During this (already) long electoral campaign not a single party has to date, and as far as I know, proposed specific and targeted assistance for family businesses. In addition, I believe that assistance for start-ups is misguided.

We have never had a policy specifically for family business- Kevin-James Fenech

Any government has ‘limited resources’ at its disposal. Therefore, if you provide assistance for start-ups, as both parties are proposing, you are logically limiting the amount of assistance available for other types of business structures which may after all be more important to the local economy.

My reasoning is that family businesses are the real engine of growth in the Maltese economy. Start-ups have an extremely high failure rate – some estimates put the figure as high as 70 per cent. I’d rather the new government invest its ‘limited resources’ in start-ups which have at least survived their third year, and after having been subjected to market forces and competition. This way the Maltese taxpayer has a good chance of getting a decent return on investment.

As to family businesses, my natural preference – this type of structure is the most robust and value-adding and merits our complete attention. Business research indicates that family businesses in general tend to account for 50 per cent-plus of a country’s GDP, 60 per cent-plus of a country’s employment, and 70 per cent-plus of all new job creation.

Granted, I am slightly biased in favour of family businesses since the majority of my clients are local family firms of various sizes. For the sake of clarity, a family business need not mean a small enterprise. A family business can mean Ford, Samsung, Toyota, Wal-Mart, L’Oréal, Peugeot, Tata Group, Porsche, etc. Obviously, I am quoting foreign companies that we’ve all heard of to make a point, but trust me when I tell you that there are some very large and successful family businesses in Malta which generate large revenues and contribute significantly to the country’s tax revenue.

Business research (Kachaner, Stalk and Bloch) shows that family businesses are much more resilient than any other form or type of business, and in the current economic climate that’s not such a bad thing.

The research I am referring to shows that despite the fact that during good economic periods, family-run companies don’t always earn as much money as companies with more dispersed ownership, they tend to fare much better in times of recession which according to the ‘new normal’ can mean several years of depressed growth and double-dip recessionary environments.

Fortunately for us, family businesses tend to focus more on ‘resilience’ than performance. They, therefore, adopt much more long-term (10-20-year) value-adding strategies than any other type of business which is good for the local economy since long-term strategies result in more stable rates of growth, employment and investment reducing shocks and spikes in the economy.

Let’s appreciate the difference in psychology of running a family business compared to a publically listed company or one with dispersed shareholding.

A family business can afford to follow Jeff Bezos’ advice of being “…willing to be misunderstood for long periods of time” since they tend to build a business for their children and grandchildren to enjoy – the management of a publically listed company tends to report to a dispersed pool of shareholders with different and varying interests. Also a plc always has the constant worry of share price pressure, which inevitably leads to short-term business thinking and action.

A family business tends to treat the company’s money as the family’s money and therefore does a better job of keeping expenses (overheads) in check and under control. Family businesses in general tend to be much less leveraged and CAPEX decisions are determined by how much they’ve earned rather than by how much the bank is willing to lend them.

Family businesses are good for the economy because of the way their directors manage them.

The main parties aspiring to be in government come March 10 should consider having a policy specifically for family businesses, and (if resources are available) for start-ups which are three years or older.

We have never had a policy specifically for family business; perhaps a different tax rate, a special type of tax credit for CAPEX, an incentive linked to the duration of employment of non-family members, preferential interest rates, etc.

A comprehensive and well-thought policy targeting specifically family businesses (the real motor of our economy) could help deliver the growth we as a country desperately seek for our economy in these depressed and sober times.

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Kevin-James Fenech is director consultant at Fenci Consulting Ltd.