Mass Mutual Survey Finds Family Businesses Optimistic About Growth

A survey sponsored by Massachusetts Mutual Life Insurance Company (MassMutual), the Family Firm Institute, and the Cox Family Enterprise Center at the Kennesaw State University Coles College of Business and released earlier this month indicates that family businesses are optimistic about their robust growth, although not without having to face future challenges. According to the study, family businesses, increasingly led by women and driven by strong ethical and family-oriented values, are most at risk for financial troubles due to the lack of formal succession planning and preparation, and the personal financial issues of family business owners. 
 
The survey, conducted every five years, found that family-owned businesses are growing both in terms of revenues and jobs, and they expect to continue doing so. Women are often leading that growth and have assumed leadership positions in family businesses at much higher rates than their counterparts have in primarily non-family firms in the Fortune 1000, of which only 2.5 percent are currently led by women. 
Importantly, this unique research study also raised red flags: Many family business owners have not adequately prepared for managerial and ownership succession, nor have they prepared a personal estate plan to ensure an efficient transfer of wealth to heirs. 
 
"This survey is just one example of the Institute's dedication to raising public awareness about trends and developments in the family business field," said Judy Green, Ph.D., executive director, Family Firm Institute. "This research study is the oldest of its kind in America and a leading measure of family business trends. It is particularly important because family businesses fuel the American economy," according to Green. 
 
"The research results demonstrate that many family businesses can benefit from a variety of professionals who understand the unique issues, needs and challenges faced by family business owners," said Beth Wood, marketing director, U.S. Insurance Group, MassMutual, which offers its agents access to the Certified Family Business Specialist Program, the first accredited graduate program developed exclusively with The American College for MassMutual. "To ensure continuity and future growth and security, family business owners need to focus attention on succession, estate planning and other family business and financial issues." 
 
The independently conducted survey canvassed more than 1,000 family-owned, predominantly closely held businesses to gauge strengths, challenges and changes since the last survey was conducted in 2002. Among its many findings: 
 
•Nearly three out of four firms report increased revenues over the past three years, with more than one-third reporting increases in excess of 11 percent. Looking forward, 22 percent expect double digit growth and more than half expect an increase in sales revenues up to 10 percent. More than one-third expect to add employees. 
 
•Among family business owners who expect to retire in five years, fewer than half have selected a successor; of those expecting to retire in six to 11 years, less than a third have done so. Nearly a third has no estate plan beyond a will, nearly double the number of those surveyed in 2002. And only 54 percent report a clear understanding of the impact of estate taxes, which can jeopardize future generations' ability to continue the business. 
 
•There has been an almost five-fold increase in the number of women leaders in family business since 1997, and almost a third of firms indicate they may have a female successor. 
 
•Most family businesses (60 percent) believe that their ethical standards are more stringent than those of competing firms. More than one third (37 percent) have written ethics codes, and discussions about ethics with employees, customers, and partners