Family entrepreneurship: new areas for economic growth

№ 4, 2023


Elena Nikolaevna, the experience of the Chamber of Commerce and Industry of the Russian Federation in the initiative to legislate the status of family businesses is being discussed at the interchamber level on a regular basis. The topic of family business has been discussed repeatedly in Minsk. What is the uniqueness or attractiveness of introducing the "family business" concept into the legal framework along with the existing forms of entrepreneurship?

For many years the Chamber of Commerce and Industry of the Russian Federation has been systematically supporting and developing family entrepreneurship. Worldwide experience shows that family business plays a very important role and is the basis of foreign economies, because it is aimed at strategic development and sustainability.

Historically, family dynasties have made a significant contribution to our economy. Merchants and industrialists of the Russian Empire throughout the centuries were, perhaps, the most influential and dynamic social group. They created jobs, developed manufacturing capacity, were the first to introduce know-how, and also built social facilities and helped the ones in need. When talking about famous Russian entrepreneurial dynasties, one should mention Tretyakovs, Mamontovs, Demidovs, Bakhrushins. And there are more than a dozen to mention. Family entrepreneurship in our country is gaining momentum every year, and we, as the oldest association of entrepreneurs, see great potential in it and consider it necessary to engage with family companies and help them at all levels.

Family business is a unique phenomenon, because it provides an opportunity for the emergence and existence of a financially stable and independent family, all members of which, representing several generations, are linked by a common goal and a common cause. Family business educates younger generations as patriots, forms people capable of proactive and creative thinking, ready to set-up their own business, develop the economy, and add to the growth of entrepreneurial community.

Family businesses form actual dynasties that promote not only family brands, but also their country. By engaging in charity and patronage, such businesses create a favorable living environment both for family members and all other people around.

To summarize, I can say the following: family business is a strong business that prioritizes the quality of its activities, aims at long-term operation, involves all generations of the family in an entrepreneurial activity, is characterized by the presence of common goals, values and plans, love for their business, willingness to invest more in development, to work with greater dedication.

In one of your speeches, you referred to the experience of China as an example. Among other values that define the principles of doing business with family enterprises in that country was the following: relatives have more commitments to each other than business partners have in regular business relations. In your opinion, does this apply to Slavic realities?

Yes, this principle is applicable to all family companies around the world. After all, joint activities unite all generations, common tasks and interests emerge, everyone contributes according to his or her abilities, and is responsible to the others for his or her own part of the work. And there is always something to do for everyone in a family business.

The Russian Family Council, the Russian Forum of Family Entrepreneurship, family business centers in federal regions are up and running. In some regions "family business" has already been introduced as a legal term. All these business dialogue formats have been in existence in Russia for several years. What can be said at this stage about modern family entrepreneurs? What are their needs?

Obviously, family businesses – just like other small and medium-sized enterprises – need a stable and predictable business environment, support mechanisms as well as affordable and long-term financial instruments...

But beyond these general needs, family companies need their own legislation to define their status and regulate their activities.

This legislation has to address the most pressing issues of family business development, as regards as the inheritance of family companies and the transfer of family businesses; businesses growth and development when new activities and legal entities emerge, which the tax authorities consider as affiliate businesses and impose fines; management of family businesses in general, including mindset, business and family conflicts, involvement of young people and retirees in family businesses, creation and promotion of family brands, and much more.

I suppose that first of all it is necessary to work out and stipulate in the national legislation a simple procedure for transferring business by inheritance, which would make it possible not to divide it into separate entities, not to sell it or place it under management, but to successfully develop the ideas and principles that were laid down by its founders. This is extremely important, because the founders of many family companies, who created their business in the early nineties of the last century, have already come to the point of passing it on to their successors – and this is a rather complicated and time consuming process. Now there are certain mechanisms that allow one to inherit a company, but they are quite difficult to use, especially when it comes to family businesses.


Speaking of family companies, can you clarify the scope in question: what share of SMEs do they represent? (Or as regards GDP?)

According to expert estimates, family businesses account for two-thirds or more of businesses worldwide, accounting for 70 to 90 percent of annual global GDP and 50 to 80 percent of employment. There are over 14 million family firms in the European Union, employing 60 million people in the private sector. The average age of family firms is 80 years.

Our research activities demonstrate that in today's Russia family businesses operate in all sectors of the national economy. These include furniture workshops, private bakeries, and shops... Family traditions are evolving in farming and banking sectors.

74 percent of small and medium-sized businesses in Russia are family companies. 52 percent of family businesses have a turnover of up to 500 million rubles.

Research data shows that 57 percent of entrepreneurs have one generation working in their business, 36 percent reported they have two generations employed, and 7 percent of companies have three family generations involved.

Speaking about the contribution of family businesses to the Russian economy, it is worth mentioning that:

99 percent of farm products are grown by family agricultural companies;

95 percent of private schools in Russia are founded by family entrepreneurs;

90 percent of anti-virus products in the IT sphere are designed by private family companies;

80 percent of private hotels and 60 percent of catering companies are family businesses;

75 percent of Russian cosmetics are produced at factories run by relatives;

50 percent of all bread in Russia is baked by family bakeries.


How, from the business community perspective, can family businesses make a tangible contribution to the economy? Will they become a point of growth?

