Family businesses are welcome winners in the pandemic
Pilita Clark: They embody the best of corporate behaviour by thinking long term
In a crisis, community-minded companies represent a kinder face of capitalism. Photograph: Getty Images/Cultura RF
When Covid-19 started tearing through Britain last year, Richard Balson was ready for it.
His family’s butcher business in the Dorset town of Bridport dates back to 1515 and has been through plague before, along with fire, flood, recession and the Napoleonic wars.
“This Covid disease is just another obstacle we’re overcoming,” Mr Balson told me recently, when I called in to his modest shop to see how it was faring.
As it turned out, business has been humming. At the start of the outbreak, panicked customers were spending up to £70 each shop visit, not the usual £10 or £20. Many were filling a new deep freezer, local sales of which abruptly ballooned.
“Some people were even putting freezers in their front rooms,” he marvelled, adding meat was not his only bestseller. Big 56-pound sacks of potatoes flew out his narrow shop door at a rate of more than 80 bags a week. “People were afraid of what was going to happen.”
Although his sales to pubs have faltered during lockdowns, other trade has made up for it, which was pleasing to hear.
Family businesses are unsung in modern economies, yet they are far from insignificant and as the pandemic wears on, many underline an intriguing fact that studies have shown for years: these companies tend to do well in disasters.
After the 2008 financial crisis, British academics found family outfits had consistently lower insolvency rates than other companies, regardless of their size. That is just as well, considering how many people work for them. Family firms are estimated to account for 85 per cent of the world’s companies. In the UK alone, they employed more than half of private sector workers in 2018, according to the Institute for Family Business Research Foundation.
Conventional wisdom says family-controlled firms, be they corner stores or conglomerates, such as Mars, embody the best of corporate behaviour by thinking long term and focusing on resilience. As any viewer of Succession knows though, they can also be riotously awful. That fictional TV series reflects very real tensions that have long divided some family firms.
This is a reminder that these businesses can represent both the best and worst forms of capitalism, says Josh Baron, a partner at the BanyanGlobal family firm advisory group.
Banyan has been surveying family groups during the pandemic and found last year that more than half had had a change in family relationships – 26 per cent for the better and 32 per cent for worse.
Still, other research shows that family firms are also more frugal, less inclined to flashy acquisitions, more community-minded and even more innovative than other companies. These are admirable qualities in a pandemic – and evident in the Balson butcher business.
Mr Balson has steered clear of the rampant expansion he has seen rival butchers try. “I’m always asked, ‘How have you managed to keep going so long? What’s your secret?’” he says. “One reason is we’ve kept it small. We’ve always been happy to have one shop and do it properly.” Balsons also do their bit for Bridport, offering discounts for NHS workers last year and free home deliveries to isolated customers. Family businesses are often accused of being too conservative and stodgy to innovate. But studies show that, even though they tend to have smaller R&D budgets, they get more innovation for each dollar spent on R&D, in the form of patents, new products and so on.
Invention has been a necessity at Balsons. When rationing struck in the second World War, Mr Balson says his father turned to “whacon”, or corned whale meat. His shop now sells goods that would have stunned his forebears, from crocodile steaks to a new sausage brought out last year to celebrate the family’s 505th year in business.
The 505, as the banger is known, is made from pork, ginger beer and marmalade and is selling well.
As Mr Balson puts it: “In this game, you’ve got to be innovative. You’ve got to not be afraid to change. You’ve got to move with the times and give people what they want.” Quite.
– Copyright The Financial Times Limited 2021