Mar­keters are al­ways on the look­out for op­por­tu­ni­ties. They of­ten ask if there is a dif­fer­ent way to seg­ment the mar­ket. Can we find hid­den op­por­tu­ni­ties in a mar­ket space that is ne­glect­ed? Are our com­peti­tors ex­plor­ing ar­eas that we have ig­nored? One seg­men­ta­tion cri­te­ri­on fre­quent­ly missed in busi­ness mar­ket­ing is whether the firm can be clas­si­fied de­mo­graph­i­cal­ly as a fam­i­ly en­ter­prise. This recog­ni­tion has the po­ten­tial to open doors in­to an­oth­er mar­ket space.

Blind spot think­ing

We of­ten seg­ment busi­ness mar­kets de­mo­graph­i­cal­ly—use of sales, num­ber of em­ploy­ees and as­set size. We can al­so in­clude the ge­o­graph­ic ar­eas they be­long to as re­gions of a coun­try and hope they have some mar­ket sim­i­lar­i­ty. We could use sec­tor mar­ket seg­men­ta­tion: en­er­gy, dis­tri­b­u­tion, re­tail, agri­cul­ture, home-based, ser­vice or­gan­i­sa­tions, etc.

In ad­di­tion, we can use the stage in the firm’s life cy­cle. Younger firms’ be­hav­iour might re­volve around prod­ucts and ser­vices that sup­port their search for a suc­cess­ful busi­ness mod­el. A more ma­ture or­gan­i­sa­tion might want of­fer­ings that as­sist it in grow­ing or mak­ing its peo­ple more pro­duc­tive. A de­clin­ing com­pa­ny might be search­ing for so­lu­tions to re­ju­ve­nate its tra­jec­to­ry and avoid the in­evitable de­cline that some firms ex­pe­ri­ence.

Still, firms of­ten miss an­oth­er seg­men­ta­tion se­lec­tion. Com­pa­nies can be clas­si­fied ei­ther as fam­i­ly-owned/op­er­at­ed or not. This slic­ing might seem aca­d­e­m­ic, but it has many ben­e­fits in mar­ket strat­e­gy for­mu­la­tion. Strat­e­gy, you might be ask­ing, what are these ad­van­tages? Since seg­ments must be dif­fer­ent and valu­able, as a mar­ket strate­gist, you must find com­pelling rea­sons to in­clude these ubiq­ui­tous firms in your new mar­ket­ing and sales plan.

Sev­er­al things bug you about fam­i­ly firms. Many seem suc­cess­ful in the mar­ket­place and are a dom­i­nant form of or­gan­i­sa­tion, and they seem to amass a large as­set base and keep de­vel­op­ing in­no­v­a­tive strate­gies. You point to Bhag­wan­sigh’s con­ver­sion to self-ser­vice re­tail­ing, while their main com­peti­tors still have over-the-counter ser­vice—labour-in­ten­sive and low-im­pulse pur­chas­ing mod­els. Fam­i­ly busi­ness­es are en­ter­pris­ing, but there is more to it than your su­per­fi­cial as­sess­ment.

Why fam­i­ly firms are su­per suc­cess­ful

The mega rea­son fam­i­ly firms can out-com­pete their coun­ter­parts is that they are en­tre­pre­neur­ial. While most firms have en­tre­pre­neur­ial roots, they be­come less ag­ile, hire man­agers who fo­cus less on in­no­va­tion, and be­come less risk-tak­ers as they grow. How­ev­er, there is an­oth­er di­men­sion to fam­i­ly busi­ness­es’ en­tre­pre­neur­ial think­ing: it is col­lec­tive with many fam­i­ly mem­bers.

While fam­i­ly busi­ness­es may have start­ed as a solo­pre­neur em­bark­ing on a jour­ney of dis­cov­ery when the founder slow­ly and metic­u­lous­ly pol­li­nat­ed the oth­er fam­i­ly flow­ers, they de­vel­oped in­to an en­tre­pre­neur­ial bou­quet over time. This de­vel­op­ment can be a for­mi­da­ble busi­ness strength.

This col­lec­tive en­tre­pre­neur­ial in­tel­li­gence of fam­i­ly firms can in­crease re­turn on in­vest­ment. Here is what hap­pens be­hind the scenes. The fam­i­ly starts talk­ing at the din­ner ta­ble (their first board­room) and then makes an in­vest­ment choice with lit­tle de­lay. Fre­quent­ly, ma­ture firms mis­be­have in their in­vest­ment de­ci­sions; they miss the boat of op­por­tu­ni­ty, and risk-averse man­agers sub­lim­i­nal­ly think about how to im­prove their ca­reer op­tions.

