How Successful are

Family Businesses?
And what are the
Keys to Success?
5 Pillars of a Successful Family
Business
1. Human capital

2. Social capital

3. Patient financial capital

4. Survivability capital

5. Lower costs of governance

Human Capital
The first pillar is the family's human capital, or "inner
circle." When the skill sets of different family
members are coordinated as a complementary
cache of knowledge, with a clear division of labor,
the likelihood of future success improves
significantly
Social Capital
The family members bring valuable social capital
to the business in the form of networking and
‘word-of-mouth’ which has become very common
in modern-day businesses.
Patient Financial Capital
The family firm typically has patient financial
capital in the form of both equity and debt
financing from family members. The family
relationship between the investors and the
managers reduces the threat of liquidation. Faster
source than a bank loan
Survivability Capital
The family company must manage its survivability
capital-family members' willingness to provide free
labor or emergency loans so the venture doesn't
fail.
Lower Costs of Governance

The family business must manage its ability to hold down the
costs of governance. In nonfamily firms, these include costs for
things such as special accounting systems, security systems,
policy manuals, legal documents and other mechanisms to
reduce theft and monitor employees' work habits. Trust is key
Balance in daily life
Family Passion
 Raise kids around the family business

 Keep a high synergy and possible family

successors close to the businesses

 Do not keep secrets

 Trust
Biggest Family businesses North
America
 Mars ($30 Billion) – 100%

 The Washington post ($4.72 Billion) – 70%

 Walmart ($419 Billion)- 44.7%

 Jean Coutu (Canadian) ($2.54 Billion)- 55%

How it works

 Clear understanding of tasks

 Clear and Early Communication

 Physical Space

 Real Names Vs Nicknames

 Diverss Opinion
Pros
 Loyalty

 Sacrifices

 Flexibility

 Communication

 Knowledge of Co-worker
Cons
 Sensible topics

 Obstacles with family members

 Pressure

 Socialization
Middle East
Saudi Arabia
 6 out of the top 10 highest revenue family businesses in
the Middle East are Located in Saudi Arabia

 90% of businesses in Saudi Arabia are wholly family

owned as opposed to 70% in the European Union
Israel
 Andre Messika Diamonds

 Makor Capital
Risks of Failure
 Trap 1 – Automatic Entitlement

 Trap 1- Solution

 Trap 2 – Business Vs Family Growth

 Trap 2 – Solution

 Trap 3 – Family Isolation

 Trap 3 – Solution