Family business – a German model for success

The economic importance of owner-managed companies in Germany is immense: around 90 percent of all active companies in Germany are family-run. They generate 52 percent of total turnover in Germany. By definition, a company is considered a family business if it is either owner-managed or if the family holds the largest shares in the company. This category therefore includes well-known names such as VW, Aldi and Bosch, but also countless smaller, less well-known companies.

The importance of family businesses for the labor market should not be underestimated: They account for 58 percent of total employment. This shows that family businesses are a major job engine: Between 2007 and 2016, the 27 non-family-controlled companies represented in the DAX increased their employment figures by four percent. For the 500 largest family businesses, the increase over the same period was 23%! And that’s not all: The tax authorities also benefit from family-run companies, which pay significantly more tax than non-family-controlled DAX companies.

On the one hand, I see regional ties as the most important success factor, which is certainly greater for family businesses than for corporations. Especially in rural areas, where there is often a lack of jobs and apprenticeships, they stabilize the job market. They often retain this loyalty to their home region even when they have long since grown into global players. The screw manufacturer Würth from Künzelsau or the biotechnology company KWS Saat based in Einbeck are just two examples of this.

The fact that the involvement of the next generation creates a healthy mix of innovation and the preservation of values and traditions also makes these companies successful and stable. And last but not least: Family businesses are generally more crisis-resistant: unlike corporations with a high free float, family entrepreneurs invest their own money. The long-term effects of their actions therefore play a major role for them. This measured approach has paid off in many times of crisis. Even during the coronavirus crisis, family businesses have fared better than comparable companies.