Family businesses need to be flexible to get through bad times

We’re not that far into 2022, and it’s already shaping up to be another challenging year for America’s 5.5 million family businesses grappling with the coronavirus pandemic.

Rampant inflation, supply chain bottlenecks and acute labor shortages persist.

Family businesses are vital to America. According to the Conway Center for Family Business, they account for two-thirds of our country’s GDP, just over 60% of US jobs, and 78% of all new jobs created.

They are resilient and agile.

Family businesses, particularly those in the third or fourth generation, have learned from experience to weather hard times, says José Liberti, a professor of finance at Northwestern University in Chicago.

One Northwest family that has been coping with many stressful times for over a century is the Campbell family. They have owned and operated Campbell’s Resort on Lake Chelan since 1901. It is an award winning, fifth generation family business.

The family legacy dates back to 1898 when Clinton Campbell, a judge from Sioux City, Iowa, took the train to Wilbur and hiked three days to Lake Chelan. He bought the original hotel lot for $400.

In 1901 he and his wife Caroline completed the construction of a 16-room hotel.

The original owner, who famously said, “He sold a sand dune to a git,” would be amazed to see the 170-room Campbell’s Resort, conference center and restaurant today.

This ‘sand dune’ is now part of 550 meters of premier beachfront along one of the most picturesque and pristine lakes in the world.

The couple built a hostel that honored the community and accommodated people from all walks of life. Their only son, Arthur, helped dig the basement that added to the hotel’s restaurant.

Over the years, the family has endured hard 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 who served in World War II and dealt with disruption caused by wildfires in the area and economic downturns. Now they are confronted with the corona pandemic.

The sudden outbreak of the Covid-19 pandemic decimated Campbell’s meetings and events business and closed the dining room. The resort has gradually reopened, but inflation, labor and supply shortages, and social distancing restrictions increased operating costs.

The silver lining is that last year visitors returned to local wineries and for family vacations. It helped that the Chelan Public Utility District invested in high-speed internet that allowed people to work remotely.

What are the ingredients for family business longevity?

Researchers Josh Baron, associate professor at Columbia Business School, and Rob Lachenauer found that, on average, family businesses last much longer than typical public companies.

“Rather than obsessing about hitting quarterly profit targets like public companies do, family businesses tend to think in terms of generations, which allows them to take actions that put them in a better position to weather tough times,” Baron reported and Lachenauer.

Justin Craig, clinical professor of family business at Northwestern University, adds that successful family businesses use institutional memory, intelligent diversification, debt management, and adaptation to change and new technology.

Over time, families that bring the next generation into the business and leverage their skills have a better chance of success.

They’re focused on creating different types of value (financial, social, relational, and reputational) and have an edge, said John A. Davis, who directs family business 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 to America.

Entrepreneurial families must be able to survive times of crisis in an agile and financially strong manner.

Don Brunell is a business analyst, author and columnist. He has retired from the Association of Washington Business. He can be contacted at [email protected].

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