After a few years of caution, U.S. family businesses are feeling optimistic and ready to grow again, according to PwC U.S.’s third Family Business Survey. Some 93 percent of U.S. family business owners feel confident about their future growth prospects, compared to 81 percent of family business owners globally.
That’s not to say it’s all smooth sailing.
The economy is still a key issue for family businesses in the coming year, with 68 percent saying market conditions are a primary concern. However, that’s down from 88 percent who were worried about market conditions in the prior survey two years ago.
In addition to greater optimism about external factors, family businesses in the U.S. also feel more confident about their internal operations, with more than three-fourths saying they plan to pass their business on to the next generation (up from 55 percent two years ago).
Although family businesses are planning growth, they’re not rushing into it but instead taking a long-term view. The majority (82 percent) say they plan to grow steadily over the next five years. Just 11 percent of businesses say they will grow quickly and aggressively.
Overall, however, family businesses are taking a more proactive stance seeking opportunities for growth. Companies in the study were focused on investing in innovation and expanding to international markets. More than half (58 percent) see innovation as key to growth, while almost half (47 percent) are expanding overseas, and 54 percent expect to do so in the future. This is a significant increase from the 30 percent who had plans to sell internationally two years ago.
What are the biggest challenges for family businesses, and how can they overcome them? PwC identified two key areas:
Talent Shortage – Both Internal and External
More than half (52 percent) say it’s hard to find employees with the skills they need to compete. Within the family, succession planning is a concern, with 50 percent worried that the next generation doesn’t have the skills or drive to lead the business going forward.
What can they do?
Focus on grooming successors now. Succession planning is still a stumbling point for family businesses, with 38 percent of the survey respondents saying this is a major challenge for them. Develop a plan and work to ensure your family members will be ready to move into key positions when the time comes. If they don’t have the aptitude or desire, your plan should involve developing talent among non-family key employees or bringing in outside expertise.
Even among those family business owners who plan to pass ownership of the business on to their heirs, 24 percent say they will bring in outside management to help run the business.
Family business owners see technology as a double-edged sword. While technology has enabled many family businesses to scale and thrive, the rapid pace of change makes it hard to keep up. More than one-third (39 percent) say the need for new technology will be a substantial challenge for them over the next five years.
What can they do?
Take advantage of the younger generation’s natural relationship with technology. Groom in-house talent to keep up with technological change and learn the IT skills that will be needed to keep your business competitive in the future. Then give the younger family members the freedom to make real changes in how your business is run.
What challenges is your family business facing this year and beyond?
Farming Couple Photo via Shutterstock