From my perspective, I can state with confidence that family businesses are already a significant driver of socio-economic development in the regions, a real point of growth that creates new jobs and serves as a successful example for other families. In addition, family companies are an important factor in improving the demographic profile, because such families often raise at least two or three children.

They set-up and run their businesses in their home areas, investing not only in the enterprise itself, but also in the local environment, improve the overall quality of life, and create opportunities not only for family members, but also for those who live in the neighborhood. They serve as a kind of an "anchor" for young people who choose stay in the region and do not leave for big cities in search of jobs. With their family brands, they also promote their regions, attracting not only new business partners but also potential tourists.

The government is interested to support and develop family entrepreneurship because family business is the most sustainable segment of the national economy, as such companies don't stay open just for a year or two, they are aimed at long-term development. Family businesses are often large companies. A legally recognized family company means legal employment of all family members, a stable tax payer, a link between generations, business dynasties. In addition, family companies are more responsible, care more than others about their business reputation and brands, because this is the future of their family.

I am confident – and the world history proves it – that such enterprises will grow and prosper not only now, but also in the future, not just securing their own financial stability, independence and comfort, but also forming a favorable living environment for all those who live together with them in one village, city and country.

Not so long ago you referred to the establishment of family entrepreneurship as a possible national idea. What, in our opinion, is the secret of successful traditions, the emergence of new labor dynasties, when in the name of the company after the owner's last name "...and sons" (or daughters) is added, and the approach to business becomes a cause of life?

The secret here is simple – family business is established for centuries, its strategy is built for many decades to come, and it is based on passing on the family business by inheritance. Here I would like to recall the words of the President of the Russian Federation, Vladimir Putin, who has repeatedly emphasized the significant role of family business, the importance to maintain the remarkable traditions of Russian merchants and industrialists who did not only develop their business, but also the world around them, thus leaving their mark in history and passing on the good name to children and subsequent heirs of the family business. Exactly for such family businesses a family brand is needed and

Did you know that there are about 5600 companies in the world that are 200 years old? More than 50 percent of them are located in Japan, 15 percent in Germany, 4 percent in the Netherlands, and 3 percent in France. The vast majority of these companies are family businesses.

There are also family-owned companies with a history going back more than a thousand years! Just a few examples from Japan: in 705 "Nishiyama Onsen Keunkan" hotel was founded, in 717 – "Rekan Hoshi" and "Koman" hotels, in 718 – "Zengoro" hotel. In 771 a paper bag producing company named "Genda Shige" was established in the Land of the Rising Sun, in 970 – construction company "Nakamura Shaji". And here are the European companies in this category: 803 – Stiftskeller St. Peter, Austria, restaurant; 862 – Staffelter Hof, Germany, wine; 953 – The Bingley Arms, UK, pub; 1000 – Château de Goulaine, France, wine; 1000 – Marinelli Bell Foundry, Italy, foundry.

Which effective instruments of state support for family business could you name?

It is still difficult to speak about measures of state support for family businesses due to the fact that the relevant legislation has not yet been formed. Of course, being small or medium-sized enterprises, family companies have access to all the relevant existing support instruments, but those specific needs of family business, which we mentioned earlier (inheritance and transfer of business; training of family business heirs; development of family business and formation of a group of companies; creation and promotion of family brands; involvement of young people in family entrepreneurship, access to really long-term financing – for a period of 15 years or more, etc.), are not yet being addressed in a comprehensive and strategic way.


Perhaps you are aware of examples of successful family-owned Belarusian enterprises? Do they have any distinctive features? What are the common points of growth of family entrepreneurship for our brotherly countries?

I think that the common features of family companies in Russia and Belarus are teamwork and focus on long-term existence, readiness to form real entrepreneurial dynasties and build a joint business for the benefit of their families and the world around them.

From our relatively small practical experience of interaction with Belarusian business, I can name a few examples of family companies from various spheres that I've had the opportunity to get acquainted with:

"Conte Spa" JLLC (a well-known manufacturer of hosiery and clothing);

Skorobogatov Sergei Gennadyevich – head of farm household;

"Druzhba and K" farm enterprise;

"BROSTOK" CJSC (attraction of investments);

"Spetsservice Personnel" M&A LLC (marketing and information services);

"Ralados Plus" LLC (transportation services);

"Experimental Mechanical Plant" OJSC (production of medical and industrial furniture);

Linnik Dmitry Arkadyevich (individual tailoring);

"AleStep 77" LLC (wholesale trade in industrial products, construction and repair);

"Yagodka" farm enterprise;

"Johannes Rau Minsk International Education Center" JLLC (hotel, restaurant, conference center services);

"DVIPROM" UE (wholesale trade);

"Wooden House Bel" LLC (manufacturing of wooden structures (houses made of glued laminated lumber), production of fuelwood pellets);

"AdvanceNeftekhim" LLC (production of petroleum sorbents, wholesale trade).

By the way, almost all of these companies are members of the Belarusian Chamber of Commerce and Industry. And many of them had no idea they were family businesses until we told them about our initiatives in this area at one of the events as part of Belarus-Russia Chamber-to-Chamber cooperation. Therefore, I believe it is important to continue our efforts to support and develop family entrepreneurship through the joint activities of the business unions of both countries.