Growing up around my family’s packaging business, I was always familiar with the close-knit nature and values that come with doing business with family. But it wasn’t until much later that I realised just how widespread family businesses are, not just in my own community, but around the world. What surprised me wasn’t the presence of family businesses, but their potential scale and economic impact.

That got me thinking: what exactly qualifies a business as a “family business”? Is it when a family member is the CEO? When board seats are held by family members? Or when a certain ownership threshold is met? Today, definitions vary, but the simplest and most widely accepted criteria boil down to two core elements: (1) more than one family member holds ownership in the business, and (2) the family maintains some form of control.

In the UK, the Family Business Research Foundation (2025) found that family businesses accounted for 93% of all firms in the private sector and generated £2.8 trillion in turnover in 2023—that’s 50% of the country’s total private sector. What’s even more interesting is that research suggests that family businesses don’t just dominate by number, they also outperform their peers and have proven their ability to survive economic downturns.

At Norte Partners, we don’t find this surprising, as we believe that the “family” element is a strategic advantage, and here’s why:

1. Acting with Legacy in Mind

It is a core sociological concept for families to be the basic unit of society, and historically there has always been an element of preservation, survivability, or legacy that permeates when it comes to running a family.

In the same sense, family businesses are typically run with a more long-term horizon in mind. According to PwC (2023), 43% of global family businesses have been in operation for over 50 years, highlighting this long-term mindset. Hence, it is less likely for these firms to make decisions to benefit shareholders only in the short run. In fact, studies have shown that family businesses tend to outperform other businesses in times of economic hardship (in effect, sometimes sacrificing gains in periods of normalcy in exchange for a higher probability of survival). For the same reason, family businesses also tend to reinvest within and commit to longer horizon investments.

2. Familial and Community Ties

In family businesses, financial outcomes aren’t always the first or only priority, and that’s often a good thing. When decisions are guided by personal relationships and shared values, they naturally reflect a more human perspective. That means it may not be just about what makes sense on paper, but what feels right for the people involved. And more often than not, those choices, whether it’s supporting the local community or offering help to someone else, end up strengthening the business for the long run in ways that don’t immediately affect fiscal returns. That’s how families work, and it’s a big part of what makes family businesses so resilient and trusted over time.

For example, in my personal experience, our family business has always tried to share resources with the wider community when major typhoons damage local infrastructure. Choices like these, it turns out, are better for businesses in general—good relationships with others in the community and in general being known for fair dealing leads to a higher amount of trust placed in family businesses. Studies have shown that family businesses are seen as more trustworthy than others – according to the Edelman Trust Barometer (2024), 70% of people trust family-owned businesses to do the right thing, a whole 12 percentage points higher than for privately-held companies.

3. Focusing on Growing and Retaining Talent

Following the previous point, family businesses, by nature of the definition, also tend to have more family members employed in the firm. As such, there tends to be a greater focus on growing and retaining talent within the firm as well. More employees tend to stick around for longer, including the CEO. (The average tenure of a CEO in a family business is up to 24 years, compared to 3-4 years for public non-family firms.)

In fact, research by Gomez-Mejia et al (2023), shows that family businesses tend to recognize the value behind human capital and are more likely to foster relationships with employees over time. Building on those findings, Heino, Alimov, and Tuominen (2024) concluded that in economic downturns, family businesses make a concerted effort to avoid downsizing for short-term financial gains, precisely because they foster relationships with the people in the company.

4. Skin in the Game

Finally, family businesses also differ from traditional firms in that they inherently have skin in the game, with full exposure to equity upside and downside, as well as more emotional ties to the business. As such, this incentivizes members of the family to be more conscious about the decisions being made within the firm, evidenced by some characteristics often attributed to family businesses, such as an aversion to debt financing. In fact, a survey done by McKinsey (2023) found that family businesses use debt to finance only 12% of new investments.

Given that the structure of family businesses inherently results in the alignment of owner-shareholder incentives, there is less conflict between short- and long-term gains and decisions can be made without the pressure of earnings reports.

Challenges and opportunities

All this being said, we also recognize that there are challenges that arise with the same traits above. Having executives that are in charge for longer could hinder the growth of these businesses at some point, and internal disagreements or inter-generational conflicts could also occur. To counter that, it is important for well-performing family-owned businesses to implement strong governance policies to ensure that the forward-looking outlook remains.

At Norte Partners, we believe that family-owned businesses represent a unique type of company, where purpose, people, and performance can align. These businesses often demonstrate superior long-term thinking, resilience through market cycles, and commitment to community. We also recognize the challenges that come with mixing family and business, and we see these as opportunities for us to support family businesses and preserve what makes them special.

At Norte Partners, we are all about preserving the legacy of small businesses and supporting them to grow into the future. If you are a small business owner or an advisor thinking about succession, get in touch – we’d love to chat.

References:

Asaf, E., Carvalho, I., Leke, A., Malatesta, F. and Tellechea, J., 2023. The secrets of outperforming family-owned businesses: How they create value—and how you can become one. [online] McKinsey & Company. Available at: https://www.mckinsey.com/~/media/mckinsey/industries/private%20equity%20and%20principal%20investors/our%20insights/the%20%20secrets%20of%20outperforming%20family%20owned%20businesses%20how%20they%20create%20value%20and%20how%20you%20can%20become%20one/the-secrets-of-outperforming-family-owned-businesses-how-they-create-value-and-how-you-can-become-one.pdf [Accessed 23 Jul. 2025].

Edelman, 2024. Edelman Trust Barometer: Global Report. [online] Edelman. Available at: https://www.edelman.com/trust/2024/trust-barometer [accessed 28 July 2025].

Family Business Research Foundation and Centre for Economics and Business Research (Cebr), 2025. The State of the Nation: The UK Family Business Sector in 2023. London: Family Business Research Foundation. Available at: https://norte.partners/wp-content/uploads/2025/07/1466c-fb_rf_stateofthenation_2025_web_04.pdf [Accessed 25 Jul. 2025].

Gómez‑Mejía, L.R., Sanchez‑Bueno, M.J., Miroshnychenko, I., Wiseman, R.M., Muñoz‑Bullón, F. and De Massis, A., 2024. Family control, political risk and employment security: A cross‑national study. Journal of Management Studies, 61(6), pp.2338–2372. DOI: 10.1111/joms.12970

Heino, N., Alimov, N. and Tuominen, P., 2024. Family firm employment behaviour during a financial crisis: Does generational stage matter? Journal of Family Business Strategy, 15(3), p. 100624. DOI: 10.1016/j.jfbs.2024.100624.

Ibrahim, N.A., Angelides, J.P. and Parsa, F., 2008. Strategic management of family businesses: Current findings and directions for future research. International Journal of Management, 25(1), pp.95–110.

PwC, 2023. PwC Global Family Business Survey 2023: Transform to Build Trust. [online] PwC. Available at: https://www.pwc.com/gx/en/services/entrepreneurial-and-private-business/family-business.html [Accessed 25 Jul. 2025].