What is a family business?
According to the Family Business Network International and the European Group of Owner-Managed and Family Enterprises (GEEF), an enterprise can be termed a ‘family business’ if the below conditions are met:
- The person who established or acquired the firm (share capital) or their families/descendants possess 25% of the right to vote mandated by their share capital.
- The majority of votes are in possession of the natural person(s) who established the firm, in possession of the natural person(s) who has/have acquired the share capital of the firm, or in possession of their spouses, parents, child or children’s direct heirs. The majority of votes may be direct or indirect.
- At least one representative of the family or kin is involved in the management or governance of the firm.
Family Businesses in Ireland and beyond:
Family business and families in business are at the heart of the Irish economy. According to reports, approximately 75% of all Irish companies are Family owned firms, providing around 50% of GDP and employment. (DCU). Innovators, producers and suppliers in many fields, the contribution of family owned businesses to the Irish economy is significant, both through their own businesses and beyond. Moreover, Irish families in business are often drivers of economic and social development, being extremely committed to and involved local community investment and initiatives within their own local communities (DCU). Household names include Keeling’s, Barry’s Tea, and Musgraves.
But it’s not just in Ireland that family businesses play a crucial role. Across Europe, families in businesses represent between 55 – 90% of businesses depending on the country (KPMG), while worldwide, in 2010, 15% of the world’ largest enterprises were family owned, according to the McKinsey Global Study, including household names such as BMW, FIAT, Walmart, L’Oreal and Samsung.
Challenges facing families-in-business
Families in business face many challenges, both those that are typical to all enterprises, as well as unique challenges that that only families in business face.
The unique challenges of families in business can be captured in seven key areas
- The relationship between the family and the company
- Developing the Next Generation
- Preparing the Next Generation for Ownership and Management
- Ownership Clarity
- Finding consensus
- Conflict Resolution
- Wealth Management