The key findings from PwC’s 2019 Irish family business survey show that growth is on the agenda in spite of disruption. Launched as part of a major global initiative comprising nearly 3,000 respondents in 53 territories, the survey shows Irish family businesses recognise a clear sense of values and purpose can increase revenues, that they have more to do on strategic planning and succession, and that Brexit, talent and profitability are top family business challenges.
Pictured launching PwC's Irish Family Business Survey are (left to right): Liz McCarthy, Dogpatch Labs; Tom Shipsey, Stonehouse Marketing; Frances McArdle, Heigh for Hire and John Dillon, Leader, PwC Entrepreneurial and Private Business Practice.
Having achieved strong growth levels over the last number of years, Irish family businesses remain in robust health, with high levels of optimism about future growth. Despite Brexit and other external uncertainties at the time the survey was conducted, the vast majority (86%) of Irish family businesses expected revenues to grow in the next 2 years. However, the pace of this revenue growth is expected to slow: while a quarter (25%) experienced double digit growth in 2018, just 15% expect sales to grow quickly in the coming years. To achieve this growth, a third (33%) expect to be involved in a merger or acquisition in the next 2 years.
The survey demonstrates a clear link between putting values at the heart of strategy and strong growth prospects. For example, 80% said that having a clear sense of values and purpose directly increased their businesses’ revenues and profits. A similar proportion (79%) said it made their business more attractive to potential joiners. However, while 78% (Global: 75%) believe their stronger values and purpose gives them a competitive advantage, only 35% have those values articulated in written form (Global: 49%). In our experience, a family business without a well-documented values and purpose statement is missing an opportunity to reach its full potential.
The survey further highlights that businesses who achieve greater than 10% growth are ahead in terms of business disciplines. For example, 91% of these faster growing businesses had a clear sense of agreed values and purpose compared to 75% for family businesses with lower growth; 47% had made significant steps in terms of digital capabilities compared to 38% for those with lower growth.
While growth aspirations are strong, the report highlights that these growth expectations are not always achieved. Focusing on strategic planning remains a blind spot for too many family businesses. Nearly two-thirds (64%) of survey respondents admitted to not having a fully costed, formalised and documented strategic plan for the next 3-5 years, with global counterparts doing better (51%). Of the 36% of Irish respondents who have formal plans in place, 41% were experiencing double digit growth. This demonstrates the strong link between strategic planning and performance excellence, the value of building up the disciplines that, over time, create a distinctive legacy.
John Dillon, PwC Entrepreneurial & Private Business Leader, said: “The survey confirms that Irish family businesses, despite external risks, are ambitious for the future. The message from the survey is clear: adopting an active stance towards business and family values generates real benefits that pay off in real terms. Business values should be clearly defined and articulated, but also embedded in the business culture and the day-to-day decision-making, and regularly reviewed. A commitment to a clearly defined set of values is not only good for better financial performance but also improves talent attraction and retention, and can also help family businesses navigate the challenges of technological and competitive disruption.”
The single key challenge holding up future growth, according to the survey, is Brexit (58%) with Irish family businesses being much more concerned than global businesses (11%). At the same time, the survey highlights that Irish family businesses can do more to diversify their businesses compared to global counterparts. For example, nearly half (46%) currently operate in only one sector and in one country (Global: 30%) and just 29% said they will be selling their goods and services in new countries in two years’ time (Global: 38%).
Owen McFeely, Director, PwC Entrepreneurial & Private Business Practice, added: “A key disruption continues to be Brexit which is and will be an increasing concern as developments unfold in the UK. We urge those family businesses trading with or through the UK to intensify their Brexit plans. The survey highlights that Irish family businesses have some way to go compared to global counterparts to diversify their businesses. In light of Brexit, seeking scale in international markets needs to be considered.”
Over half (53%) plan to pass on management and/or ownership to the next generation (NextGen), but a third (34%) of these have not engaged NextGens in preparing for these changes. At the same time, less than one fifth (18%) have a robust, formalised and communicated succession plan in place.
Teresa McColgan, Tax Partner, PwC Entrepreneurial & Private Business Practice, said: “With the majority planning to pass on management and/or ownership, continuity planning is critical. NextGens will face a different landscape in terms of the impact of technologies such as artificial intelligence and robotics, as well as cybersecurity risks. It is therefore good news that the majority (72%) of NextGen future leaders are expected to gain experience and develop skills outside of the family business to ensure they keep pace with innovation. At the same time, a greater focus on continuity planning can help and equip NextGens with all of the skills needed to thrive in a digital age.”
Other key findings include: