Where businesses aren’t entering foreign markets, it appears that almost half of those surveyed don’t do so due to:
- lack of familiarity with the market;
- financing to take the first step;
- lack of public support;
- their products/services are not transferable into overseas markets.
This indicates that they understand the products they offer, the markets they are most suited to, and a commerciality that some other businesses often lack. It’s pleasing to see how many family businesses are planning to grow during the next six months, and that this growth is being stimulated by both the domestic and international markets.
The future of the family business market
However, with over half of the respondents indicating that their major challenges to growth include the increased administrative burden such as tax structures, regulatory frameworks, and talent shortage, the opportunities to stimulate growth via the simplification of some legislation could be significant
Many family businesses have continued to grow during the past 12 months both in terms of turnover and staffing size; however, just over half of the respondents have experienced challenges with respect to access to funding.
The majority of respondents indicated that their business has been affected by greater restrictions to financing leading to issues with cash management and in a small amount of extreme cases loss of control of the business. A large proportion of respondents also indicated that they have experienced challenges in accessing bank credit.
Investment opportunities in other markets
Approximately a third of respondents indicated that it’s largely due to the increase of guarantees needed to secure the loans. In addition, a quarter of respondents indicated that banks have no interest in financing family businesses.
Regardless of a perceived reluctance by banks to fund family businesses, almost 50% of respondents indicated that they still see bank financing as being the most attractive source of funding during the next six months. A shortage of funding could represent a key risk for family businesses as limited access to financing could restrict future investment and growth.
While many family businesses have continued to experience success, access to funding however will be the stimulus for future success. The challenges of the last couple of years have been unrelenting, regardless of which European country the business sits in, and while many businesses have needed to make difficult decisions, many family businesses have thrived.
Restricted access to finance
What drives these businesses’ success is subjective, but there are common themes which emerge including having good governance structures and processes in place – considering this market segment enjoys a freedom to carve out their future success, the acknowledgement of what good governance can bring is high and at 72%, it’s the most important factor.
This is also supported by other statistics in the survey:
- 60% indicated that fairness among family members is important;
- 67% indicated that establishing a family code of conduct or constitution is important;
- 87% rated preparing and training a successor before the handover of leadership as one of their top priorities;
- 32% considered the ability to take a long term view as the key strength of their business.
Plans for growth
The balance of identifying a successor and dealing with rivalry among successors is slightly mis-matched with over half of respondents appearing unconcerned about rivalry for the role of successor. Could family businesses see inter-family competition as beneficial to the future of the business?
When it comes to maintaining family control of the business – 84% of respondents saw maintaining control of the family business as a key driver for success.This is taken a step further with 54% indicating that they considered maintaining roles of senior members of the family retiring/exiting being important.
This demonstrates that the family unit carries a lot of weight in these businesses. Communication between family members across the generations and ensuring that family are informed of business issues also rated highly in the survey, scoring a combined 86% and 84% respectively.
Ensuring that a succession strategy is in place
The survey results have highlighted the important contribution that family businesses are making across Europe and how their levels of confidence are affecting success indicators such as turnover. However, future success is partly reliant on their ability to continue to meet the challenges that lie ahead.
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