In Australia, the family business sector accounts for approximately 70% of all businesses. The average turnover is $12 million per annum and the average number of employees is 372. Research data collected in 2006 estimated that the worth of family businesses to our Australian economy was more than $4.3 trillion.
Given the important contribution that family businesses make to the Australian economy, there is a lack of research and data collected about this important business sector.
Most the current research is focused on the challenges and problems faced by small and medium businesses. Although family businesses also encounter these same issues, they face additional challenges which are unique to them.
The additional challenges that a family business faces include balancing family and business needs, developing a formal succession plan for the future of the business and the family members operating and controlling the business so that family control of the business is maintained and family members of the business are adequately compensated.
The limited research also showed that family businesses:
are more likely to demonstrate flexibility and resilience to survive tough times within their business and detrimental effects of a severe economic downturn,
they are more likely to reduce their business debt rather than increase business debts
generally have less debt and therefore are more stable over time
are less likely to make staff redundant and are more likely to hire and maintain staff over long periods
are better for the local community surrounding the business as family businesses are more likely to invest more in their community both for business investment and in terms of philanthropic activities
generally take a long term view which balances short term rewards with long term sustainability and prosperity.
Given these positive attributes of a family business, and their significant contribution to the productivity of the Australian economy, the Government needs to ensure that more research to define the term family business, determine the characteristics of a family business, the economic contribution they make and the unique challenges they face so that Government policy and tax legislation can support family businesses to grow and continue to prosper for the long term and future generations.
Efforts by the Government made to promote the success and sustainability of family business, to ensure that their failure rate is further reduced, will positively impact positively impact our economy at inconceivable proportions.
Paul Baggetta, Founding Partner and Principal of Baggetta & Co, has been a Taxation Accountant for over 32 years, a Financial Planner since 1998 and in 1983 qualified as a Real Estate Licensee holding a Triennial Certificate (currently not trading), and operated his own Real Estate business for over 5 years as a second business.
* Sources include:
KPMG and Family Business Australia Survey of Family Businesses 2009 (in conjunction with Bond University)
The MGI Australian Family and Private Business Survey 2010 (in conjunction with RMIT University)
The MGI Family and Private Business Survey 2006 (in conjunction with RMIT University)
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