New report shows family firms ‘most trusted globally’ – reinforcing their appeal to business buyers

Advice (JH), John Hatt, News, Team

The 2014 Edelman Trust Barometer, which focusses on levels of public trust around the world, has just been published. Its key findings include that (with the exception of Asia) family owned businesses are THE most trusted, outpacing other SMEs and private companies, ‘big business’ and state-owned businesses.

This report follows an earlier one by the Institute for Family Businesses (IFA) which suggests a number of reasons why family firms are not just popular with consumers: businesses buyers are particularly keen on them, too. Why?

Closely linked reasons for popularity

The IFA report found that family-firm owner managers run businesses with an eye to the long-term. They are much better at continuing to invest during recessions and take more modest salaries and dividends, preferring to reinvest instead. They also command greater staff loyalty. These factors help family businesses to build strength in depth – and develop the high levels of trust revealed by the Edelman survey.

Family firms are often criticised by financial industry professionals for being overly-cautious, for a sentimental approach to their staff and for holding cash. But these are the very reasons behind staff and customer loyalty. They were also central to the ability of many family firms to weather recent storms more successfully than highly-geared businesses run by employee managers focussed on quarterly results – and maximising the share price when their options mature.

The challenge facing new owners

No wonder business buyers are keen on family firms. They want a business with strong foundations and thus value the same things that the staff and customers prize. Yes, the transition of ownership out of the family has to be carefully managed but, done with sensitivity, that is rarely a problem in itself. No, the real challenge is in subsequent management strategy and style. Will you, the new owner, follow the practices which made the business so good in the first place, or succumb to shorter-term temptations?

A slideshow summarising the report can be found here. Its other findings include that we in the UK now trust energy companies less than the citizens of any other country in the world. Trust in governments is higher than in businesses in just five out of 27 countries surveyed, and lowest in South Africa, Spain and Poland, at 17%, 18% and 19% respectively. In the UK, it’s 42%, compared with 52% for businesses.

The website of the Institute for Family Business can be found here.

The Business Partnership is highly experienced in advising buyers and sellers on the sensitivities involved in the sale of long-held family businesses. A video about how business owners can measure the ‘sellability’ of there business can be found here.