The Wall Street Journal ran an interesting article about the devastating effect the recession is having on family owned businesses. The SBA estimates 90% of U.S. businesses are family-owned. During 2008 about 4.3 million businesses with 19 or fewer employees closed according to the Bureau of Labor Statistics. If 90% of those firms were family controlled businesses more then 3.8 million families have lost their livelihoods and most likely have also lost a considerable amount of personal wealth. This drastic dissipation of wealth and family control of assets is yet another blow to the middle class. Its impact of entrepreneurial activity and capital formation initiatives may create additional headwinds for the economy seeking to overcome the deep recession.
Beth Wood, a family business market development specialist at MassMutual observes that family businesses are "often steeped in tradition and not as flexible to change, tend not to have formal plans in place to respond to crisis. They've seen reductions in top line revenue that they just can't react fast enough to. Problems securing credit in this recession have also prevented some family businesses from getting the funding they need."
Family owned enterprises must overcome the gravity of generational business cultures that inhibit and resist change. SMEs will survive and thrive if they can identify emerging opportunities the current business cycle is creating. SME's will survive and thrive if they have the will, resourcefulness and a supportive culture to change. These are the qualities required for long term sustainability and growth. Business as usual is giving way to a "New Normal," where adaptability to structural market changes are keys to asset preservation and wealth creation.
Risk: family trusts, asset preservation, small business, bankruptcy