Family businesses are different from closely-held businesses in that the two or more family members own more than 15% of the equity of the business, family members are employed or manage the business, and the intent of the members is to retain ownership.
Per the Family Enterprise USA in 2011, there are 5.5 million family businesses in the US. That number soars to 17 million when you include sole proprietors. Family owned businesses contribute $8.3 trillion or 57% of the U.S. GDP , employ 63% of the workforce, and are responsible for 78% of all new job creation. More than one-third of Fortune 500 companies are family-controlled.
There are approximately 35,000 US family-owned businesses with more than $25 million in annual revenue.
If you have followed any of the political or economic discussions of the last 3-4 years, you will know that most believe that the way out of the current economic downcycle is through the rapid expansion of the small business base in America.
The papers that you read those discussions in are probably family-owned like the Sulzberger family’s New York Times, the Graham family’s Washington Post, and the Murdoch family’s Wall Street Journal, which is now part of News Corp.
Wal-Mart is the largest family-owned business in the world with over $420 billion in revenue. US firms like Gap, Cargill, Comcast, Levi Strauss, LL Bean, Fidelity Investments, Kohler, and Ford Motor are all family-owned businesses. This is also true across the globe, for example, see Germany’s BMW, Korea’s LG Electronics, Japan’s Casio, Ilaty’s Fiat, and Sweden’s Ikea.
Entrepreneurial firms do not have a great track record of preserving the spirit of innovation that motivated their founding and propelled their growth through the early years. Only about 30% of these firms survive under the same owning family beyond the first generation. Only 12% survive to the third generation and only 4% to the fourth generation.
There are some success stories. The oldest family owned business operating in the US is the Zildjian Cymbal Co. of Norwood, MA which was founded 1623 in Constantinople and moved with the family to the US in 1929. They have sucessfully passed down to Zildjian heirs for fifteen generations.