Why Family Businesses (Inherited Businesses) May Last Longer than Start-Ups

  • Cambodianess
  • March 15, 2021 6:07 AM

Since the COVID-19 pandemic is still a major concern, Samnang and Sothie tend not to meet in person. Yet, the two men regularly communicate with each other on social media. Today, Sothie and Samnang started their day with a discussion on family businesses, that is, businesses that have been run by a family for generations, compared to start-up businesses. Between the two, they wonder, which one may last longer?

Sothie: Eh, Samnang! I just want to ask you a silly question. You and I are not really business people. So why do we enjoy so much talking about something that is not our field?

Samnang: Yes, we do not have specialized knowledge of the business world. Nevertheless, we still know something about it. We do not “practically” know how but we can “theoretically” understand it.

Sothie: Alright! Since we are on the same page, let’s continue our discussion. Some people say that a family business can last longer than start-up businesses. If so, why is it the case?

Samnang: Well, in my opinion, family businesses are businesses that have been running for a long period of time. The younger generations of the family take over and continue to run it. Even though it is a knowledge and experience that are passed down from generation to generation, it is also, of course, practical knowledge acquired by directly managing and handling the business’ activities. But that practical knowledge is not a simple thing. On one hand, their workforces are their own family members and, sometimes, they may face internal conflicts. However, it is quite difficult for them to break up the family. Regarding products, the reputation of their products has been built and maintained by the family over generations. The majority of their buyers are loyal customers who know the history of the products. No marketing is needed in this case.

Sothie: However, I have heard that running a family business model can be hard when it comes to expansion. Is that correct?

Samnang: What you have heard is not wrong. When running a business as a family, the investment available can be limited. Yet, the good side is that family businesses are not prone to bankruptcy as much as start-up businesses.

Sothie: Yes, but why?

Samnang: A family-run business is a business full of entangled connections regardless of the challenges it may face. Basically, they are one family. This is a crucial and vital element of family businesses. In the case of start-up businesses, if they are created by a family, the risk of internal conflicts can be reduced. However, if they are created by people from different families, the risk of internal conflicts rises dramatically. Besides any other issues, internal conflicts are the main driving force that propels businesses into the abyss of bankruptcy. By looking at this one factor, we can at least conclude that family businesses can survive longer than start-up businesses.

Sothie: After listening to you, if I want to run a business, which of the business models should I pick?

Samnang: There are no rules in business, my friend. Sometimes, we make a profit. Sometimes, we do not. Some other times, I think that businesses must involve spiritual belief. That is the reason why there are spiritual offerings. Sometimes, running a business is a matter of destiny. Whether you believe this or not, this is just an observation.

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