Family businesses must be nimble to survive bad times
We aren’t too far into 2022, and it is already shaping up to be another challenging year for America’s 5.5 million family businesses dealing with the coronavirus pandemic.
Rampant inflation, supply chain bottlenecks and acute worker shortages continue.
Family businesses are vital to America. According to the Conway Center for Family Business, they account for two-thirds of our nation’s GDP, just over 60% of U.S. jobs and 78% of all new jobs created.
They’re resilient and nimble.
Family businesses, particularly those which are in their third or fourth generations, have learned from experience to survive through hard times, says José Liberti, a professor of finance at Northwestern University, Chicago.
One Northwest family which has dealt with many stressful times for over a century is the Campbell family. They have owned and operated Campbell’s Resort at Lake Chelan since 1901. It is a fifth-generation award-winning family business.
The family legacy dates to 1898, when Clinton Campbell, a Sioux City, Iowa, magistrate, traveled by train to Wilbur and hiked three days to Lake Chelan. He purchased the original hotel property for $400.
In 1901, he and his wife, Caroline, completed construction of a 16-room hotel.
The original property owner, who famously said, “he’d sold a sand dune to a sucker,” would be amazed to see Campbell’s Resort today with its 170-rooms, conference center and restaurant.
That “sand dune” is now part of 1,800 feet of prime waterfront beach along one of the world’s most scenic and pristine lakes.
The couple built a hostelry that has been a credit to the community and accommodated people from all walks of life. Their only son, Arthur, helped dig out the basement which added to the hotel’s restaurant.
Over the years, the family weathered tough times.
Arthur served in World War I and contracted the deadly Spanish flu and survived.
Later generations struggled through the Great Depression. They had two sons serving in World War II and dealt with disruptions caused by area wildfires and economic downturns. Now, they are confronted by the coronavirus pandemic.
The sudden onset of the Covid-19 pandemic decimated Campbell’s meeting and events business and closed the dining room. The resort has gradually reopened, but inflation, worker and supply shortages, and social distancing limits added to operating costs.
The silver lining is that visitors started returning last year to local wineries and for family vacations. It helped that Chelan Public Utility District invested in high-speed internet which allowed people to work remotely.
What are the ingredients for family business longevity?
Researchers Josh Baron, adjunct professor at Columbia Business School, and Rob Lachenauer found, on average, family businesses last far longer than typical publicly-traded companies.
“Rather than being obsessed with hitting quarterly earnings targets, as public companies are, family businesses tend to think in terms of generations, which allows them to take actions that put them in better position to endure tough times,” Baron and Lachenauer reported.
Justin Craig, clinical professor of family enterprise at Northwestern University, adds that successful family businesses leverage institutional memory, smart diversification, manage debt and adapt to change and new technology.
Over time, the families which bring the next generation into the business and leverage their abilities have a better chance of succeeding.
They focus on creating various kinds of value (financial, social, relational and reputational) and have an advantage, said John A. Davis, who leads family enterprise programs at MIT’s Sloan School of Management.
Fostering an environment where a sixth generation of the Campbell family can continue to grow, adapt and develop their business is important for America.
Families in business must be able to be nimble and financially strong to weather disruptive times.
Don Brunell is a business analyst, writer and columnist. He is retired from the Association of Washington Business. He can be contacted at TheBrunells@msn.com.