5 Myths About Family Businesses

PricewaterhouseCoopers recently interviewed leaders at 89 U.S. companies for the latest edition of its PWC Family Business Survey. The telephone surveys conducted in August 2010 reveal a portrait of family business as shaken by the current market conditions, but optimistic about a rebound and positioning themselves to take advantage of it.

The answers also tend to pull the rug out from under common misconceptions about family business. Here are five of the most surprising findings:

Misconception: Family businesses tend to stay in the family.
Reality: Just barely, for now, but the trend suggests otherwise for the future of family businesses. PwC found just 55 percent of family business owners intend to pass their business on to the next generation. That slight majority is likely to be a minority by the time the next survey is taken unless current trends reverse. How so? In the 2007 edition of this survey, nearly three-quarters (72 percent) voiced plans to keep the family enterprise all in the family. This decline in family ownership plans was perhaps the most startling finding of the survey.

Misconception: Family businesses tend to be stuck in low gear and low growth.
Reality: Over the next year, family business leaders have targeted IT infrastructure, training, sales and marketing as areas they plan to spend on.

Misconception: Family businesses right now have more job candidates than they know what to do with.
Reality: The family business leaders who responded to the survey said their biggest internal challenge was finding qualified workers. And that may be getting worse, at least a little, given that the percentage citing this was up 3 percentage points to 52 percent from 49 percent in 2007.

Misconception: Going to work at your family's business is equivalent to breaking the code of life. You get a cushy job and a fabulous inheritance when the previous generation dies or retires.

Reality: Only about six of 10 (62 percent) of family business leaders reported having sufficient resources to divide their assets fairly between all heirs. Furthermore, owners don't plan to sell or hand control to the next generation soon: Just a quarter of them foresee an ownership change in five years. Finally, while most report having a succession plan, 40 percent don't.

Misconception: U.S. businesses, family-owned and otherwise, are contemplating slow if any growth in the near future.
Reality: Most (58 percent) of the U.S. respondents to PwC's survey expect core markets to improve over the next year. And 70 percent listed growth and expansion as chief business strategies during that time. And they have the means to do it: Three quarters can lay their hands on excess cash.

For small business owners who deal with family firms, this is good news -- although it might be a good idea to encourage your family-owned customers and vendors to think about a succession plan. For family business executives, who presumably already know all this, it's time to step up and take your rightful places as genuine leaders. You can't hide behind the myths anymore.

Mark Henricks has reported on business, technology and other topics for The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications. Follow him on Twitter @bizmyths.