In this post we outline some of the findings of the latest Irish and Global PwC Irish family businesses survey of 1,952 family business executives in more than 30 countries worldwide including 100 participants in Ireland.
Irish family businesses have suffered much greater sales reductions in the last year compared to their global counterparts. The general economic environment (85%) and price competition (67%) are major challenges facing Irish family businesses. Two-thirds (63%) say the need to continually innovate is a challenge while a third (34%) are concerned about having the right skills, both key drivers for future growth.
Despite this, however, Irish family businesses are confident about the future and have ambitious growth plans. For example, over three-quarters are planning sales growth over the next five years. Irish family firms are also planning export growth. Over a quarter (26%) of their sales in the next five years are expected to be derived from exports.
Irish family businesses survey
Paul Hennessy, PwC Irish Family Business Leader said: “Irish family businesses are dealing with the challenges presented by the continuing uncertain trading environment with renewed resilience. They have adapted and continue to adapt their business models for a ‘new normal’. With the majority planning to expand in the next five years, they are confident about the future. As key contributors to our economy and society, however, a large proportion of survey participants believe that Government does not recognise the importance of family businesses. For example, they would like to see improved access to finance.”
A key challenge facing Irish family-owned businesses is the recruitment of skilled staff, cited by 34% this year compared to 27% in 2010. Over a third (36%) say that attracting the right skills/talent will be an issue to be dealt over the next five years, and a similar proportion (32%) say they will struggle to retain key staff in the same time period. Irish family businesses are more concerned that the next generation won’t have the required skills to manage the business in the future compared to their global counterparts (Ireland:31% v Global:24%).
Other challenges reported by Irish family businesses include:
- 85% report that the general economic situation will be a key challenge in the coming five years compared to just 66% for their global counterparts.
- 40% said that cash flows and controlling costs are the greatest cause for concern compared to just 17% for their global counterparts.
- Succession planning remains a challenge for over a third (39%).
- Available finance (26%) is a challenge compared to just 14% for their global counterparts.
- Exchange rates (22%) and uncertainty about the Euro (21%) are concerns for over a fifth of survey participants.
John Dunne, PwC Partner added: “Family businesses are recognising the importance of having the right skills to drive future growth. Some are concerned that the next generation may not have the necessary skills and they are addressing this. They see the importance of developing talent from within as well as the role and fresh perspectives that outside skills bring. They also recognise the importance of constantly innovating in a world of continuous change as they look to new markets.”
Over a third (36%) of Irish family businesses anticipate a change in ownership in the next five years; 55% report that they will pass the management of the business to the next generation; a further 15% will pass on the ownership but with professional management brought in. Challenges around succession continue to be front-of-mind, often further compounded by family conflict/politics, and the need to attract and motivate non-family staff. For example, the survey revealed that only half (51%) of the Irish family businesses have a shareholders’ agreement in place, and a quarter (24%) have no procedures in place to deal with conflict.
Family businesses believe their structure offers significant advantages and benefits – particularly their agility/flexibility, continuity and the longer-term perspective. They cite the key role they play in job creation, the stability they bring to a balanced economy, and their entrepreneurial nature. Over half of Irish family businesses (57%) believe they are more entrepreneurial than other businesses.
And they believe they have developed a stronger set of values than other businesses. For example, 83% of Irish family firms believe they battle hard to retain staff even in the bad times, and they have a strong commitment to supporting employment and community issues.
The way forward – Government can do more
Nearly 60% of Irish family businesses are of the view that Government can do more to help their businesses survive and develop activities in the current climate. An overwhelming majority (81%) believe that Government should make it easier for Irish family businesses to access finance. 43% believe that Government does not recognise the importance of family businesses to our economy.
Specifically, the majority of family businesses feel that Government could and should do more to help them succeed, with measures such as:
- Easier access to finance
- Assistance with succession (simplified tax regime on handover, advisory support)
- Financial incentives for family business start-ups
- Specific tax reliefs (e.g. for long-term employment and/or investing back in the business)
- Grants/incentives for research and development, and investment in new technology
- Training and support aimed at family businesses (e.g. succession planning, international expansion, conflict resolution, professional management)
- Encourage the creation of networks.
Paul Hennessy concluded: “The survey shows that family businesses have a clearly defined sense of loyalty and responsibility to create and retain jobs even during the tough times. It is important that this sector is not at a competitive disadvantage. The sector needs a strong voice to engage with Government to provide the economic benefits it aspires to. While this report suggests that Government can do more for the sector, family firms can also do more to help themselves. One of the ways is through establishing a unified voice, for example, through a Family Business Network. It has been proven in other territories that such networks have assisted the development of the sector.”