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The 1993 South Dakota family business survey.

A year ago the Business School was awarded a grant from a private South Dakota foundation to explore the character and problems of South Dakota family businesses. This grant was used to sponsor a statewide family business conference which was held this past May in Pierre, and to perform some preliminary research into the unique needs and condition of the South Dakota family business. This article describes the results of that research.

Original survey research is risky business. It is like trying to describe an elephant by grabbing different parts of the creature in the dark: grab a leg and you will conclude it is much like a tree; hold the tail and you will say it is more like a snake. Thanks to the 126 "parts" (survey respondents), we think we have a good initial feel for what this highly complex creature called "South Dakota family business" looks like. At least it is a start. One thing we know for sure, family business is the backbone of our State's economy and society.

So, take a look. Some of the survey findings might strike you as intuitively obvious, but then-others may surprise you. This statistical abstract has numerous interpretations and applications and will form a great foundation for ongoing research efforts.

A Little Family Business History

Almost 60% of the businesses surveyed were founded between 1960 and today.

Half of those considering themselves family businesses were in their first generation. Of those businesses who had generational successions the following was found: 7% - in their second generation 52% - in their third generation 28% - in their fourth generation 11% - in their fifth generation 2% - in their sixth generation

Independence was indicated to be the primary motivation for starting family businesses, followed by financial rewards, to stay in the community, to work with family members, and lack of other employment opportunities. The majority of businesses were self-financed in their start-up and nearly as many reported they used some form of bank financing. Additionally, 21% indicated they borrowed from a family member with only 8% reporting any state financial assistance.

All in the Family

Only 5% indicated that they were the only family member in the business. Clearly families are in this together, with the following percentages reported: One other family member - 19% Two family members - 33% Three family members - 22% Four family members - 12% Five or more - 11 %

There were also many different combinations of family relationships found to be working in the family business. In 60% of the cases spouses were working together, 45% of the time parent and son(s), 33 % of the owners had their fathers working with them, 26% daughters, 24% brothers, 19% mothers, 9% sisters and 6% cousins, uncles and aunts.

Sales Volume and Employee Growth

The questions reporting on sales volume and total number of employees provided very encouraging evidence of growth. Between

1980 and 1993 those answering the survey reported an 111% average sales volume growth per firm with the average volume today being $5.7 million per firm. They also projected a 54% average sales volume growth between now and the year 2000. The average number of employees per firm experienced a growth rate of 39% over the same thirteen year period. At present there is an average of 42 employees per firm and they project a 33% growth in employment by the year 2000.

Opinions, Opinions

We asked family business owners their opinions on everything from whether they plan to sell the bu time they had to spend with their families.

The following statements give a lot more of South Dakota family business opinions and you can see if you agree or disagree. I often feel stressed out or overworked. 55% Agree 40% Disagree I'm too busy to do long term planning? 42% Agree 54% Disagree Most of my time is spent dealing with problems a d crisis 43% Agree 52% Disagree I wish I had more time to devote to my family ? 59% Agree 34% Disagree I rarely ask my subordinates for their opinions? 10%, Agree 81% Disagree It's hard for me to accept someone else's ideas? 12% Agree 78% Disagree Too many good people have left the company] ? 6% Agree 81% Disagree My employees wouldn't work hard if I were not there to push them? 16% Agree 71% Disagree Poor employee performance is too often tolerated? 41 % Agree 50 % Disagree Confusion frequently arises about areas of responsibility? 30% Agree 60% Disagree Employees don't appreciate the sacrifice made by our family]y? 35% Agree 54% Disagree I don't think I will ever be able to retire? 26% Agree 66% Disagree Business problems overflow into the family? 52% Agree 37% Disagree Family problems overflow into the business? 73 % Agree 68 % Disagree Family members are compensated at market levels? 57% Agree 30% Disagree Employees know the company's mission? 71% Agree 18% Disagree Intend to eventually sell business? 43% Agree 45% D agree South Dakota is a business friendly state? 60% Agree 15% Disagree * "Don't Know" responses account for the full 100% in the opinion questions.

More Information Needed

The family businesses also ranked the areas where they felt more information was needed in order for them to be successful. Estate and tax planning headed the list followed by retirement and transition planning, succession planning, insurance planning, and training the next generation. On the average, personal family issues such as family values, sibling rivalry, and intergenerational relations were ranked lower than financial business issues.

Keeping the Family Business Healthy

Government regulation and taxes were over-whelmingly ranked as the greatest threat to the survival of the family business. The economy and competition were distant second and third, while family dynamics and other concerns were ranked last. In the "other" category, some reported that the lack of a next generation was their biggest threat to survival. When presented a list of actions or activities used by family businesses to enhance business operations, only profit sharing received a significant rating. None-of-the-above was the most popular answer.

Business Services and the Family Business

A series of questions were asked concerning the adequacy/availability of eight different business services. Those surveyed were then asked to rate the same services in regards to their understanding of family business issues and special needs. The following eight graphs on page 7 report the comparative findings. The left black bar rates the general adequacy or availability, and the right striped bar compares how the respondents view the services understanding of family business issues. While the comparisons are not always helpful, there is a general trend to rate the services lower on their understanding of family business than on providing the service itself.

For example, while 48.8% of the respondents said that insurance services were excellent in their area, only 26.4% were of the opinion that those providing insurance services were understanding of the unique problems and needs confronting the family business.

Closing Thoughts

When asked whether they felt there was a need for an ongoing university based family business educational, researcg and service program, 77% responded positively, 10% were not sure and 13% said no. Additionally, 60% of those surveyed indicated that they were interested in "networking" with other family businesses in South Dakota through conferences, local roundtable discussions and newsletters.
COPYRIGHT 1993 The Business Research Bureau
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Tosterud, Robert; Habbershon, Timothy; Liahjell, Even
Publication:South Dakota Business Review
Date:Jun 1, 1993
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