Fast-Growth Family Firms: Lessons from the Gazelles

Overview: In an effort to better understand the fast-growth family firm, the article tells about an analysis where a set of companies growing faster than the Fortune 500 but maintaining the same level of profitability. These firms are family owned and family controlled. The average age of these firms is 17 years with one-third of them being less than 10 years old; one-third, 10- to-20 years old; and one-third over 20 years old. Growth is one of the most risky strategies a firm can choose. Few family firms choose aggressive growth, but for those that do, there seems to be a set of activities or “best practices” that improve their chances of success. Best practices in the area of planning include preparing and sharing a business plan that is specific enough to influence management decisions. The plan is influenced by an active board of directors comprised of both family and non-family members who are both external and internal to the firm. Family firms seek funding that allows them to grow aggressively and yet maintain control. Less likely funding sources include private investors, public offerings, and venture capitalists. Whatever reluctance the family may have about seeking external funding is overcome after the second round of funding, and we find that subsequent rounds are sought almost every three years, a figure consistent with nonfamily firms.

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Format: PDF | Size: 49KB | Date: Jan 2003 | Pages: 15