PwC Malta’s latest Family Business Survey shows that 80 per cent of respondents expect further growth in the next two years.
The survey findings, however, emphasise that future growth cannot be easily projected, since there are many key challenges to address such as the need to innovate and accessing the right employee skills.
The PwC survey has become a bi-annual tradition and research was conducted with a wide range of local family businesses towards the end of 2018.
This year’s survey also shows that local family businesses experienced growth in 2017 and 2018.
Growth among Maltese family businesses is similar to that recorded in the 2016 survey. Twenty-eight per cent of respondents recorded double digit growth over their previous year comparative. A distinct difference compared to the 2016 results is that no respondents recorded a reduction in sales. The remainder retained the same level of performance as recorded in the 2016 survey.
Family businesses remain a key pillar for the Maltese economy and this growth brings along with it common challenges that family businesses must face, such as keeping up with technological advancements. In fact, the key challenges identified by local family businesses were accessing the right skills and capabilities (69 per cent) and the need to innovate and keep ahead (54 per cent).
The survey sheds light on changes affecting the business environment that have had an equal influence on the family business sector. Digital disruption, changing expectations of stakeholders and the revolution of the world of work have had an impact on the opportunities and challenges now faced by family businesses. Most noticeably, this edition of the survey demonstrates a link between putting values at the heart of strategic planning and strong growth prospects.
While 93 per cent of family businesses have a clear sense of agreed values and purpose, only slightly more than half (57 per cent) of respondents have those values and the company’s mission articulated in written form. The results also show that such values can benefit family businesses, especially in the areas of employee recruitment, retention and business reputation. For example, 96 per cent of local respondents say that values and purpose improved the company’s reputation.
The key challenges identified by local family businesses were accessing the right skills and capabilities (69 per cent) and the need to innovate and keep ahead (54 per cent)
David Valenzia, Territory Senior Partner at PwC Malta, said: “Family businesses need to adopt a mindset of profit with purpose, leveraging their strong values to enhance their reputation, legacy and resilience in an ever-changing business environment. These values will guide businesses to be sustainable in their approach and take well-informed decisions in the interest of all stakeholders.
“To be successful in the future world of work family businesses must invest in reskilling and upskilling their workforce, enhancing their people experience and embracing new technology. This requires comprehensive strategic planning which is lacking in local family businesses given that over half of respondents (52 per cent) were found to have no formal strategic plan in place. Taking these steps will result in family businesses being better equipped to build a competitive advantage in a digital age and secure a lasting legacy that is fit for the future.”
The survey provides insights into how the pace of technology advancements is influencing family businesses. Thirty-nine per cent of local businesses feel vulnerable to digital disruption and more than half of respondents (52 per cent) feel that they are vulnerable to a cyber-attack. In fact, 54 per cent of respondents foresee that they will step up their digital capabilities in the next two years.
This edition of the survey also focuses on the role of the next generation in family businesses. Sixty-three per cent of next gens work in the family business, however, well over a third of respondents indicated that neither ownership nor management will be passed on to the next generation.
This could imply that nowadays next gens have many opportunities outside of the family business resulting in a lack of interest in or moving away from the business their predecessors built. In this case, it is vital for family businesses to have a clear succession plan. Having said this, only nine per cent of local family businesses have a formalised and well-communicated succession plan.
Michel Ganado, consulting partner at PwC Malta, said: “Continuity and succession planning remain a key priority for family firms and their stakeholders to be prepared for the future. So much so that the government of Malta introduced legislation to provide incentives and support family businesses in their transition from one generation to another through the Family Business Act.
“Furthermore, we see the importance of such plans as we try to navigate through a digital age, meet changing stakeholder expectations and encourage new ideas from the next generations. Planning for the future will bring about new challenges, but more importantly will present new opportunities for family firms to seek further growth.”
More information about the survey is available at https://www.pwc.com/mt/fbs2019