The impact and sustainability of family businesses

(Opinion piece originally published in JDN)

Local roots, a web of trusting relationships, a long-term culture: it's hardly surprising that French family businesses demonstrated a high degree of resilience during the pandemic crisis. Although they rarely make the headlines, they nevertheless represent over 80% of our productive fabric.
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The challenges of transferring ownership

However, they all face the same problem: passing on the business. In fact, over two-thirds of them do not make it past the second generation, and this percentage decreases with each successive generation.  

Handing down on an estate also means passing on a certain outlook on the world. In one case, it's the new generation of a large family association refusing to take a plane to attend a seminar over a few days. In another, a descendant is directing all of his investments towards agro-forestry. Sometimes, it might even be an heiress in search of a balance with her family history who ends up changing the direction of the entire business...

In a family business, concern for future generations is not an abstraction: when it comes to transferring productive capital to heirs, the bond is palpable. Passingf things on means preserving this bond.

What, then, can be done to facilitate intergenerational dialogue and create the conditions for a smooth handover?

(Re)embed impact in the company's DNA to guarantee its long-term future. 

A legacy that is passed on is also human and intangible capital, a capacity to create jobs, support local industries and take a long-term view. The key to long-term success lies in an ability to redirect activities and redeploy capital to keep up with the economic changes of the time. Two centuries ago, the Peugeots were millers. Then the family mill became a foundry, the foundry became a factory, the factory, automobile production lines. Today's industrial revolution is one of impact. Taking into account the social and environmental consequences of one's activity is not a matter of magnanimity: it ensures that the conditions for future profitability are maintained.

For a company manager with a genuine concern for the long term, putting impact at the heart of his industrial project today is a way of overcoming the critical handover stage. Indeed, it is a philosophy of action that brings everyone together: some because they want to see what they've created endure, others because they would be willing to turn down an inheritance that they couldn't turn into a vehicle for commitment.

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Become a player in the impact revolution for future generations

Investing and becoming involved with impact entrepreneurs is one way of initiating and expanding this approach: learning by doing, as it were. There are several ways for family businesses to get involved: investing in evergreen funds, creating a dedicated investment vehicle or participating in a specialized multi-family office. The most ambitious even set up an impact club deal within the family, which has the indirect advantage of creating links between the generations.

To realize their full potential, impact finance start-ups will need the patient capital and experience of the managing families of France's finest SMEs, who can give new meaning to their mission. Impact finance and family businesses are a marriage of the heart and the mind.