Evaluation of the factors that ensures long-term sustainability of family businesses

Abstract

Family businesses are an integral sector in the economy of all countries, and will increasingly become major role players in the employment needs of their countries, as the entrepreneurial spirit evolves in the minds of the people to create their own wealth and lose their dependency on state funds and large corporations as main providers of jobs. It becomes evident that the unique and very valuable traits of family businesses should be developed and preserved for everyone's sustainable economic, social and personal prosperity. This study identifies and evaluates the factors that ensure lasting family business value. The primary objective of the research study is to offer practical recommendations to family business owners and other family or non family members to nurture their new or inherited businesses. The reality that faces family businesses is the complexity and dualism of balancing the needs of both the family (emotional) and the business (rational) to prolong and preserve all interest for the benefit of both parties. It just so happen that family issues, values and expectations often clash with sound business decisions. Business managers and family mentors need to be aware and skilled to steer everyone in the proper direction where the goals of the business and the family converge. The ultimate goal is harmony among family through effective communication and conflict resolution by employing the formal business and personal tools to fix any irregularity or obstacle that keeps the family business from sustaining itself for future generations. The research was conducted by means of a literature and empirical study. The literature study entails literature on the key dynamics of family businesses and factors that ensure long-term sustainability of family businesses. The literature review formed the basis for evaluating the factors that ensure the long-term sustainability of family businesses. These factors were empirically tested in practice by means of a measurement instrument and subsequently evaluated. Based on the evaluation of the empirical study, it was concluded, that the four most neglected factors or sub-factors in ensuring the long-term sustainability of family businesses are: disciplinary procedures for the family members, transfer of management to the younger generation, estate tax of the family business and establishing and maintaining communication forums.