Small Business

Family owned companies usually last a long time

by Ian M. Berkowitz

Over the last few weeks, I have been writing about the uniqueness of family businesses.  You should be aware that almost all of the material I have been writing during this series can be used in any type of business.

As a small-business owner, having the right principles, structure and foundation are critical elements to your ability to establish and operate a successful business venture. This week, I bring to your attention the possibilities of where your business can go and how far it can go if it operates with the principles that guide most family businesses.

Professor William O’Hara, the expert on family owned and operated businesses, posed a rhetorical question in his recent book, “Centuries of Success.”  The question was -- is there any institution more enduring or universal than a family business? He also provided his own answer: “Before the multinational corporation, there was the family business. Before the Industrial Revolution, there was the family business. Before the enlightenment of Greece and the empire of Rome, there was the family business.”

Many family businesses have lasted for hundreds of years; however, the world’s oldest family business, Kongo Gumi, was founded in 578 AD in Osaka, Japan and is now being managed by its 40th generation. Over the centuries, Kongo Gumi, a construction company, has participated in the construction of many famous buildings, including the 16th-century Osaka castle. Today, the family continues to build and repair religious temples and manage general contracting from its Osaka headquarters.

Hospitality Firm

Not far behind is a second Japanese company, Hoshi Rykon, founded in 718 AD in Komatsu, Japan, and is now being managed by its 46th generation. This company is in the hospitality industry and the family has owned and operated a hotel and spa in the same location for almost 1,290 years.

Given the age of the United States, our oldest businesses have certainly not been around as long as our Japanese counterparts. However, a recent survey by Family Business Magazine has confirmed at least 102 family businesses that remain owned and operated by the same family since at least 1865, and some cases, date back as far as the early 17th century.

These US corporate successes include 43 manufacturers, 21 farms, 25 services businesses, including 12 funeral homes and 10 retailers, plus a few that defied definition. No real geographic location is predominant as they are scattered across 36 states and Puerto Rico stretching from Maine to California. Broken down by state, the most family-friendly successes are found in Pennsylvania, with 11, and Illinois and Massachusetts, with nine each.

The top five principles used by these businesses were: stay small, as about half of the listed companies employ fewer than 15 people, and many have fewer than 10; don’t go public, as offering stock to the public is a tempting way to raise capital, but it’s also a temptation for takeover artists. Only three of the listed companies are publicly traded, and they’re near the bottom of the list. 

Stay Suburban

Avoid big cities, as only 27 of the 102 oldest companies are based in metropolitan areas large enough to house major-league sports teams. Moreover, of the 50 oldest companies, only seven are located in major urban areas. Finally, keep it in the family. As a rule, families outlast nations, corporations and other organizations so it’s no surprise that family firms, by and large, outlast non-family firms.

For you real curious readers, a few of our oldest highly name recognizable family businesses here in the US are Zildjian Cymbal, which as also the oldest, Corning Glass, Crane & Co., King Ranch, Levi Strauss & Co. and Anheuser Busch.

Ian M. Berkowitz is a former attorney/advisor with the United States Small Business Administration in Washington D.C.  During his tenure with the Federal Government he specifically worked in the areas of disaster relief for homeowners and businesses and government contracting.  He is currently a practicing business and real estate attorney in Boca Raton.  In addition to his law degree, Ian also holds a Masters Degree in Government from The John Hopkins University.