The Truth About Family Businesses

A local business coach separates fact from fiction and offers advice to help things run smoother.

Perspective Guest 01

Family businesses are the lifeblood of south Louisiana and the United States — 90% of businesses in this country are family-run or family-owned. Family businesses provide more than 60% of the nation’s employment and over half of the GDP.

The math is simple: If you want to grow a stronger economy, do more with family businesses.

Even though there are a lot of myths about family businesses, they ARE a great bet. They strengthen not just our business community, but the whole community. Sure, the intersection of business and family can be messy, but there are some simple tools available to help strengthen any family business.

The Real Facts About Family Businesses

The statistics misquoted virally about family businesses state only 3% survive a third-generation handoff. This is just NOT true. Multigenerational family businesses are, in fact, stronger because:

  • They are almost always long-term focused; their goals are aligned with sustainability (a nice contrast to many of today’s ‘pop-up’ investments).
  • Institutional memory of more than one generation allows them to ride the cyclic ups and downs of the market with slight or almost no reaction. They’ve seen it before.
  • Those in family businesses are quick to respond to trends, but not first to jump. Family businesses adapt well because of the younger generation’s desire to change with times, balanced by the older generation’s deliberate thought.
  • The path from dinner table to boardroom is short. Ideas heard from younger members during Thanksgiving dinner move quickly up the chain.

Family businesses are usually anchored by family values. Letting the business down is letting the family down, so good corporate governance and an inherent emphasis on product quality or customer service is continually present.

Here’s the scorecard on how family firms outperform non-family firms:

  • EBITDA earnings before interest, taxes, depreciation and amortization) runs 2 points higher.
  • EVA (economic value added) is 5.5% greater
  • ROA (return on assets) is 6.65% greater
  • Revenue growth is higher, usually averaging 5% or more.
  • Family businesses are trusted more than non-family businesses per the 2016 Edelman Trust Barometer.


Of Course Family Businesses Have Some Drama

Family drama is hard, emotional work. Adding it to your business makes things really tough. I frequently see the family drama and family craziness layered over businesses. You’ve seen it too — the irrationality of applying family rules to the business:

  • Jody gets promoted because he’s mom’s favorite.
  • Aunt Matilda gets paid for doing nothing.
  • Karen’s adult children consistently miss their measurables; they don’t even work directly for Karen.
  • Kris got promoted because she’s the tallest and oldest in the family.

There are two clear fundamental rules to follow in family businesses

1. Family rules run the family; home business stays at home.

2. Business (e.g., professional) rules apply in the business.

What may be a standard reaction for the family is definitely not normal for a professional setting. You may still beat up on your siblings (I do); do not bring that into the business. Your brother — when in business with you — is a professional co-worker. Be mindful of wearing your sibling hat or co-worker hat at all times.

If you are a family business reading those two rules and freaking out … you are normal, common even. Resources abound to assist you and your family business. Start with the Tulane Family Business Center, where resources and comfortable peer group discussions are available.

One last plea to all: Please help our community grow by doing more business with family businesses.


Perspective Guest 02

Matt Hahne is a Professional EOS Implementer who helps make family businesses stronger by using simple, real-world-proven tools to introduce accountability and discipline, clarify and communicate vision, and build team health. He may be reached at
(504)250-3807 or