Be­hind the high­er rate of re­turn, busi­ness fam­i­lies are no­to­ri­ous for con­trol­ling their ex­pens­es. With share­hold­ers and a fam­i­ly name at stake, man­agers will seek op­por­tu­ni­ties to re­duce costs and have mas­tered an­oth­er high cost. Un­like non-fam­i­ly firms, fam­i­lies have a longer in­vest­ment hori­zon—they in­vest for the next gen­er­a­tion and some­times do not want their funds back.

Fam­i­ly firm dark side

All is not well with these unique firms. Some­times, the trait that makes them suc­cess­ful can be a coun­ter­weight to their quick de­ci­sion-mak­ing. Fam­i­ly con­flict can take away and turn them in­to a bu­reau­crat­ic or­gan­i­sa­tion slow­ing down a time ad­van­tage built in­to this type of firm.

Fam­i­ly feuds can al­so lead to de­clin­ing gov­er­nance and chaos, ul­ti­mate­ly lead­ing to an or­gan­i­sa­tion that does not have a com­pet­i­tive ad­van­tage. How­ev­er, one of the most sig­nif­i­cant ail­ments is that fam­i­lies fail to tran­si­tion to the next gen­er­a­tion. In my book, Build Your Lega­cy Busi­ness: Solo­pre­neur to Fam­i­ly Busi­ness Hero, I dis­cuss de­vel­op­ing a suc­ces­sion plan ear­ly and build­ing a cul­ture of con­ti­nu­ity.

Still, some of the chal­lenges that fam­i­ly busi­ness­es have may cre­ate op­por­tu­ni­ties for mar­keters, and their knack for wealth gen­er­a­tion makes it an ex­cit­ing mix for sell­ers. Be­fore you de­vel­op your mar­ket­ing strat­e­gy, con­sid­er their unique traits and how you can deal with them.

Op­por­tu­ni­ties for strat­e­gy

Prob­a­bly the most sig­nif­i­cant op­por­tu­ni­ty for or­gan­i­sa­tion­al sell­ers is the con­sid­er­able buy­ing pow­er of fam­i­lies. Since most of the world’s en­tre­pre­neur­ial firms are fam­i­ly owned, they have amassed great wealth and of­fer po­ten­tial for con­sumer, cap­i­tal and in­vest­ment-type prod­ucts. Some fam­i­ly en­ter­pris­es are so large that they have an arm called the fam­i­ly of­fice, which search­es for ex­tra-fam­i­ly busi­ness in­vest­ments.

All com­pa­nies en­gaged in B2B sell­ing should be con­cerned about the life of their busi­ness cus­tomer. This cog­ni­tive blind spot is sel­dom an is­sue for B2C com­pa­nies. Still, busi­ness mar­keters should be alert for signs of de­cline. Sup­pose you are a com­mer­cial lender with long-term mort­gages. In that case, it is com­mon to have more than 50 per cent of your busi­ness clients as fam­i­ly en­ter­pris­es (they of­ten ac­count for more than half of all busi­ness­es glob­al­ly). This fact means your bank has high­er risk ex­po­sure. Ask your risk man­agers what their strat­e­gy is if some large fam­i­ly firms fail due to the sud­den death of the founder or CEO. Fi­nan­cial strat­e­gy pro­fes­sion­als sel­dom know about this suc­ces­sion is­sue. How­ev­er, fi­nan­cial ser­vices com­pa­nies should have an ad­vi­so­ry ser­vice (as their mu­tu­al fund man­agers do) that guides clients in deal­ing with these tough de­ci­sions.

What is a threat for some firms might be an op­por­tu­ni­ty for sell­ers. Some­times fam­i­ly en­ter­pris­es ex­pe­ri­ence a sud­den loss of a sig­nif­i­cant per­son, and this could make the trans­fer of lead­er­ship and own­er­ship dif­fi­cult. One way to fund the loss of a share­hold­er is in­sur­ance—key­man in­sur­ance tak­en out by the firm or its share­hold­ers can cov­er the loss of an­oth­er.

Fam­i­ly firms are the in­vis­i­ble dou­ble sword in the com­pet­i­tive land­scape. If you miss them in your mar­ket­ing strat­e­gy, your ap­proach will like­ly be less than op­ti­mal. Fam­i­ly busi­ness­es sub­lim­i­nal­ly hide as op­por­tu­ni­ties, but if you can un­lock them, it could open a new mar­ket space for de­vel­op­ment.

Saj­jad Hamid is an SME & Fam­i­ly Busi­ness ad­vis­er, au­thor—Build Your Lega­cy Busi­ness: Solo­pre­neur to Fam­i­ly Busi­ness Hero

• www.linkedin.com/in/saj­jad­hamid

• en­tre­pre­neurt­nt@gmail.com

• en­tre­pre­neurt­nt.com