Family Business Facts

Some of the prevailing statistics concerning family businesses and their impact on the economy are quite surprising. Here are just a few:

  • There are 5.5 million family businesses in the US. (FEUSA, 2011)
     

  • Family owned businesses contribute 64% of the U.S. GDP (that’s about $10.7 trillion), employ 62% of the workforce (FEUSA, 2011), and are responsible for 78% of all new job creation. (Astrachan & Shanker, 2003) 35% of Fortune 500 companies are family-controlled. (Businessweek.com, 2006)
     

  • ROI is greater in family businesses, averaging a 6.65% greater return than non-family firms (ffi.org, 2010)
     

  • The average lifespan of a family-owned business is 24 years (familybusinesscenter.com, 2010).  About 30% of U.S. family-owned businesses turn into second-generation businesses, approximately 13% are passed down successfully to a third generation, and 3% to a fourth or beyond (Businessweek.com, 2010)
     

  • Currently, 24 percent of family businesses are led by a female CEO or President, and 31.3 percent of family businesses surveyed indicate that the next successor is a female. Nearly 60 percent of all family-owned businesses have women in top management team positions (Mass Mutual American Family Business Survey, 2007).  Of the non-family firms in the Fortune 1000, only 2.5 percent are currently led by women (Fortune magazine, 2007)
     

  • Family-owned companies account for 80 percent of all businesses worldwide, and about one-third of them are owned by women. (Karen Klein Bloomberg Business Week, 2011)By 2050, virtually all closely held and family-owned businesses will lose their primary owner to death or retirement. Approximately $10.4 trillion of net worth will be transferred by the year 2040, with $4.8 trillion in the next 20 years (Robert Avery, Cornell University, “The Ten Trillion Dollar Question: A Philanthropic Gameplan”)
     

  • Within 10 years, 40.3 percent of business owners expect to retire, creating a significant transition. Of these, fewer than half (45.5 percent) of those expecting to retire in five years and fewer than a third (29 percent) of those expecting to retire in five years have selected a successor, meaning there is much work to do and potential sources of instability for our economy. Of those who have selected a successor, the successor’s median age is about 18 years younger than the current chief executive. Co-CEOs, as in previous years, is being considered at a similar rate (42.2 percent). (Mass Mutual Family Business Survey 2007)
     

  • In their study of S&P 500 firms, Dyer & Whetten (2006) find that family firms exhibit more social responsibility than non-family firms. The authors relate such behavior to the owning families’ concern about image and community reputation
     

  • Families’ preference for within-family CEOs are associated with large declines in operating performance and valuation when family CEOs did not attend selective undergraduate institutions, but such correlation does not exist for unrelated promotions. Perez-Gonzalez (2003)
     

  • Family circumstances critically influence the choice of business strategy. There is significant potential for conflict between business logic and parents’ fairness considerations when assessing ownership inheritances or expansion strategies. Ward(1987), Gersick et al. (1997)