When most people think of a 'family business', their mind instantly turns to some version of a little corner shop, most likely run by a husband and wife. If not that, as there are famous examples of very successful family businesses, then most would at least assume a few key characteristics about the business model.
We’re here to filter out the facts from the fiction for you, referencing our findings from our recent KPMG Family Business Global Survey.
Our survey found that the majority of family businesses highly valued control and leadership of the business staying firmly in the hands of the family themselves.
More than three-quarters of survey respondents (76%) say that the family holds a majority stake in the business. This includes 42% that own 100% of their company, giving family members ultimate control over company direction.
The Family Business Global Survey also found that in 71% of those surveyed, the CEO of the business was a family member and family members having a dominant role in the management team of the business was very important to them.
Interestingly though, the size of the company played a big part here, as the majority of small to medium sized firms had a family member as CEO, while the larger businesses were less likely to have a family member fill the CEO role.
While it’s true that family businesses are favouring keeping a strong presence in the business through majority ownership and family members filling day-to-day management roles, there is a distinct change in the worth of outside expertise in our findings.
Our survey found that many family businesses are increasingly recognising the need to bring in outside expertise and talent at senior levels and they also understand the importance of the checks and balances that independent, non-family members can provide to their company. In most family businesses, this balance is achieved by building a board that has at least a few non-family members.
The data from our survey suggests that nearly half (42%) of family businesses have chosen to raise financing from HNWI’s who were either close friends or relatives of the family business owners. Of this group, 92% stated that it was a positive experience, and one that they would choose again over other financing sources.
58% of the family businesses surveyed stated that they are seeking external financing. However, the uniquely long-term perspective most family members have when managing their companies, together with a reluctance to relinquish control and a desire for discretion, means that finding finance that matches their requirements can be a challenge.
As a result, family businesses are casting a wide net when seeking funding, using a variety of finance sources, from more typical bank debt through to tapping family wealth, securing support from other businesses and bringing HNWIs on board as investors. Some respondents also feel that banks often don’t understand the unique characteristics of family businesses and therefore fail to appreciate some of the sensitivities inherent in running a family-owned company.