Sep 11, 2024
By: Prerna Tyagi
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Family-owned businesses have been prevalent in India since over a century, but in recent years, they have transformed, adapting to the changing tides of the nation's growth. From manufacturing and services to technology and retail, the influence of these family-run enterprises is undeniable.
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India’s business landscape is dotted with powerhouse family-owned enterprises like the Ambanis, Adanis, Birlas, Jindals, and Nadars. But what sets the most successful FOBs apart? According to a McKinsey report, here are the key traits that make them stand out.
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Family-owned businesses (FOBs) contribute over 75% to India’s GDP. Projections from the same report suggest that FOBs could account for 85% of GDP by 2047.
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FOBs consistently outperform other companies when it comes to profitability, boasting operating margins that are 7.8% higher and revenue growth that is 2.3% greater.
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It’s no longer enough for FOBs to rely solely on family management. The most successful enterprises are those that bring in professional executives to guide operations. This shift towards professionalism results in a 7% higher capital efficiency.
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The transition of leadership from one generation to the next is one of the most challenging aspects for FOBs and can make or break the said businesses. The top-performing FOBs handle generational shifts smoothly (unlike Succession), ensuring continuity and a clear vision for the future.
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The most successful FOBs diversify across nonadjacent sectors, not only scaling their operations but also reducing risk.
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Top FOBs excel at identifying, training, and retaining talent, driving long-term success through strengthened organisational culture.
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Robust governance ensures smooth transitions, balancing family roles with business goals.
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