EY Cyprus and the Cyprus Chamber of Commerce and Industry launch the 1st Family Business Study report
In response to the growing demand from family businesses for expertise and thought leadership focused on strategic growth, succession planning and agile management, EY in partnership with the Cyprus Chamber of Commerce and Industry (CCCI) conducted their first Family Business Study. The study aimed to understand and analyse the key issues, challenges and difficulties faced by family businesses in Cyprus, also looking at areas such as what drives their decisions, the role that government incentives play and how effective these incentives are. The views of 95 executives from successful Cypriot family businesses were surveyed and several in-depth personal interviews were conducted with some of the leading decision-makers in these companies across Cyprus. The survey and interviews lasted from November 2016 until March 2017 and the findings, which are presented and analyzed in the Family Business Survey Report 2017, substantially enrich existing knowledge of family businesses in Cyprus and identify best practices and solutions for their success.
Some of the main issues and challenges that Cypriot family businesses face are management leadership, long-term succession management, increased competition, economic and financial risks, taxation and bureaucracy.
Cypriot family businesses (49% of the sample) consider an established brand and customer loyalty as the most important success factor for their company, followed closely by a long-term management perspective and focusing on high quality. Key factors influencing decision making for significant business model changes were the general economic environment (63%), financial risks (59%) and increased competition (53%).
Nearly half (46%) of family business owners and managers surveyed indicated they actively improved business performance by cultivating their companies’ knowledge transfer process and introducing better management systems. 44% and 42% respectively, indicated improved working capital management and improved cooperation arrangements with suppliers as decisive factors for improved performance. On average, maintaining a short cash conversion cycle proved to be a key determinant of success for Cypriot family businesses. Bank loans and retained earnings are the preferred financing options for the vast majority of the sample, at 67% and 53% respectively. The majority (59%) also believe that in order to grow their business they should focus on new products and that embracing new technologies, such as social media, CRM systems and production automation, is of utmost importance in achieving their business targets.
Meanwhile, respondents stressed the need to have strong and more proactive support from government agencies to realize robust growth. Taxation seems to be a major issue of concern for family businesses in Cyprus, as 72% of respondents cited increased tax reliefs and other incentives would adequately bolster their growth. Nearly 45% believe there needs to be a simpler and accelerated process for issuing permits from government bodies while 35% stated they lack support in promoting local products and services overseas.
Among the most critical issues, succession is of the upmost importance. 88% of survey participants stated transferring the business to the next generation is vital. Few family businesses pass the company to the second generation and even fewer to the third or beyond. The majority (52%) combat this issue by planning for succession early and training and educating the next generation to prepare them for ownership and leadership. Current family business owners are willing to employ and seek guidance from senior experts and managers outside the family. Both genders are equally interested in taking part in the family business, with women participation increasing over the last few years. In fact, family owned and family controlled businesses have a higher percentage of women in senior positions and on the Board of Directors compared to non-family businesses.
Stavros Pantzaris, EY Cyprus Country Managing Partner, says: “To support the unique needs of family businesses, EY globally provides specialized services, best practices and innovative strategies. At EY Cyprus, drawing on our international network and leveraging the valuable know-how and experience of our executives, we will continue to support Cypriot businessmen and Cypriot family businesses, aiming at their further development on the island and ensuring that they will continue their positive and dynamic course for generations to come.”
Phidias Pilides, CCCI President, says: “Family businesses are the backbone of the Cypriot economy. For this reason, the research and the results that have been extracted are considered to be particularly important as they present the difficulties and challenges that these businesses face. The survey explores how much they have been affected by the economic crisis, local and global competition, internal issues as well as a number of other factors. For us, supporting family businesses is a priority and we feel it is our duty to help them adapt to the changing business environment and the new challenges of the global market.”
The results of the study and the official launch of the Family Business Survey Report were presented during a working breakfast at the EY Nicosia Office, on 19th September 2017. The full survey report is released on the EY website: www.ey.com/cy