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The economy determines the number one challenge facing family businesses, a Grant Thornton survey finds, closely followed by staff and succession planning.
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Family businesses ‘fret over cash flow, but optimistic for growth’
19 September 2023
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Nine out of 10 family businesses fret over cash flow even though two-thirds express optimism about the economic outlook, according to Grant Thornton’s Family Business Survey.
Released to coincide with National Family Business Day today, the survey showed the top concern was influenced by inflation, high interest rates and a possible recession although respondents were also focused on the growth potential of new products and markets.
Recruiting and training staff and family members was named the second biggest challenge for family businesses, followed by succession planning, developing products and tackling new markets.
“The top two challenges are interesting as they can be linked to the current economic climate where the majority of Australian family businesses are looking to improve cash flow while also attracting and retaining the best staff,” Grant Thornton national head of family business consulting Kirsten Taylor-Martin said.
“Succession planning comes in at number three and is still such an important issue for family businesses as it can be extremely challenging to balance maintaining family relationships and fairness while encouraging business growth.”
But she said survey respondents were failing to exploit research and development grants and other assistance, with most family businesses ranking government support as unimportant.
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“Government grants appear to be an untapped resource for family businesses indicating there is a need for education, simplification and support for understanding available benefits, particularly for innovative family businesses, like the R&D tax incentive and government grant programs,” she said.
The report said family-run operations accounted for around 70 per cent of all businesses and employed roughly half of the workforce.
Almost three-quarters ranked succession as a key priority, with 43 per cent currently formulating a succession plan, 38 per cent already implementing a plan and just 15 per cent without a plan.
Grant Thornton said another key theme from the survey was leaving a legacy, especially as a business was handed down through generations.
“There is a mindset change between generations and whether they see themselves as owners or stewards of the family business,” it said.
“From the second to third generation, there is an opportunity for the family to discuss their involvement in the community and the impact they wish to make. As the family moves from third to fourth generation, the focus shifts to the family legacy.”
The survey found upholding family values trumped concerns about sustainability, ESG and diversity.
“Sustainability and ESG might not yet be fully resonating with family businesses,” Grant Thornton said. “It is clear family businesses are guided by their family values not terminology and mandatory standards.”
“The potential for growth when it comes to diversity in family business is currently untapped.
“Similar to sustainability and ESG, there is a disconnect with many family businesses not fully realising the power of diversity and how it can contribute to expansion and longevity of the family business.”
Grant Thornton’s Family Business Survey was sent to 2,000 family businesses in May and the results were compiled from 280 responses to more than 30 questions on company structure, demographics, operation and key themes.
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