COLUMN: Family business

Namik Čolaković
Namik Čolaković

In the middle of this year, the results of KfW Bank’s research on family businesses in Germany was quite unnoticed by BH media. The key observation is that over the next five years or by 2023, nearly 840,000 small and medium-sized companies in family ownership will face a question or dilemma about who will inherit that business.

Research has shown that nearly a hundred thousand entrepreneurs will retire already by the year 2020, and they have not yet found a solution to continue their family business. The crucial problem is that either there are no heirs or are too young or simply do not want to do the job.

Such a situation will undoubtedly negatively reflect on the SME sector, which is the basis of the German economy, because it employs two-thirds of the total number of employees and is responsible for a third of corporate income. Of course, such solutions are not at all easy, but extremely complex, so that the views of active entrepreneurs are divided, as sales is consider by 42 percent, and 54 percent intend to leave the company in family ownership.

In order to be, at least, simplified, to gain insight into the complexity of this, it is necessary to break down the ‘family business’ syntagm.

The family is already widely regarded as a fundament of the society and, in addition, one of its definitions can be expressed, which states that it is a social group characterized by co-habitation, economic cooperation and reproduction. In theoretical terms, as part of highlighting the main characteristics of the family, it can be said that in this context, they set their own interests ahead of the interests of others, that there is a connection between family members in which emotions, loyalty and affiliation are present.

On the other hand, business is a term commonly used in a simplified form as a general mark of every action that includes business, entrepreneurship, trade, and earnings. Every business, driven by the laws of market supply and demand, should ultimately produce profits. Accordingly, the basic determinants of business are uncertainty, risk taking, experimentation, search and research. It should be noted that the business community of people with different interests, in which the goals and tasks are specified, and the interaction within that community should produce the expected results.

By comparing the definitions and characteristics of family and business, it is easy to conclude that these are two systems, which are of mutually conflicting characteristics and it is almost impossible to imagine a mix of so many different systems and believe that they can successfully coexist. However, practice shows the opposite and successful family businesses around the world have been in place for decades and indicate that this is not only a possible but also a desirable option. A positive combination of family and business, if managed and properly directed, can build a sustainable system that will successfully exist and overcome the transfer of ownership over several generations. Statistics on family businesses show that only 30 percent of these companies survive the transfer to the second generation, 10 percent to the third, and three percent to the fourth generation of successors.

Observing this issue within Bosnia and Herzegovina, the available statistical data indicate that more than 80 percent of the family owned companies are owned by the founders, with more than two thirds, in the next period, facing the generation transition, engaging external managers, deciding on further development or sales and many other specific challenges, characteristic of all family businesses in the world.

At some expert and scientific meetings in Bosnia and Herzegovina, the topical importance of family companies was dominated by the conclusion that they are an opportunity for long-term stabilization, and that they can ensure the sustainability and stability of the domestic economy in the coming years only if they successfully meet the challenges expecting them. Therefore, all levels of government are expected to receive adequate support for development and strengthening of family entrepreneurship, because it generates a large percentage of GDP that directly meets the needs of the population, while at the same time it can bring job creation, which goes up to 60 percent in the world.

Given that such research is not conducted in an organized way, there is no mentioning of the potential problem related to the transition of ownership in family companies in Bosnia and Herzegovina, given the presence of migration of the population from the country. While in Germany they turned on an alarm for this upcoming problem, here there is still no explanation why isn’t on the agenda or simply said, we have nothing to say …

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