Family businesses are preparing for recession, with nearly 60% of respondents to the latest industry survey believing Australia faces a period of sharp economic downturn.
The September quarter Pitcher Partners Family Business Index, based on a survey of 306 businesses across Australia performed in conjunction with the Family Business Research Unit at Monash University, found expectations of the world economy are extremely negative, with only 19% positive about its health, down from 47.2% in June, while expectations of business profitability are down slightly.
These recessionary fears have been influenced by a slump in the key indicators of revenue, profitability and growth.
While Victorian family businesses report improvements across these core measures, operators in Queensland and South Australia have been hard hit.
Firms in other key states, including New South Wales and Western Australia, also experienced poorer results across these key indicators.
On the revenue front, only 69.7% of family businesses now describe turnover as 'excellent', down from 78.9% in the previous quarter. Just 4.2% of Queensland respondents indicated 'poor' sales for the June quarter, but almost 38% now report 'poor' results.
Profitability is also in decline, with 35% of family business owners now indicating 'poor' returns, up from around 26% in the prior quarter. Once again, both Queensland and South Australian (SA) firms reported massive slumps in profitability.
Notably, of those reporting 'excellent' profitability, a greater proportion come from the transport and storage (100%), recreational (75%) and construction (72.7%) sectors.
Similarly, operators in Queensland and SA report a sudden and severe drop in growth in the September quarter.
A third (33.3%) of family businesses in the Sunshine State experienced 'poor' growth in the period, significantly up on the 4.2% that reported a similar result in the June quarter. The percentage of SA firms registering 'poor' growth jumped from 7.7% to 28.6%.
As with profitability, family enterprises in the transport and storage sector appear to be enjoying strong growth, with 100% reporting 'excellent' growth in the quarter, followed by manufacturing (78.4%), recreational (75%), and retail trade and wholesale distribution (74%).
Pitcher Partners' Ian Stewart says family businesses are preparing for the worst.
He noes that the aftershocks from September 11 have impacted upon the sector, with 62.1% believing the effects of global terrorism have hurt their business to a large extent.
"Consumer confidence has been severely dented. This has flowed into reduced sales, cancellation of orders and some have even cited nervous bankers," he says.
"(In response) operators are reducing debt, cutting costs, and creating a leaner workforce.
"But in typically optimistic style they are also looking at new marketing initiatives and new products to see them through."
The Index results also send a clear message – family businesses do not want governments bailing out failing corporations, although two thirds support the protection of employee entitlements.
"(Some) 90.8% of respondents do not agree that governments should aid large corporations that fail," Stewart says.
"Responses to why corporations such as Ansett, HIH and One-Tel failed reveal family businesses have a hard-nosed, no-nonsense attitude.
"Respondents blame bad and dishonest management, and boardroom greed."
To read more on the survey, including family business' attitudes towards tax reform, human resources issues and succession planing, see this week's bizreview new bulletin, emailed to subscribers on Wednesday evening. Call 1800 649 578 or email subs@pubserv.com.au for details.
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