When people are asked about family businesses, I think the first image that comes to their mind is what they find in their own neighborhoods — perhaps a dry-cleaning shop run by a husband-and-wife team, or a favorite local restaurant with one generation working the kitchen and another working the front of the house. By contrast, megacorporations with well-known national brands that seem to be everywhere in our lives often define what people think of as “big business.”
Those assumptions make it easy to overlook the fact that family-owned businesses come in all shapes and sizes and are not limited to entrepreneurs and so-called “mom-and-pop” stores. In fact, families own and operate more than one-third of all companies in the Capital Region, according to a Lending Tree survey. Many have sales in the millions of dollars per year, with some revenues even reaching into the billions. They also employ hundreds, and in some cases thousands, of local workers.
In the Capital Region, some family names are easy to spot because they are often on the front door and synonymous with the business. In other cases, the family connection may not be as obvious. But family-run businesses are very familiar to us because they are a big part of our everyday lives. We buy cars from them, such as The Niello Company, which we spotlight in this issue; we eat in their restaurants; we buy food and gadgets for our kitchens from them; we build and update our homes using their products; we drink our favorite beverages that they co-pack, and we even drive on roads that family-owned businesses build.
Some family-run businesses have become very familiar to us because they’ve been part of our lives for a long time, often for decades and through more than one generation. That’s the case with El Novillero Restaurant in Sacramento, Club Pheasant in West Sacramento and Genova Bakery in Stockton, all of which you can read about in this issue.
Research from the consulting company Deloitte shows that family-run companies have twice the revenue growth of those run by corporate management teams while producing 30 percent greater return on assets and 40 percent more shareholder value. They also bounce back from bad economic times more quickly, the research shows. In short, family-run companies enjoy longevity because they are successful, perhaps due to the entrepreneurial drive that created them and the pride of having the family name on the door.
Family businesses tend to share their success with the community, likely because they are so personally connected to it. The most recent Global Family Business Survey from PricewaterhouseCoopers shows that 85 percent of family-owned businesses donate to philanthropic causes and volunteer in the community. In the Capital Region, we see that benefit in their generous support of nonprofits, museums and civic ventures.
Family-run companies enjoy longevity because they are successful, perhaps due to the entrepreneurial drive that created them and the pride of having the family name on the door.
Not surprisingly, family-controlled businesses face the same kinds of challenges as those run by large corporate management teams. They look at expanding into new markets, creating new products, finding capital to fund growth, and developing succession plans for the next generation of management. Flyers Energy in Auburn practices this: The petroleum company has diversified into car washes and real estate and is developing a succession plan.
We know that meeting those challenges can be further complicated by family dynamics. Jeff Wilser looks at how to support the mental health of those in your family business. The objectivity and clear thinking needed to make business decisions can conflict with the more personal way families make decisions. It can, for instance, be hard for a company founder to know when to let go and allow younger family members to take the reins of a business or to allow them to change direction to keep up with more modern market demands.
Laurie Lauletta-Boshart talked with members of major family businesses in our area about how they are passing the torch to the next generation. The PwC study shows that two-thirds of the 2,800 companies it surveyed have a next generation family member working in the business, either as a director, manager or some other capacity, laying the foundation for the future.
Plus, there is the dedication toward the communities where these families have chosen not only to work, but to live. The owners of family-run businesses are more than merchants — their personal touch reflects our local culture. They are, after all, also our friends and neighbors.
We applaud family-owned businesses and are proud to focus on this subject annually. Our Capital Region has grown and prospered largely because of the incredible work and passion put forth by family-owned businesses, and I look forward to seeing what the next generations create to build even further on that foundation.
President and Publisher
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