As the recession is gradually fading out
Almost three quarters (71%) of European family business owners put the debt crisis behind and expressed confidence towards their business in the future, according to the recent European Family Business Barometer 2017 (sixth edition), released by the European Family Business (EFB) and the KPMG. They also reported that uncertainty associated with potential legislative changes that could impact the free flow of talent across borders is top of mind and that continued integration and tighter political ties would be welcomed.
With Brexit negotiations underway, the current political climate remains one of the top concerns for European family businesses. Political uncertainty was ranked as a top concern by 30% of respondents across Europe. Next to this, 43% of respondents identified the “war for talent” as the most important issue they face. The availability of labor paired with the increasing cost of labor cited by 32% of respondents is putting greater pressure on family businesses. The need to balance family concerns and business interests was reported as important or very important to their business by 87% of respondents while 84% of respondents indicated that preparing and training a successor was important or very important to their business.
Moreover, after several years of improving economic results, family business owners are looking towards the future and seeking new ways to capitalize on the momentum of their success. Of the businesses that were surveyed, only 7% plan to take the profits out of the business. The rest have plans for reinvestment that involves strategic initiatives such as building or improving infrastructure, manufacturing or marketing (47%) or planning to build their workforce (28%). Mr. Jonathan Lavender, Global Chairman of KPMG Enterprise said: “In our survey, 57% of family businesses reported an increase in turnover over the past year and of those, 75% are planning on reinvesting their profits into the business. However, concerns regarding the potential impact of political uncertainty and the future of the European Union remain in their minds”.
As far as Cypriot family businesses are concerned, 65% of the ones surveyed are feeling confident regarding their economic outlook for the next 12 months while 63% reported an increase in turnover over the past year and 53% have increased their staff. 47% of family business owners are planning on reinvesting their profits in the business while 57% of them identified increased profitability as the top priority for the next two years; interestingly, almost half of the respondents (49%) believe financial literacy is essential amongst family members. Increased competition was ranked as a top concern by 47% of respondents. In addition, the “war for talent” is considered as a growing concern, as 32% of respondents reported the lack of skilled workforce as one of the most significant concerns of the year ahead. Communication between generations was cited as very important by 69% of respondents, while 72% of them rated commitment of the local community as important or very important to their business. The need to balance family concerns and business interests was reported as important or very important to their business by 49% of respondents. 73% of respondents indicated that preparing and training a successor was important or very important to their business while 59% of them indicated that the next generation is already placed in management positions. Finally, setting good governance structures and processes is a key issue for family businesses in Cyprus, as 96% of respondents cited it as important or very important.
Mr. Demetris Vakis, Board Member and Head of Family Business at KPMG in Cyprus said: “Family businesses in Europe have had another strong year in 2017 and remain very optimistic about the future. Relating to the Cypriot family businesses, three major concerns were identified in the survey: finding the right balance between the interests of the family and those of the business, having good governance structures and processes in place and providing the right and balanced training of the successor before leadership succession takes place”.