European family businesses remain upbeat about future prosperity

05 December 2016 Consultancy.uk

Family businesses in Europe are upbeat about their growth prospects over the coming twelve months, new analysis finds. Large businesses in particular have enjoyed robust revenue growth so far this years, as well as robust employment growth. In the mid-term, European family businesses are focused on improving profits, revenue and innovation. 

Family businesses across Europe are generally positive about the future, a new report from KPMG Enterprise and European Family Business*, titled ‘European Family Business Barometer’, finds. The study is based on a survey involving 959 family business respondents, 44% of which have revenues of more than £50 million and 47% of which are more than 50 years old.

European family business confidence coming 12 months

According to the survey, confidence among family business owners for the coming 12 months remains relatively high, at 72% confident. The number of family businesses neutral to conditions over the coming 12 months has ticked up slightly since last year, to 21%, although it is far lower than in 2013, when it stood at 34%. Those with a negative outlook for the coming 12 months stood at 7%, down from 12% in 2013.

Sizable differences between large and small family businesses were noted however. 76% of large businesses say that they are optimistic about the future, for small enterprises, this falls to 58%. Ken McCracken, KPMG’s Head of Family Business Consulting, comments, “It is very encouraging to see that in spite of the recent upheavals in the European market, family businesses feel confident and optimistic about their future prospects and demonstrate positive performance.”

Previous 12 months family business metrics

The research also sought to identify how family businesses have fared in a number of key economic metrics over the past 12 months. The research found that turnover at 54% of firms has increased this year, while at 30% it was maintained, both are slightly down on last year when 58% of firms recorded turnover increases and 26% maintained turnovers. This year 16% of respondents had decreases in turnover, which is in line with results from 2015 and 2014.

The report further found that staff numbers have increased at the business of 47% of respondents this year, while 9% saw layoffs, this is up from last year when 46% of businesses saw increases and 16% of recorded layoffs. Again, considerable difference between large and small businesses are noted, with 74% of large businesses seeing increased turnover and 60% increasing staff levels, while for small businesses, 47% have grown turnover and 34% their workforce over this year.

Family businesses within the survey’s purview also appear to be more interested in activities abroad, with 65% saying that they had increased such activity this year, while 4% said they decreased such activity, this is up on last year, when 58% said that they had increased activity and 7% said that they had decreased activity. 

Turnover increase over past 12 months

Of the companies who said that they saw improved turnover in Q2 of this year, the largest cohort (65% of respondents) say that their revenues were up between 6% and 25% per annum, 7% saw increases of more than 26%, while 28% say increases of 0% to 5% were recorded. 

The research also sought to identify what priorities family businesses have over the coming two years. Top of the list is increasing profitability, cited by 57% of respondents, followed by increasing turnover, at 34% of respondents. Innovation too is a key area of importance, cited by 25% of respondents, while 22% of respondents plan to expand their business into new markets.

Family business priorities coming 2 years

Areas of least importance are the education and training of staff, cited by 13%, followed by the diversification of products/services, cited by 17% and attracting new talent, cited by 18% of respondents.

Respondents were also asked to identify the key areas that are key drivers for success for a family business. The top most cited area (by 93% of respondents) is having a ‘good governance structure and processes’ in place, this was followed by 92% who said that it required ‘communication between generations’. 87% of respondents cited ‘maintaining control of the business’ as a key driver for success, followed by 85% who said ‘preparing and training a success’ before leadership succession actually takes place is important. 81% said that ‘financial literacy among family members’ remains important.

McCracken adds, “Family business owners seem to have found their keys to success; they actively rely on their traditional structures and cultural strengths and are taking steps to boost their companies’ ambitions. Nevertheless, survey respondents expressed clear concerns about the intensifying ‘war for talent’, as their inability to compete for the best talent may hinder their further growth.”

* The federation of national associations representing long-term family owned enterprises.

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