The last researches testify that the family companies advance single on profitability. Why and how on it to earn?Family firms — from small local family shops and million small and medium scale enterprises being a basis of the majority of economy, to the multinational giant companies, such as Swatch, Samsung and BMW — always played an important role in stimulation of economic growth. In spite of the fact that in the second half of the XX century in many known world family companies the families which have based them were reduced by the shares in result of public placement of shares in stock markets, they continue to take part in control, and often and to supervise many of these companies. It can have important consequences for investors.
The eligibility of generations in the companies in which families founders still own large or controlling stakes, gives them steady, remaining throughout many generations, competitive advantage.
So, the last study which has been carried out by Boston Consulting Group (BCG), showed that such companies show steadier coefficients of profitability, than the single companies, and this tendency is marked throughout the entire periods in a business cycle, including during the periods of crises, in all studied countries (see the diagram). Other recently published research in which results of some oldest family companies are given in Japan, also allows to assume that family control of the company is tightly connected to long-term financial superiority.Steadier coefficients of profitability, characteristic for family business, are reflected in course of their actions. Family firms usually exceed single in speaker of a share price in long-term perspective that specifies that the factor of family possession can increase the cost of assets for investors. For example, the German DAXplus index which calculation includes actions of 30 largest family companies, for last ten overtook wider DAX index for 41%. The best indexes showed such companies, as BMW, Fresenius, Henkel and Volkswagen. One more example of superiority of family business over competitors is the index of Credit Suisse family business which traces the companies under family monitoring in Europe and the USA. This index outstripped the MSCI World index for 110% over the last 10 years.
In what reasons of superiority of family business? First, they aim at having accurate long-term goals, avoiding traps of short-term planning. Secondly, for family business more conservative is characteristic in comparison with single firms approach to control: they have less debts and more carefully invest the capital. And at last, family firms aim to stimulate big emotional commitment to the brands that leads to smaller routine of frames.
In spite of the fact that all these factors speak well for family business, investors shouldn't forget about risks, characteristic for the companies of this kind.Them treat planning of eligibility, a nepotism and intra family hostility. From this point of view for investments it is better to select the companies which the second generation owns at least and which already learned to overcome some of these problems. For example, many families conclude the accurate oral and written arrangements regulating possible problems (for example, conditions on which family members can participate in business, boundaries of corporate and financial strategy etc.). Thus, the companies controlled by families in second and in third generation, shall have operating mechanisms of minimization of "family" risks for business development.
Successful family business plays an important role in many economy. They create the most part of national gross domestic product, provide employment and create new workplaces. Possibly, most their strong side is the aiming at longevity that involves careful control, creation of strong links to the workers and clients, and also long-term investments. Such business model provides at least similar if not the best, profitability in comparison with competitors, and also provides stability during crisis. It does them by an important factor of stability of national economies and interesting objects for investments.