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Imperial Houseware Distributors Inc.

Family Business

Worldwide, there are around 200 family businesses with annual revenues of at least $2 billion each. Employing half the world’s workforce, they generate well over half the world’s GDP. In the United States alone, 24 million family businesses employ 62 per cent of the workforce and account for 64 per cent of the GDP.

Similarly, in India 95 per cent of the registered firms are family businesses and in Pakistan over 90 per cent of the registered firms are estimated to be family businesses and finally, Wal-Mart, the world’s largest company is also a family business.

Family-owned businesses have certain inherent strengths, such as the ability to withstand economic shocks. They are also good at making quick decisions, maintaining good business relations and enduring time-proven leadership qualities. Belonging to a single family-culture, FOEs have strong set of values which renders them a distinct identity.

Often, a long-term strategic thinking that results into prudent business decisions enables FOEs to become sustainable, which increases the chances of ‘succession from within’. In the wake of an ever-changing business world like technological advancements, new business approaches, managerial practices, emerging competitive norms and latest market trends, the FOEs generally remain flexible so as to adopt innovative technologies.

However, FOEs face several challenges: accessing capital; and balancing debt/equity; diversifying wealth, managing risk and providing liquidity’ and managing succession; appointing competent directors/ managers.

In general, FOEs find it hard to adhere to ‘separate business entity’ concept, isolate family and company relationships. Similarly, they stick to informal governance policies which are specific and limited to their own set-up. These FOEs must embrace a bit of corporate governance.

Another challenge facing FOEs is managing growth from generation to generation. In case of less capable hands, sustainability becomes a problem. It is a dilemma because stability and growth in profits is only possible if capable persons are managing the FOEs and incapable family members are replaced with capable non-family members when continuity in family management is missed out.
 

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