quarterly.exchange | Q3-2019 Table of Contents



Issue:
Q3-2019 - Survey Report

Keeping it in the family

Family businesses are well positioned for success with many needing to think about future succession

by Exchange Magazine

When we hear the phrase “family business”, most of us probably have a stereotypical image rooted in tradition and heritage. But the first annual Exchange Magazine Business Survey has revealed that it’s not business as usual for family businesses in this region – in fact, the large majority of respondents say that they are not doing business the same way they have in the past.

Eighty two percent of respondents referred to themselves as owner, co-owner or partner with 80% identifying themselves as working in a family business, with 65% of respondents either second or third generation.

Respondents to the survey were clearly committed to sharing information about the state of family business; they took an average of 13 minutes to complete the survey, a lifetime in on-line response! Just over 70% of respondents were associated with family businesses – 59% describing themselves simply as family businesses, and 12% identifying themselves as partnerships with family members working in them.

Business in transition

Respondents that were planning a business transition were planning to go through the transition in 2-4 years or longer. Out of the responses, most planned on transferring ownership to a family member through share transfer.

Out of all the respondents, 66% were actively running the business, while 86% were actively or semi-actively in running the business. For these extra 20% it was clear that one of the advantages of running a family business is, you pick your own hours.

Becoming more of a challenge every year are the economic environment and the growth of regulation, cyber security, artificial intelligence and robotics.

Eighty two percent of respondents referred to themselves as owner, co-owner or partner with 80% identifying themselves as working in a family business, with 65% of respondents either second or third generation.

The majority of all businesses were not operating the same way today as they have in the past. Sixty six per cent of respondents were in growth mode, with another 20% entering growth mode and only 13% not in growth mode. Generating more customers is where 40% of respondents spend their time, while others were involved in product development or procurement in one way or the other.

Challenges

“Accessing the right skills and capabilities” was determined to be the most challenging for respondents over the next two years, with succession planning and conflict between family members also noted as concerns.

Least challenging to respondents were international matters, and corruption in other countries was not a problem at all. International competition, lack of a Free trade deal, and the government’s trade negotiation style are not significant challenges to most respondents.

Given the high number of family businesses taking part in the survey, very little conflict existed with siblings, and those who responded indicated that the separation of business needs versus family needs was understood and accepted.

Becoming more of a challenge every year are the economic environment and the growth of regulation, cyber security, artificial intelligence and robotics. Challenges noted also included the need to innovate to keep ahead of domestic competition, while the price of energy and raw materials are starting to matter. As analytics or data science starts to assist in the decision making process of many companies, managing that data to make it work for the organization was somewhat of a challenge for many respondents.

Over the next two years, investing in digital capabilities is where most saw change coming from. As well, 50% respondents say that earning the majority of revenues from new products and services will change during that time period. Twenty percent were going to change their business model.

Of the all the respondents, three quarters had sacrificed short term profit for long term gain.

Governance

The majority of the respondents manage their business with a shareholder board or board of directors. Nine percent of respondents felt an obligation to pursue the family business, with 82% genuinely believing in the goals of the business and expressing the desire to contribute along with the confidence to do so.

Family members, in most cases, were kept in the loop concerning business goals and vision, although 36% said there was not communication about the business goals and vision to family members.

Given the high number of family businesses taking part in the survey, very little conflict existed with siblings, and those who responded indicated that the separation of business needs versus family needs was understood and accepted. This is supported by over 75% of respondents, indicating the future vision and goals of the business where “well communicated and understood”, while 36% indicated conflict in balancing the needs of the family versus the needs of the business.

Communication

Respondents felt that they were average communicators, with communication taking place more frequently between owners, then management and then stakeholders.

Concerning reconciling issues, over 66% indicated they were good at it.

The majority of respondents, well over 80%, felt confident that customers understood their value and purpose as a business. This also indicated a good sense that they had all the right players in place. All respondents say that their business has an “agreed sense of value and purpose”.

Concerning reconciling issues, over 66% indicated they were good at it. In letting important issues rise to the surface for discussion, almost 75% of respondents were open to it. However, value and purpose may need to be brought more front and centre as respondent rate themselves very poorly in this regard.

Managing growth is seen as the greatest cause for conflict in respondents’ businesses.

The majority of all respondents (93%) believe that communicating value and purpose to “all employees” is an important aspect of running a business.

This survey is Exchange Magazine’s first annual business survey. We are grateful to the Center for Family Business for their support with this survey. We would like to encourage participation in our 2020 business survey.

Family business is defined for the purposes of this survey as “business owners who are currently or have been in the past, holding or have held a influential ownership position in a private business operating in or around Waterloo Region and Guelph.”

Participation in this survey was anonymous. If you provide your email address to us for the purposes of taking a future business survey, it will just be known that you are willing to participate and we will inform you of 2020 business survey once it is available.



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Looking forward to next years survey:

Take the 2020 Exchange Magazine Business Survey

Question about the 2019 survey please email: Editor@exchangemagazine.com

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Exchange Magazine for Business Editorial Dept.

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