European Family Business Trends: Modern Times?
European Family Businesses demonstrate an increasing confidence in the future, positive performance and a clear desire and ability to adapt to the new market trends at odds with conservative image
Family businesses have proven to be both successful and resilient. Their importance for the economy is obvious. Take a look at Europe, where 14 million family businesses provide over 60 million jobs in the private sector (source: European Family Businesses). In various countries, they represent from 55% to 90% of all companies (source: European Family Businesses) and are present in businesses of all sizes, from corner shops to big corporations.
Many family Businesses are increasingly proud of being a ‘family’ company and are seeking to demonstrate their unique formula for lasting growth and success: to capitalize on ‘family’ strengths while actively adapting to the new and ever-changing market. European family businesses will grow, undergo strategic changes and capture overseas opportunities, and they are actively becoming more professional by improving their governance and hiring outside talent. And while facing a number of significant challenges, they prove their ability to adapt and make fast decisions in order to secure a bright future for their family and their business.
75% of European family businesses feel optimistic about the future for their business
While the overall EU economy may be seen as feeble and unstable, European family businesses are demonstrating increasing confidence and stable growth. Over half of the respondents to the recent KPMG survey (58%) cite a turnover increase in the last six months, and 46% – new recruitments. Backed by their confidence, three quarters (75%) of family businesses surveyed plan future growth and new investments in the year to come.
European family businesses capture global economic opportunities
European family businesses are challenging the common belief that they are less inclined to grow internationally and are rapidly increasing their activities abroad: 74% of the surveyed companies are already operating beyond their national boundaries, compared with 60% two years ago.
Furthermore, almost a quarter (23%) plan to invest further in expanding abroad and cite moving /exporting into new markets among their top business priorities for the next two years.
Despite a common misconception, family businesses are open to new sources of financing and are ready to offer equity in the company’s capital, to the right investor
The right investor is primarily an investor with a similar appetite for business risks and returns, as well as similar values and an understanding of the family business’ nature. High-net-worth individuals have proven to be that sort of ‘right’ investor. 42% of family businesses have previously received direct investment from HNWIs, and 92% of those consider this experience as positive.
Other key findings of the report include:
- European family businesses demonstrate a strong ability to adapt to their environment and are ready to take fast strategic decisions: 41% of respondents are planning to undertake a strategic change in their business over the next twelve months. The primary choices of this group are passing on management of the company to the next generation (26%) or selling the business (21%), both of which entail a drastic change in the company’s management and ownership style.
- Striving for further growth, many European family business owners take steps to achieve higher professionalization within their companies: they improve their governance structures and bring in outside talents. 88% of them already have some formal governance mechanisms in place, and 76% have already integrated non-family member management roles.
- Family Businesses extend philanthropic activities: 34% of respondents consider them important for their business, compared to 18% two years ago. Still family businesses remain secret ‘heroes’: their philanthropic activities are often local and not widely known.
While family businesses show a high potential and desire for future growth, there are a number of significant challenges that could handicap their success. The most critical concerns surround competition, recruiting and retaining talents, and declining profitability. In addition, the size of the business impacts the company’s ability to develop and compete. Sometimes these challenges require business owners to make difficult choices for the future of their business.
“The family business market is rapidly changing. Companies are coming out of the shadows and increasingly advertising ‘we are a family business’. We are pleased to see that they are growing and demonstrating a strong desire and ability to grow further and succeed. But the challenges that companies face are concerning, and if they are not managed in a timely manner, may have a detrimental impact on their future success,” says Christophe Bernard, KPMG’s Global Head of Family Business. ‘Family businesses are not only the backbone of many countries’ economies today, but may be their future as well. Provided that family businesses learn to quickly navigate the challenges faced, their future will certainly look bright.”
To view the full report, please visit: http://www.kpmgfamilybusiness.com
The report is based on the research and insights of KPMG’s Global Centre of Excellence for Family Business, as well as using the findings from our two recent studies:
- European Family Business Barometers, conducted through 2013 – 2015 in partnership with EFB (European Family Businesses) and delivering insights into the confidence levels of family businesses in Europe. The fourth edition ‘European Family Business Barometer: Determined to succeed’ was released in September 2015 and was based on the 1401 competed questionnaires received from 25 European countries;
- Global Family Business Survey ‘Family matters: financing family business growth through individual investors’, conducted by KPMG and gathering responses from 125 family businesses and 125 high-net-worth individuals based across 29 countries worldwide, covering a total of 82.4% of global GDP (released in September 2014).