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What Startups Can Learn From The Family Business Model

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In the UK, there are 4.8 million family businesses. That’s a whopping 88% of all companies in the country.

In the US, 87% of businesses are family-owned, making up 59% of employment. There is no doubt the family business model is successful.

Many of these businesses are intergenerational, meaning not only are their many generations of the same family involved in the business operation, but leadership is also passed down through the family.

This model might seem outdated to today’s startup entrepreneurs, whose goal is to rapidly increase the value of their businesses before finding the optimum time to exit.

However, despite very different business models, there are still valuable lessons that modern startups stand to learn from family businesses, from keeping control to building a brand that lasts.

In this article, we will explore a few of the lessons from the family business model, which, in turn, we suggest are valuable tips you can use to improve how your company operates.

Control

One of the disadvantages of modern startup culture is that businesses are often forced to trade equity in exchange for quick cash.

Funding rounds help companies get to where they want to be at a faster pace, especially in the early stages where cash flow problems are particularly prevalent. Still, they often relinquish control and agility to do so.

Like in the family model, what may benefit businesses is keeping control and letting the businesses grow slower. While rapid expansion and a quick exit for the entrepreneur may not be possible in this scenario, it does negate several other problems.

For example, businesses often find their customer service section unable to cope with increased demand as they grow too big too quick. Likewise, you may become too big for your premises, leading to inefficiency or finding yourself unable to hire quality candidates as fast as you need them. These growing pains are averted with a more organic, slower growth form.

The family business experience may be beneficial in some cases insofar as you can hold on to control, and the business will grow at a healthier rate, with you as the owner keeping it real to your initial vision.

Loyalty

Keeping it in the family also has the advantage of loyalty. Worker motives need not be questioned in the same way as other companies. With the family-run business, ‘everyone is in it together’; hence they have loyal teams. While some families may occasionally bicker, like typical sibling rivalry, the heart of the business is the family unit itself. Maybe your startup can create a similar mindset!

Develop a core team of trusted staff. Family businesses often take on very inexperienced staff they are related to and train them. While some might call this nepotism, there are some advantages for every startup to take on greener employees. You can prepare them exactly how you think they should be taught, with the skills needed for the position. This is an opportunity not often afforded to businesses.

This core team you have trained will be grateful for the opportunity and the skills and confidence you have given them. Your reward for this trust is a loyal team molded from day one to fit the role. A word of warning: patience is required by the truckload.

There is a trade-off to choosing inexperienced staff. You will need to commit to training and cope with low productivity from the new workers while they spend time learning the ropes and getting up to speed.

Community

Startups are often criticized for being companies that do little to engage with the community around them. This is very different from most family businesses. They are usually so successful because they are familiar. They give back to the community by being part of it.

Not only is this the right thing to do, but it’s also great for your marketing. Support local causes, and it will pay dividends to the local community. Andrew Nisbet, Director of the Nisbet Trust, said, “. At the same time, many owners think locally when it comes to business; there has been a tendency over recent years for philanthropy to move in the opposite direction.”

Giving back to your community doesn’t have to be money, especially when your funds are tied up in the business. Being personable, buying locally, and supporting local fundraising and volunteer initiatives are ways to involve your business in the community.

History

Another thing that startups stand to learn from this model is creating history. Family businesses don’t jump ship at the first chance they get. They aim to build something that lasts – to create a mainstay in their communities.

Family businesses form more long-term relationships with suppliers and advisors. The owners put the future of the company before their own personal success. This leads to a forward-looking, generational culture. Forming relationships means deals can be done more quickly and less formally. I’m sure all startup owners would be delighted at the prospect of less red tape.

The cash-out culture that is present in most startups is often not sustainable. You need to think like a family business to build a brand that will last for generations. It’s not like this model has been historically unsuccessful. Walmart, Volkswagen, and Berkshire Hathaway started as small, family-owned companies. They have since become titans in their respective industries.

Summing Up

You can execute your vision if your startup focuses on controlling the businesses. Train your staff appropriately, just as a family business would, and think beyond your own ‘four walls’ by getting involved and giving back to your community. Embed these things into your culture, and your startup will become a force to be reckoned with in your field and be a lasting legacy for future generations.

HubSpot