9%NET RETURN Family businesses make up 70 per cent of all businesses in Australia and considerable research has been undertaken into what makes them different to their counterparts in the public company arena. In researching this issue John L. Ward from the Loyola University of Chicago recalls the time when a man’s word was his bond. He refers to a time when business was done on a handshake, on trust. A time when business was based on relationships, often family relationships. “I knew your father. I knew your grandfather.” These statements meant: “I know your values, your background and how important your reputation is to you, so I know I can trust you and I am comfortable doing business with you.” With ever-increasing competitive pressures, low margins, rapidly changing markets and technology and the emergence of bigger, more bureaucratic companies, there is an increasing appetite for working relationships based on trust, reliability, and long-term orientations. Because family businesses often foster these values, they are seen as desirable business partners. Therefore, if we identify one of the key differences between corporate businesses and family firms as being the ability for consumers to build a trusting relationship with the “name above the door” then we can realise why many family firms are returning to promoting themselves as family-owned and operating with family values. Of course, it is not enough just to rely on your family name or good reputation. Like their public company counterparts, family businesses need to be competitive in the business arena on price, quality and service. Family businesses also need to be run as professionally as possible and not as a mum-and-dad operation. External influences are essential to ensure that decisions are made in the best interest of the business and not necessarily the family. Management of the highest calibre that the business can afford should be employed to ensure the business operates at its optimum to ensure the competitive advantage mentioned earlier can be capitalised on. Many challenges exist on the path to professionalising a family business, such as resistance to change. The first generation that started and built up a business grows accustomed to doing things one way — their way. Along comes the second or third generation, quite often with university qualifications and/or external work experience. This new generation can see that certain things could be modernised or done differently and this is often met with resistance. Professor Ward, who will be the keynote speaker at the National Family Business Australia conference later this year, summarised his findings succinctly when he said: “With the reputation of your family on the line, with your personal integrity behind every handshake, and with the economic future of your heirs at stake, owning a family business is not only a significant responsibility but also an opportunity for an increasingly valuable competitive advantage.” When reputation is relatively important FAMILY BUSINESS BRIEFING ■ Andrew Mostyn ................................................................................. ■ Andrew Mostyn is WA chairman of Family Business Australia