Majority of family businesses collapse due to familial issues, study shows

Published 29.04.2016 00:00
Majority of family businesses collapse due to familial issues, study shows

Family businesses fail more often due to familial issues as opposed to commercial consequences, according to Akbank's study, 80 percent of collapses are caused by familial problems

According to a study by Akbank, only 30 percent of family-owned companies are passed down to the second generation. A total of 80 percent of company collapses are affected by familial issues, while only 20 percent of the companies collapse due to commercial reasons. Additionally, the study found the average lifespan of family-owned companies in Turkey is 25 years, and indicated that family businesses that solve their problems do so over family dinners.

Conducted by Akbank in collaboration with Sabancı University's Executive Development Unit (EDU), Deloitte and TAİDER Family Business Association, the "Keys to Sustainable Success for Family-Owned Business" study was announced during a press conference. The study is meant to help family-owned companies on their way to institutionalize and become sustainable. The study includes the results, interpretations and expert evaluations of interviews conducted by Sabancı University on 15 successful family businesses in Turkey. The publication that covers the analyses by Deloitte, which was created by compiling and interpreting the interviews with the family-owned companies, will be used as a source book during the Akbank Family-owned Business Academy.

Nearly all of the family-owned companies participating in the study usually hold "family council" meetings during family dinners or meetings. According to the companies, the active use of a family council mechanism will speed up the process to reach their goals. There is usually an age limitation for the family councils, and the family members over the age criteria can attend the council meetings regardless of their positions and shares in the company. Although none of the companies participating in the study has a succession plan, it is a primary component of their action plans.

Indicating that the family-owned companies in Turkey hold a very important position in the entrepreneurship ecosystem, the executive vice president in charge of Akbank SME Banking, Bülent Oğuz, said: "Our traditional structure generates appropriate circumstances for family-owned businesses to be established and developed; however, it is a fact that not just in Turkey, but also all around the world, family-owned businesses do not last that long." He added that, according to Turkish Statistical Institute (TurkStat) data and the Istanbul Chamber of Commerce, 95 percent of registered companies are family-owned companies. Among this number, 98.8 percent of the small and medium-sized enterprises (SMEs) are family-owned companies. Accordingly, the average lifespan of the family-owned businesses is 25 years, and only 30 percent of them passes down to the second generation, while only 12 percent pass down to the third generation and only 3 percent are passed to the fourth generation.

There are many reasons family-owned companies collapse; however, 80 percent of them collapse due to decisions made regarding familial problems. Only 20 percent of the companies collapse due to commercial reasons.According to European Union reports, 50 percent of all companies around the world and 90 percent of companies in the U.S. are family-owned, while the Fortune 500 indicates that 40 percent of the world's largest and most successful companies are family-owned. The companies' average lifespan is between 25 years and 30 years. Lastly, family-owned businesses represent 90 percent of the national income in Turkey.

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