Just one big family (business): Europe matches the concerns of family business in Australia

Bill Noye, Partner In Charge, Family Business
Dom Pelligana, Partner in Charge, Melbourne, Enterprise

KPMG’s sixth edition of the European Family Business Barometer has recently been published, with more than 1,100 responses received from family business owners across Europe.

KPMG Enterprise in conjunction with Family Business Australia also release a family business survey prepared with the University of Adelaide. When comparing the two pulse checks, there’s no doubt that family businesses across the world share similar concerns.

Just over 50 percent of Europe’s 14 million businesses are family-owned, compared to around 70 percent of Australian businesses. Overwhelmingly, they’re optimistic about the future. Nearly 80 percent of Australian businesses and 71 percent of European businesses were confident with the economic outlook for the next 12 months. Of course, issues such as Brexit were of prime importance to Europeans, with a call for the EU to strengthen and unify. Nevertheless, even the shadow of Brexit hasn’t affected profits: nearly two

thirds of family businesses reported increased turnover, especially in Austria, UK and the Netherlands.

So what is worrying European businesses? More than half are calling for simpler tax rules and rates, less red tape and administrative burdens (over one third), more flexible labour market regulation (nearly 40 percent). This sounds very familiar, as Australian family businesses and the mid-market as a whole, share these concerns too.

But the most important issue for Europe is the “war for talent”, with nearly half of respondents facing both a shrinking labour market, which puts greater pressure on family businesses to compete.

To compensate, businesses are continuing to concentrate on innovation, with growth coming from new products and services, strong marketing and sales, effective internal processes and judicious pricing.  European businesses are exporting and diversifying their products to increase turnover and profitability. Jonathan Lavender, Global Chairman KPMG Enterprise, comments that European Family Business resilience and optimism is characterised by an intra-preneurship culture that fosters startup projects and looks to the future. Here again, Australia concurs: forward-thinking family businesses are clearly outperforming others.

One third of European families are facing succession planning in the next 12 months. In Australia a massive 81 percent of business owners are planning to retire by 2025. Succession planning is a major issue in Europe and more than half of family businesses have a Next Gen-er in management.

The need to balance family concerns and business interests remains high and communication between generations was judged as crucial by over half of European respondents. If that figure seems low, it may account for why tensions arise between generations. Indeed, in Australia, over 80 percent of respondents reported recent conflict between family members. Business owners called for greater training for the Next Gen – but are also reluctant to step down. More than half believe their successors aren’t ready to take over, and lacked financial acumen, strategic planning and leadership/management skills.

In Europe, financial literacy was noted as of prime importance to leadership, and more than 70 percent of respondents believe non-family executives would bring increased expertise to the business.

Thriving European family businesses are big on governance. One third have a family council. Many are creating family constitutions to define roles and values and 70 percent have a Board of Directors. In Australia too, governance mechanisms are evolving, allowing for greater agreement and communication. The need to formalise business arrangements, particularly when handing over the business, is a great catalyst to rethinking business structure and the roles everyone plays in helping the business evolve successfully.

The European Family Business Barometer proves that despite ongoing challenges, family businesses are still confidently moving forward and seeking new opportunities to foster sustainable growth.

The next KPMG Enterprise and Family Business Australia survey will be released early in 2018.

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