.com/information/
about-zildjian>.

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