Family businesses remain resilient: survey

By: Jason Whittaker


Australian family businesses continue to demonstrate their resilience and flexibility in face of adverse economic events, according to the latest

Australian family businesses continue to demonstrate their resilience and flexibility in face of adverse economic events, according to the latest KPMG and Family Business Australia survey.

Exploring the behaviour and performance of family businesses over the past 12 months, results are based on a survey of 613 family businesses conducted in June.

The functioning of family businesses was examined under three broad headings, including: structures and mechanisms, strength and resilience, and growth and progression.

STRUCTURES AND MECHANISMS

When it comes to deciding on governance structures and mechanisms within family businesses, only one-third of respondents reported using a formal board of directors or similar governing body.

A somewhat higher 43 percent said they utilised an ‘informal’ board or governing body, while only 28 percent had established a formal family council.

"Where family councils were being used, their meeting occurrence was regular, with 70 percent utilising this mechanism on a weekly, monthly or quarterly basis," the report says.

"Formal feedback to family members was exercised on an even more frequent basis with 76 percent utilising this either weekly, monthly or quarterly."

In terms of performance evaluation, the vast majority (85 percent) evaluated their financial performance, while evaluation of specific areas, such as operational, customer performance and human resources was evident in 60-69 percent of all respondents.

Environmental performance evaluation was undertaken at a much lower rate, with only 31 percent of family businesses engaging in such activity.

"Our survey suggested that a high proportion of family businesses now accept the need to plan for growth and success.

"Just under 90 percent of family businesses said they possessed some kind of strategic business plan. This was considerably higher than the 78 percent of non-family businesses that reported having similar plans."

STRENGTH AND RESILIENCE

In terms of strength and resilience, results show many family businesses appear to have shrugged off credit and finance constraints.

Thirty-six percent of respondents claim the availability and increased costs of finance has had no effect on their businesses over the past year.

"A further 35 percent report only a small impact. Despite this favourable result, 28 percent of businesses say they have cancelled investment projects and 46 percent have deferred them," the report states.

Employment levels have proven to be yet another good guide to business performance and sentiment.

More than half of the respondents have made no change in their employee numbers over the previous 12 months, with 13 percent even adding to their workforce.

In general, the survey confirmed family businesses are coping reasonably well with trying economic conditions, particularly when it came to issues of financing.

They also appear to be doing somewhat better than their non-family counterparts.

"Nearly 60 percent of our business respondents believed Australia had hit the bottom of the economic cycle or was already in an upward phase," the survey says.

"Family businesses were slightly more optimistic than non-family entities in this regard. However 41 percent of family businesses and 45 percent of non-family businesses thought we were still in the downward leg of the cycle."

Most family firms have welcomed the Federal Government’s various economic stimulus packages, yet their gratitude is tempered by longer-term concerns about the benefit of such measures.

"Fewer than 10 percent of respondents believed the stimulus measures would be of long-term benefit to the Australian economy and just 16 percent felt they would be of even medium-term benefit."

GROWTH AND PROGRESSION

The survey confirms the family business reputation to be typically low-key manner, highly progressive enterprises.

Despite more than half of surveyed companies expecting negative or low revenue growth over the next 12 months, one-third of them believe they are well prepared to respond to change over the same period.

A further 61 percent say they are ‘moderately well prepared’.

"Respondents rank increasing customers and sales as their most important business challenge," the report says,

"A little more than 40 percent of the current business owners we surveyed plan to pass on the business to their children or other family members. A perhaps surprising 20 percent intend to eventually sell the business to other owners or employees.

"To put this in perspective, a clear majority of those surveyed do not expect any transfer of ownership to occur within the next 5 years — for many owners succession appears to remain out of sight and out of mind."

Forty five percent of respondents already have someone from the next generation working in the business.

When it comes to the biggest challenges for the future, respondents voted increasing customer base/sales as the most problematic task.

This was followed closely by increasing profits, business/strategic planning and business growth.

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