Blood is thicker than water, and it’s booming for business. A new report shows that last year marked the largest growth increase for family businesses in 15 years, and certain traits are setting high performers apart.
The 32.4 million family businesses in the U.S. play a major role in the overall business economy and employ approximately 59 percent of the American workforce, per the nonprofit Family Enterprise USA. According to the 11th Global Family Business Survey released this week from PwC, 71 percent of family businesses reported growth in their latest financial year. Forty three percent achieved double-digit growth, and 77 percent expect to grow in the next two years.
Alongside this notable growth, the report also identifies key areas where family businesses are not fully tapping opportunities for big payoffs. Here are a few ways your family business can improve its performance:
1. Strengthen your digital capabilities
Digital capabilities can be transformative for family businesses. According to the report, almost 10 percent more family businesses with strong digital capabilities had double-digit growth in the last year. But the report shows that only 42 percent of family businesses believe they have strong digital capabilities. Since 2021, digital capabilities have dropped as a priority by almost 20 percent, while “protecting the core business, covering costs, and surviving” has increased in prioritization.
Investing in your company’s digital capabilities could include utilizing online marketing tools, a mobile app, e-commerce capabilities, and analytic-informed insights, to name just a few examples from a Deloitte report.
2. Ensure your board is diverse
Family businesses that have embraced digital transformation also tend to have more diversity on their on their boards, according to the report–a characteristic that gave these family businesses a slight advantage in double-digit growth this year. Yet only 9 percent of businesses surveyed said they have a diverse board. (The report defined diverse boards as having “two or more women, one board member under the age of 40, one non-family member and one from a different sector background.”) Over one-third had only family members on their board.
Previous research also supports the power of diverse boards, linking them to greater financial performance. Expanding networks beyond family members and keeping board diversity in mind could be an asset for your company.
3. Double down on ESG
Environmental, social, and governance factors can be critical for building strong customer relationships. “Family businesses with a communicated ESG strategy are more trusted by customers,” the PwC press release stated.
Yet, according to the same press release, 67 percent of family businesses put little to no focus on ESG. Just 19 percent say that minimizing their company’s environmental impact is a priority, and 20 percent consider reducing their carbon footprint a priority for the next two years. Family businesses that do prioritize ESG see clear benefits: 8 percent more businesses with ESG strategies experience double-digit growth, according to the PwC report.
“Family businesses are showing they can grow by welcoming change and building trust with digital communication and diverse boards — even in a challenging landscape,” said Peter Englisch, PwC Global and EMEA Family Business Leader, in the press release. “To continue this trajectory, firms will need to re-orient to focus on delivering value not just for customers, but for society. Transformation, purpose, and legacy are no longer converse, but intertwined.”
This article was written by Sarah Lynch from Inc. and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected].
