Family-owned Businesses Create 60% of Total U.S. Employment, 78% of All New Jobs, 65% of Wages

In the pages of its June 2018 issue, BPN takes a look at how some propane companies are making the most of their status as a family-owned business. These articles are the first in a series on this topic. We will celebrate more family businesses in the next few issues of BPN. Please contact us if you would like your family business to be featured in an upcoming issue of BPN.

In each of the past three years, Massachusetts Gov. Charlie Baker has proclaimed a day in June to be Family Business Day. “Family businesses are a great and significant component of our heritage and culture, and greatly contribute to the commonwealth’s economy,” his 2017 proclamation says. It also reports that family-owned businesses account for 60% of total U.S. employment, 78% of all new jobs, and 65% of wages paid.

In the propane industry, every day is Family Business Day. More than 70% of propane companies in the U.S. are independent, family-owned businesses, the National Propane Gas Association (NPGA) reports.

Family-owned businesses can have both strengths and weaknesses when compared to other business models, say two propane industry experts from Propane Resources (Mission, Kan.). Propane Resources assists propane retailers with business valuations, business sales, supply and risk management, marketing, and consulting. The consulting focuses on helping build value, and many of those who take advantage of that consulting are family-owned businesses.

“A lot of the companies we work with are family owned,” said Tamera Kovacs, financial consultant with Propane Resources. “They tend to be mid-size and smaller companies that don’t have the resources of larger companies. We can be their ‘back office’; things like supply, marketing, and consulting services, they can outsource to us.”

“We are a third party working with businesses, often family businesses, to identify issues and provide solutions,” said Cooper Wilburn, consulting analyst with Propane Resources.

While working with businesses in this capacity, they have found that those that are family-owned can have many strengths. These include control, focus, flexibility, and close ties to the community.

“They have control of the business. They get to set the rules,” Kovacs said. “Managers of a company don’t have that kind of control. In a family business, everyone can be focused on the same agenda and move ahead.”

“They are a family-owned business located in the community; they are not just one location of a large corporation,” Wilburn said. “Their customers don’t have to leave a voice mail; they can put a face to the name.”

At the same time, the two propane industry experts said, family-owned businesses can have some vulnerabilities. These include conflicting agendas and discord among family members.

“We’ve talked about the good; there’s also the not-so-good,” Kovacs said. “I mentioned earlier that a family can be focused on the same agenda. But if there is discord in the family, they may not be on the same agenda. For instance, you can have one family member who is involved in the business and another who is not.”

“When passing the business down to the next generation, the third, fourth, or later, generations become more challenging as the shares may be spread among multiple people rather than a couple of people,” Wilburn added. “So, you need to have roles within the business for many, but you need one person who is the visionary and who can have the final say when there is a disagreement.”

These are some of the issues that Propane Resources can help a family-owned business resolve. The company generally works with companies on a one-to-one consulting basis.

“We can be the objective third party who says, ‘Here’s what seems to be the problem, and here are some potential solutions,’” Wilburn explained.

“We work with companies to achieve their goals, whatever they may be,” Kovacs added. “We offer a wide array of ways to help companies, such as valuations when it is time to sell or management-level training to help a new generation come into the business.”