Family. Related by common ancestry and connected by stories, traditions, and even secrets and drama.
Saying or reading the word family evokes a full range of emotions. Respect, love, hate, fear, anger. Now translate those emotions into a family-owned brand. It’s powerful. A family-owned brand is one that has two or more family members involved and where the majority of ownership and control of the company rests with the family.
According to the 2022 Edelman Trust barometer, family brands are the most trustworthy – more than private, public or state-owned businesses. Why? Because family brands are known for their strong, distinctive cultures. These cultures are heavily influenced by the vision, style, values and stories of the family – past, present and even future.
Family brands can fuel steady business growth for years. They support the lifestyle of founders and create generational wealth. However, we’re operating in a unique moment in time. There are more multi-generational business transitions than ever before. In some cases, next generation family members take the helm with different or more ambitious visions for the future. Plus, family brands are highly attractive to many lower mid-market private equity firms, motivating many family members to sell or bring in an outside investment.
How do you gauge the health of a family brand and its elasticity beyond the family?
Whether you’re a family member guiding the brand into the future, a banker, a sell-side consultant tasked with marketing the company for sale, or a private equity firm or family office valuing the brand, the fundamental evaluative question is the same: Can the brand stand on its own without the family?
There are more questions to ask before getting to these answers. Let’s dig deeper.
1: To what degree is the family involved in the firm?
When family members meet with customers, suppliers and prospective employees – or present themselves in proposals, presentations or websites, they reinforce feelings of trust and confidence when the target feels good about doing business with a family.
It can also send unintended messages about family dynamics and politics – and settling for mediocrity because a family member is in charge of key departments like innovation, marketing and sales. The degree of involvement of the family in the business will influence decisions that the business makes. The more involvement, the more likely the family is to make decisions that reflect the family’s involvement.
Here are some key questions to ask:
- How many family members are on the executive team, Board or involved at different levels?
- How are decisions about succession made?
- Who makes decisions about investments and what is the investment criteria?
- Who owns the most important customer and supplier relationships?
- What is the current state of technology, systems and process?
If there’s ambition to grow, scale or sell the family brand, then it’s time to diversify talent and decision making. A family-owned textiles company had a fairly healthy brand, solid business practices, and stagnating growth. There were six people in the company with the same last name – three, second generation family members on the leadership team, and three kids involved in sales, finance and marketing. In order for a family brand to grow and become a big brand, they need to diversify talent, decision-making and investments – and be built upon a framework that will support a transition to a large organization.
2: What is the reputation of the family – past, present and future?
Family brand names are often linked to the families themselves. The JM Petrucci Company, The Schwarz Group, George Weston. Often, family members go to great lengths to protect both the firm and family reputation. In fact, recent studies show that family brand decisions are made to strengthen business performance and project a positive image or to preserve the family reputation.
In 2022, John R. Tyson, the 32-year-old CFO of Tyson Foods was arrested and pleaded guilty for wandering into the wrong home in a drunken state and falling asleep in a bedroom. Every major daily news channel covered the story and displayed his mug shot. He apologized to investors and analysts during an earning’s call, “I’m embarrassed, and I want to let you know that I take full responsibility for my action. This was an incident inconsistent with our company values, as well as my personal values.”
When evaluating the health and elasticity of a family brand, it’s essential to consider the family’s social capital – or the goodwill available to the family amongst individuals and groups.
Key questions to ask:
- What is the image and reputation of family members involved in the business?
- How are they connected to the community – local, business and social?
- How have family members used that social capital to enhance the family brand?
- How are they projected in social media and what impact has that had on the business?
- How has the family overcome sins of the past that may affect the brand?
3: How strong is the family name and how is it used?
Founders will often name the company using a family surname because they want to create a legacy. There is a whole branding category of “legacy brands” which are typically 25+ years or older, have historical narratives and have well-known products. The J.M Smucker Company is a great example – an $8B+ company with a Smucker at the helm and a very specific set of products.
Unfortunately, surnames don’t hold as much meaning, and many do not carry as much equity as those family brands with more descriptive names.
In today’s competitive business environment, descriptive names are preferred because it takes less time to explain the value of the company. The Smith Group may have a lot of meaning to the family – yet it requires a good deal of explanation (and investment) to make it repeatable. That’s why more than 75% of family brands refer to themselves as family brands in their marketing materials to accelerate credibility, demonstrate depth and exert a strong and trusted identity.
Family brands using surnames make it difficult to add partners. For fun, here’s a big example. How many millions of dollars were spent rebranding from Price Waterhouse to PriceWaterhouseCoopers at the time of the merger with Coopers & Lybrand to now PWC?
It’s costly and potentially confusing to consumers to brand multiple product families under a family surname. There’s a reason that the J.M Smucker Company only uses the family surname on fruit spreads.
When evaluating the family surname and its use, key questions to ask include:
- How far can we stretch the family surname without it losing meaning?
- Can the name be shortened or amended without losing equity?
- How hard will it be to explain the company name without it being a family-owned or led company?
- How prominent is the family in brand storytelling on the website, presentations, advertising?
- How much investment will be required?
- What’s the impact on the business if the family name remains on the door?
Why Now?
We’re operating in a period when the largest number of family business brands are up for sale. According to Pitchbook, with the aging Baby Boomer population (born between 1946-1964), many family business owners are looking for liquidity.
Of the 5.5 million family-owned business brands, nearly 4 million or ~75% are controlled by Baby Boomers. And nearly 50% intend to retire over the next few years which has created a wave of “estate planning-driven business sale activity.”
Unfortunately, many family business brands don’t survive generational transitions – only 30% transition from first to second and only 12% survive from second to third. There’s an adage — “Shirtsleeves to shirtless in three generations.”
At the same time, with the right attention, set of questions and decision-making, family brands can go on to thrive. Nike, arguably one of the world’s most iconic brands, is a family-owned business. Travis A. Knight, who is the son of Phil Knight, owns a significant portion of the company’s stock (plus trusts available through both subsidiary Swoosh and irrevocable trust) and holds a seat on the Board of Directors.
Nike, Ford and Walmart are family business brands. Their founders had vision and aspiration to build iconic, global brands. Differentiated strategies, business plans and rigorous execution led the way. These are also great examples of businesses that successfully (albeit with public displays of family drama in some cases) transitioned from one generation of family to another. So, which family brand will be the next?
Cover image source: AnnJane