BIG or small, a business is a business

There is a lot of folklore about family-run businesses, some of it true, some of it colorful, some of it apocryphal. On the apocryphal side, there is a wide-spread impression that family-run businesses are, one, small, struggling enterprises; and two, generally declining in numbers. As impressions go this ranks right up there with the teenage view that hip-hop singers are deep, creative artists.

Ten of the top-50 largest Canadian companies are family owned. Businesses that are owned by families generate 45% of the nation’s gross domestic product and employ half of all working Canadians. Certainly not all small family-run businesses are destined to become a Magna or Royal. But this misses the point. All the Magnas and Royals, however, were once small, family-run businesses.

I’ll admit, I have a warm spot inside me for the small, family-owned business. For one thing they are the heart and soul of the plastics industry. Our annual Injection Molders’ Survey has over the years indicated that about 50% of these companies have 50 or fewer employees. In other plastics sectors, for example extrusion, thermoforming, etc., the percentage of companies this size could be much higher.

More important, however, small family-run companies are the lifeblood of the free-market system. Less bureaucratic and often undercapitalized, they keep the global big hitters honest. That’s why it distresses me to see many small companies run, if not poorly, then carelessly; with less than full, sufficient intention to maximize their growth and value.

Many small business owners view their business as a passion or hobby first, and a business second. In the sense that such an approach can lead to unconventional and innovative methods, or a unique, humane company culture, this is good. However, indulging this sentiment can be dangerously self-centered and short-sighted. Ultimately a business, small or large, is an investment; one which you owe to yourself and to your family to manage rationally. If you want a hobby take up golf.

In today’s business environment, small business owners need to manage with the same best-practice principles used by the Fortune 500 companies. This means benchmarking, investing in technology, upgrading employee skills and eliminating waste. With smaller purchasing power and fewer marketing and sales resources, the small business owner needs to consider all means possible of solidifying and building core customer business, and expanding beyond it, including alternative financing and alliances or partnerships.

If feasible, owners of small businesses should not hesitate to move to other areas of the country where the business conditions are more favorable. In a survey of over 4000 small businesses conducted by the Canadian Federation of Independent Business, only 38% of respondents in B.C. said they expect their business performance to improve. In Alberta 64% of respondents said they expect their business to go up. These numbers need no comment.

Finally, family-business owners should let go of the out-dated notion that their business is rather like an entrusted jewel that needs to be passed on from generation to generation into eternity. As Mark Borkowski points out in his column on buying and selling a family business, only 30% of all family businesses make it into the second generation, while a mere 10% make it into the third. It’s great if the business can be kept in the family. With odds like these, however, the owner needs to put guilt behind and, when the time comes, take the best offer, and walk away knowing he has done the best he could for himself and his family.

e-mail: mlegault@corporate.southam.ca