Business Recommended

Why does everyone think family businesses are small?

Photo by Brand X Pictures/DigitalVision / Getty Images
Photo by Brand X Pictures/DigitalVision / Getty Images

This week, the Wall Street Journal held a conference in the US on the country’s middle market companies. The second item on the conference agenda was on succession and family businesses – nothing out of the ordinary with that.

Hold an event on mid-sized companies and conference programmers will pretty much always schedule in at least one session about family businesses. No big deal, here – after all many mid-sized companies are family businesses. But this link helps to reinforce a perception that family businesses are either small, or mid-sized.  

Very few people would identify Wal-Mart first as a family business

Here’s some more evidence of this common misperception. If you think of family businesses in German-speaking Europe, the immediate perception is of Mittelstand businesses, i.e., small and medium-sized companies. And ask any person on the street about family businesses and most would probably identify them with small retail businesses selling products and/or services in the main streets of a local town, or city.

Family Capital might be wrong, but few, if any, people when asked that same question would mention Wal-Mart, even though it’s not only a family business, but the biggest business in the world in terms of revenues.

Of course, this common perception of a family business isn’t bad, or indeed, wrong. Most family businesses are small and mid-sized. And their contribution to the dynamism of the world economy can never be over emphasized.

But the point is that many family businesses are also big, in fact, very big – but are rarely seen as such. The top 500 family businesses in the world, according to the Global Family Business Index, had combined revenues of $6.5 trillion in 2013, the last year the combined revenue numbers are available. These businesses include many huge companies with global brands like Volkswagen, BMW, Ford, Roche, LVMH and IKEA.

The answer lies more with the fact that these businesses are rarely covered by the media so they fall out of any perception from a business perspective altogether

Aren’t these companies helping to change the perception about the size of family businesses? Given the above, it would appear not.

Family Capital expects that many of these big family businesses tend to get classified as listed businesses first, and, at best, family businesses second. But, out of the 500, 243 are private companies, i.e., not listed. So, that argument isn’t completely valid. Probably the answer lies more with the fact that these businesses are rarely covered by the media so they fall out of any perception from a business perspective altogether.  

Indicative of this is the case of Bechtel, number 31 on the global family business index with annual revenues of $40 billion and privately owned by the Bechtel family since it was founded in 1898. Recently, Brendan Bechtel, the great-great-grandson of the founder, gave an interview to Fortune magazine. He’s expected to get the top job at the huge construction group in 2018. Fortune said it was the first major interview any Bechtel top executive has granted in over three decades. Yes, that’s right, Bechtel, one of the biggest companies in the world, hadn’t put forward a senior manager to be interviewed for more than 30 years.

Bechtel isn’t the exception when it comes to its privacy. Most of the private companies on the 500 list like their privacy, and don’t put their senior managers forward for interviews that often. But if a sizeable number of the world’s biggest businesses are rarely talked about, doesn’t that create a big gap in the understanding of how global business works?