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Percentage of Family Owned Small Businesses 

Percentage of Family Owned Small Businesses in US

A family-owned business is any business in which two or more family members are involved and the majority of ownership or control lies within a family. Family-owned businesses may be the oldest form of business organization, and today they are recognized as important and distinct participants in the world economy. According to Nancy Bowman-Upton, in the Small Business Administration publication, Transferring Management in the Family-Owned Business, about 90 percent of American businesses are family owned or controlled.
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Baylor University’s Institute for Family Business points that, the family business is a vital force in the American economy. They range in size from the traditional small business to a third of the Fortune 500 firms. It is estimated that family businesses generate about half of the country’s Gross National Product and half of the total wages paid. It is estimated that family businesses generate about half of the gross domestic product and half of the total wages paid. Their survival is fundamental to America’s economy.2

Literature Review:
The most commonly cited figures claim that family businesses represent 90-98% of all US businesses

(Beckhard & Dyer, 19833; Stern, 19864)

Researchers estimate that at least 90% of the businesses in the United States are family owned and controlled (Ibrahim & Ellis, 19945) and contribute somewhere between 30 and 60 percent of the nation’s gross domestic product (GDP) and half of total wages paid . As of September 30, 1994, the nominal GDP was approximately $6.77 trillion. A conservative estimate of the family business economic universe would therefore be somewhere between $2.03 and $3.38 trillion in annual production of goods and services (The Cornell University Family Business Research Institute6).

The following statistics reported by the University of Southern Maine’s Institute for Family-Owned Business: Some 35% of Fortune 500 companies are family-controlled. Family businesses account for 50% of U.S. gross domestic product. They generate 60% of the country’s employment and 78% of all new job creation (Stacy Perman8).

George W. Haynes finds that small-business-owning households were now just over two times more likely to be classified as high income (55.2 percent versus 24.8 percent) and about seven times more likely to be classified as high wealth (20.2 percent versus 3.0 percent
9).

Kirchhoff and Kirchhoff (198710) estimate that family firms represent the most prevalent form of enterprise in the United States today. While family firms are found in all sizes, more than 80 percent of all businesses in the United States today are small, family-owned firms.

Dreux conservatively estimates that there are 1.7 million family businesses, excluding sole proprietorships.
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Using a broad definition, the universe of U.S. family firms could include all sole proprietorships and a majority of partnerships and corporations. This would yield approximately 90% of all firms in the US or about 20 million. A definition which requires multiple generation involvement and direct family responsibility in management and ownership would lead to an estimate of about four million firms (Shanker and Astrachan, 199613).

Total Number of Family Businesses in the US
Model for total number of family business based on broad and
narrow definitions of a family business
Broad Definition Model total (000)
100% of Sole Proprietorships 17,100.0
60% of partnerships & private corporations 3,200.0
60% of publicly owned co.s 32.4
Total # of F.B.s 20,332.4
 
Narrow Definition Model
“35% of “principle occupation” Sole Prop. (8.6 million) 3,010.0
21% of partnerships* & private corporations 1,113.0
21% of publicly owned co.s* 11.3
Total # of F.B.s 4,134.3
* 35% (multi-generational businesses) of the 60% of total partnerships that were determined to be family businesses under the broad definition.

SOURCES: “1991 IRS income statistics, 1994 Mass Mutual Family Business Survey”
National Association of Securities Dealers

(See Shanker, M. C. & Astrachan, J. H., Myths and realities: Family business contribution to the US economy-A framework for assessing family business statistics. Family Business Review, 9, (1996), 107-119.)


REFERENCES:

    1. “TRANSFERRING MANAGEMENT IN THE FAMILY-OWNED BUSINESS”
      by Nancy Bowman-Upton
      Professor Nancy Bowman-Upton
      Director, Institute for Family Business
      Hankamer School of Business
      The John F. Baugh Center for Entrepreneurship
      Baylor University
      Waco, Texas
      Small Business Administration publication Transferring Management in the Family-Owned Business,
      http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sbp_exit.pdf

    1. Source: Baylor University’s Institute for Family Business (http://www.baylor.edu/business/entrepreneur/family_business/)

    1. Beckhard, R., & Dyer, W. (1983). Managing continuity in the family-owned business. Organizational Dynamics, Summer, 5-12

    1. Stern, M.H., (1986). Inside the family-held business. New York: Harcourt Brace Jovanovich. US Department of Treasury, Internal Revenue Service. (1993). Statistics of income. Washington, DC: US Government Printing Office

    1. Ibrahim, A. B., & Ellis, W. H. (1994). Family business management: Concepts and practice. Dubuque, IA: Kendall/Hunt.

    1. The Cornell University Family Business Research Institute, Bronfenbrenner Life Course Center http://www.fambiz.com/Orgs/Cornell/articles/real/ifbpa.cfm

    1. The Institute for Family Business at Baylor University, Journal article by Nancy Bowman Upton; Review of Business, Vol. 13, 1991
      http://www.questia.com/googleScholar.qst;jsessionid=LMgQXWQKxQmXZSMSJt9QsvwZ5P7pmBg2GpGQMXkt1WHR0vYbQXNS!-891952362!-2106413634?docId=5000139510

    1. Stacy Perman, Taking the Pulse of Family Business, from behemoths such as Ford to mom-and-pop shops, they share a set of common challenges in today’s business climate.
      http://www.businessweek.com/smallbiz/content/feb2006/sb20060210_476491.htm

    1. George W. Haynes (April 2007), Income and Wealth: How Did Households Owning Small Businesses Fare From 1989 to 2004?
      http://www.sba.gov/advo/research/rs300tot.pdf

    1. Kirchhoff, Bruce A., and Judith J. Kirchhoff. 1987. “Family Contributions to Productivity and Profitability in small business.  Journal of Small Business Management. 25, pp. 25-31.

    1. Dreux, D.R. Financing family business: Alternatives to selling out or going public. Family Business Review, 3, (1990), 225-243.

    1. Dreux, D.R. 1994, December 7. Business communication from U.S. Trust Company using Dun’s Market Indicators.

  1. Shanker, M. C. & Astrachan, J. H., Myths and realities: Family business contribution to the US economy-A framework for assessing family business statistics. Family Business Review, 9, (1996), 107-119.
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