Quick answer: they combine an organic business growth strategy with a long term vision.
Many of the small and medium businesses (SME) that I work with are family businesses. Topics that we work on include how to get more sales and increase profitability. For all of my clients, their key focus is how to keep their business growing. Many of them wish to build a legacy that their children can one day continue.
According to Harvard Business Review, family businesses make up about 85% of all the companies in the world.
This means that they create most of the jobs in the world. They also keep economies around the world going. Since we depend on them for so much, it is important to know what makes these SMEs successful.
The interesting thing is that well-managed family businesses last longer than most other businesses.
In fact, they dominate the list of the longest-lasting businesses in the world. Here are 8 examples of businesses that started up to 1000 years ago and that today are still owned by the same family that started the business.
- Château de Goulaine, winemaking, France. Founded in the year 1000
- Hotel Pilgrim Haus, hotel & restaurant, Germany. Founded in the year 1304
- Wachsendustrie Fulda Adam Gies, candles & wax, Germany. Founded in the year 1589
- Mellerio dits Meller, jewellery, France. Founded in the year 1613
- Tissages Denantes, cloth, France. Founded in the year 1723
- Boplaas, agriculture & orchards, South Africa. Founded in the year 1743
- Möller Group, metal products, Germany. Founded in the year 1762
- José Cuervo, tequila, Mexico. Founded in the year 1795
How did these businesses achieve this?
They follow an organic business growth strategy
Successful companies plan for growth.
They design a business growth strategy that is in line with their long-term business goals.
Moreover, they focus on organic growth. In business, organic growth is the key to success.
Organic growth is a business growth strategy that promotes long-term success. It is a controlled and sustainable growth strategy that is closely linked to the long-term goals of a business. Note that an organic business growth strategy is not a static growth strategy. It changes whenever it is necessary.
They have a long-term vision
In family businesses, owners are closely involved with daily operations. This means that the business can adapt quickly to changing circumstances. It also means that the business can focus on both the short term – what is happening today and how do we respond to this? – and the long term – how do we make sure that we can remain in business in the future?
Big businesses often have multiple management levels, meaning that many people are involved in decision-making. It also means that these businesses are slower to adapt when the market changes. If these businesses cannot adapt quickly enough, they cannot survive.
Large businesses also usually have investors. Many investors are focused on short term results: quick growth, high business valuations and high profits. This is because they need a return on their invested money and they want to obtain this return within a certain time frame.
However, this short-term focus on maximising profits can have a negative impact on long-term goals. What is right for the business in the short term may not be what is right for the business in the long term.
For businesses that are interested in staying alive for decades – or even generations – an organic growth strategy that focuses on business resilience and continuous, long-term growth is key.
Businesses that last for decades are businesses that think in terms of generations instead of quarters or years. Because of this, they take actions that put them in a better position to manage hard times.
They use a different funding strategy
Many family businesses only use their profits to grow the business. If they need external funding, they are most likely to work with banks to get a loan. You will almost never see them bring in outside investors or venture capital.
If you depend on your profits to grow the business, it means that you will have a laser focus on your profitability. You will keep looking for ways to increase your profits without endangering the business.
It means analysing your business to understand how things work.
- What are your profit drivers?
- What things eat up your profit or slow your business down?
- What types of customers do you have and how profitable are they?
- What is happening on the market and what do you hear from customers?
- What actions can you take to streamline business operations?
You will study and test all strategies that help you increase your profits.
They focus on profitability
Long-lasting family businesses understand how every aspect of their business works.
- They have a tight grip on expenses and costs.
- They pay close attention to what is happening on the market and adjust their products or services as needed.
- They also have a third element that brings the magic: they have identified their most profitable customers and focus their attention on getting more of these customers.
This enables them to build a self-sustaining profitability engine that increases profits and boosts growth. Are you interested in building a self-sustaining profitability engine for your own business? Click here to learn more.
Guide My Growth helps small and medium enterprises in Africa, Asia and LATAM grow through effective and time-tested strategies that lead to higher sales, increased profits and faster growth.
