According to the Conway Center for Family Business, family-owned businesses make up nearly 90 percent of all business ventures in North America. However, only about 30 percent of those businesses survive to the second generation, and the numbers of surviving businesses diminishes significantly with each successive generation.
Much has been said about the success or failure of small and family-owned businesses in the United States, and many blame the failures on the prevalence of larger business moving into areas and pushing the smaller businesses out.
The Wal-Mart Corporation is often used as the poster-child for big business crushing the little guy; but what we seem to forget is that Wal-Mart started out as a small, family-owned business.
A Brief History of Walmart
The first Walmart store opened in Rogers, AK in 1962. By 1967 the Walton family had expanded to 24 stores, and the company officially incorporated as Wal-Mart Stores, Inc. in 1969. Wal-Mart didn’t go national until the 1970s, and even then there were only 51 stores across the United States. It wasn’t until the 1990s that the stores began to number in the thousands, across the United States; at the end of the century they began expanding internationally.
The Secret to Walmart’s Success
The big thing is that Walmart is able to offer a large variety of products at really low prices. Some of this has to do with the fact that they are so large that they can make special arrangements with manufacturers and distributors to get products at much lower prices than smaller competitors.
Walmart also manufactures many of its own products, using factories and labor overseas, which saves them a lot of money; and they, in turn, pass those savings on to their customers.
A small family-owned store, selling similar product, can’t match Walmart’s low prices, and they also have neither the money nor the space to provide the same variety. As a result, consumers are more likely to shop at a Walmart store than at a smaller family-owned store.
There are other factors at play as well including keeping costs low by employing a large, low-wage workforce, and being able to make better deals overseas thanks to international trade agreements.
However, these practices alone are not the only reason that Walmart has successfully transitioned from small family business to international juggernaut.
Other Factors Contributing to Walmart’s Success
In a presentation sponsored by the American Institute of Certified Public Accountants (AICPA), Beth Gamel talks about some of the many issues that can lead to nearly 70 percent of small and family-owned business closing shop within the first generation, including:
- Failure to take into account, and understand, employment and tax laws; and,
- Failure to have a success strategy.
The Insight Center also outlines common traps that can destroy a family business including:
- Relying solely on future family members to carry the mantle, instead of opening up the field to experienced and ambitions people outside the family. The truth is that not all family members will be interested in, or even capable of, taking over once the previous generation has passed on.
- Not growing fast enough to support the needs of a growing family. As the children grow and begin working for the family business, if the business doesn’t grow with them there won’t be enough work available for them.
- Family members don’t branch out into other skill sets. Children tend to follow in their parents footsteps, so if Dad was the CEO, Junior often expects to fill those shoes when Dad retires. Meanwhile, there are several other jobs within the organization that go ignored, or end up filled by people who might not be the best suited. When the next generation branches out into other skillsets, rather than following closely behind the first generation, the company has a better chance of survival. Get a family law expert when you want your family to take your business in the future. With the help of a family law attorney you can be sure you’re family will not run into any legal hurdles later down the line that could interrupt their running the business as best they can.
Keeping Your Business Going for Generations
Keeping your business viable is more than just having a good product and high revenue. You also need to have a strong team to help you manage your business and your money. Sometimes this could mean branching out to include qualified people from outside to the family in your business operations.
