As diverse as LVMH, Tata Group, Walmart and Huawei are, they have one thing in common: all were founded and remain owned by the same families that nurtured them into household names. In fact, around the world, family businesses are the norm rather than the exception, accounting for up to 80 percent of global GDP and 60 percent of global employment. But their role in one particular country is even more pivotal.
Fully 95 percent (or 633,000) of all companies in Saudi Arabia are family businesses. They employ nearly half the country’s workforce and contribute some 27 percent of the Kingdom’s GDP. This means that more than other economies, Saudi Arabia faces a critical phase as it enters the so-called "succession decades”, when founders hand the reins to the next generation.
They have their work cut out. Globally, only 30 percent of family businesses survive to the second generation and just 12 percent make it to the third. Saudi Arabia’s solution? Pre-empt common succession hurdles through proactive reforms to create conditions conducive to succession.
The country’s experience could hold valuable lessons for others from Vietnam to Morocco, Chile to Bangladesh that face similar challenges in modernising their family business sectors without compromising their contributions to the economy.
Most Saudi family enterprises were established during the 1960s to 1970s oil boom. Many are now facing their first major succession challenge, with 23 percent of founders aged over 55. Yet as many as 59 percent lack a clear succession plan, and around 75 percent do not have established family charters.
Succession aside, Saudi family businesses are also under pressure to become more professional and systematic in management, and to balance traditional values with modern practices.
But quite unlike the fragmented, reactive measures – a tax incentive here, a training programme there – found elsewhere, Saudi Arabia has created an integrated ecosystem designed to address family business challenges holistically.
The bedrock of this ecosystem is the National Center for Family Businesses (NCFB). Its services cover research, governance, conflict resolution and strategic development. After all, family business challenges are interconnected – succession planning, for instance, cannot be separated from governance, conflict resolution or financing needs.
This systematic approach has already produced concrete outcomes: NCFB research shaped the Ministry of Commerce guidelines regulating family ownership relations to reduce disputes. The agency also worked with the Ministry of Commerce to draft the Kingdom’s new Companies Law, which states that family-owned companies may enter into a binding family business charter to regulate the family’s ownership in the company, its governance, management, work policies, employment of relatives, and distribution of profits.
On the ground, NCFB initiatives include certifying specialised advisers trained to understand both business needs and family dynamics. In partnership with the Ministry of Justice, the NCFB also trains and licenses mediators who can resolve family conflicts before they become destructive.
Family businesses dominate private sectors across emerging economies, yet most countries lack systematic support infrastructure. In China, more than 80 percent of the 1 billion private enterprises are family-owned. In India, family firms contribute more than 75 percent of national GDP, one of the highest percentages in the world. Neither China nor India – nor most other countries with similar family business dominance – has created the kind of comprehensive support ecosystem that Saudi Arabia has built.
The Saudi playbook models actionable responses to universal challenges: How do you professionalise informal family enterprises? How do you manage generational transitions at scale? How do you align traditional business structures with modern economic development goals?
Also Read: 4 Tips for managing the succession challenge
Here are four key strategies that other governments can adapt to their own contexts:
The NCFB model shows how governments can play a catalytic role beyond traditional regulation. The short answer: Become an active participant. By providing patient capital, conflict resolution, investing in research and aligning regulations, governments can smooth the way for entrepreneurs and family businesses.
Rather than importing best practices from other countries, Saudi Arabia invested in understanding its own family business landscape. The NCFB, for one, partnered with KPMG and Saudi academic institutions to study cultural and business realities in the Kingdom.
Several norms stand out. Respect for elders and patriarchal authority mean that founders often call the shots well into old age alongside male heads of families, even when younger members have advanced education or international experience.
At the same time, many firms prefer to hire within the family for key roles. And in a sign that tribal mores are well and alive, major business decisions often require consensus among multiple branches of the family.
In line with these practices, the NCFB’s initiatives – certifying professional advisers, encouraging the setting up of family charters and structured succession planning – were designed to strengthen governance and sustainability while respecting Saudi cultural norms. This ensures that reforms are both practical and widely accepted.
In Saudi Arabia, family business development is directly plugged into the Kingdom’s economic transformation blueprint, Vision 2030. This means family enterprise goals and national economic objectives are aligned.
By strengthening these businesses, Saudi Arabia simultaneously advances economic diversification, job creation and private sector development, all core Vision 2030 objectives.
The NCFB's holistic approach, from research and education to governance and conflict resolution, contrasts sharply with the piecemeal support found in most countries, where family businesses must navigate multiple agencies that don't necessarily communicate with each other.
For example, the two scions of a mid-sized manufacturing firm were at an impasse over the company’s current management structure.
They turned to an NCFB-certified mediator. Over several consultations, the mediator helped the brothers clarify the boundaries between their family and business roles, develop a clear succession plan and establish governance mechanisms to prevent future conflicts.
But should conflict boil over, the NCFB offers arbitration and mediation, with litigation as the last resort.
As family businesses worldwide grapple with digital transformation, sustainability requirements and changing generational expectations, Saudi Arabia's systemic approach shows how targeted institutional development can accelerate economic transformation while preserving cultural values.
For policymakers in emerging economies, the Saudi experience offers a roadmap: invest in understanding your family business landscape, create integrated support systems, and align family business development with national economic goals. Using this playbook, governments can play a catalytic role in private sector development without intervening directly in business operations.
First Published: Nov 13, 2025, 15:05
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