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Flexible family firms survive, but lag on tech

Family-owned businesses proved their flexibility through the pandemic disruptions, but are showing little inclination to embrace new technology and sustainability strategies as they plan for recovery, according to PwC research. 

17th Feb 2021
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Family businesses are flexible, but lag behind on tech adoption
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Family-owned firms are struggling to innovate and are resistant to change despite having their business models upended by Covid-19, a new PwC survey found.

Some 80% of the 2,801 family businesses across 87 countries polled by the Big Four firm said they were concerned about innovation and technology and that their progress towards digital transformation was slow.

The pandemic intensified technology adoption during the past year and those companies with established capabilities, whatever the business size, fared better than those that had to scramble to keep up, PwC said.

Just under a third (29%) of family-owned businesses said overhauling their digital strategy and improving systems was not high on their agenda, despite listing it as a priority. 

“Thriving in today’s world will require a change of mindset; a rethinking of their priorities and behaviours, including heightened investment in the digital tools needed for economic resilience; and a new definition of legacy,” said Dr Peter Bartels, global leader, for entrepreneurial and private business at PwC Germany.

“The world is changing, and so is the formula for lasting family business success.”

Despite this reluctance to push ahead with technological change, PwC said four out of five businesses (82%) are prioritising diversification and/or expanding into new markets or products. The firm said these were two of the three top priorities for businesses over the next two years.

Challenging times

PwC’s findings chimed with research from the UK’s Treasury Committee earlier this week, which noted how the economic fallout from Covid-19 was having a substantial impact on smaller firms. The MPs said the government was failing to provide necessary support for firms in difficulty, many of which received no financial aid at all.

Overall, one in five family businesses (21%) received government support, according to PwC, while 15% of the owners are putting in more of their own cash, and a further 23% said they are prepared to do so if necessary. 

The Federation of Small Businesses (FSB) national chairman Mike Cherry called on the government to ensure next month’s Budget offers small businesses more aid. 

“Directors and the newly self-employed have suffered a torrid 11 months,” Cherry said. “Last year saw the biggest drop in UK GDP in modern history. We now need the most pro-business Budget in modern history to overcome the damage done.”

PwC found almost half (46%) of family-owned businesses expect sales to decline as a result of the pandemic and a third have had to cut dividends. 

“The unprecedented Covid-19 pandemic has tested business families’ capacity to adapt to change and be resilient across generations,” said Farhad Forbes, chairman of Family Business Network International.

“As the survey results indicate, there are two things we family businesses can do better: digitalisation and sustainability. “ 

Sustainability concerns

Only a third of family-owned businesses have a defined strategy for environmental and societal standards, the survey found, putting them at odds with their publicly-traded counterparts. 

European and US family-owned businesses have been particularly sluggish on sustainable matters, PwC found. In the UK just 39% of smaller businesses have put green matters at the heart of their enterprises.

Family businesses do not face the same investor and regulatory pressures as listed firms, which must comply with and report on environmental, social and governance (ESG) standards. In contrast, among the family businesses PwC’s survey found an “increasingly out-of-date conception of how businesses should respond to society”.

This lack of focus on sustainability is a rare example of family businesses being hindered by their independence, PwC said.

“[Listed companies] have no choice but to respond, and in doing so they are visibly leading the way,” PwC said. “For family businesses, the opportunity to achieve their top priority -expanding into new markets - could serve as the impetus to invest in ESG.”

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By vstrad
18th Feb 2021 13:16

I'm delighted small businesses are giving ESG a big ignoring. Sustainability is a scam.
Small businesses know how to look after their business terrain just as small farmers know how to look after their land for future generations. It's the big boys with no stake in the places they operate that you have to look out for.

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By ASF
18th Feb 2021 14:38

Not quite so sure I would call it a scam, but the topic is definitely being hyped up by interested parties. Many small businesses, care first and foremost about survival (paying the bills, keeping family and/or staff employed), some acceptable form of return to the owners that allows them to meet or work towards their "whole life" goals. If growth fits with this, then I find they are prepared to contemplate it, but a lot of the time, the change and extra risk that comes with growth scares a lot of them off, and they would just like things not to change too quickly, whether the consultants of the world tell them they have to get with the program! I am afraid I see it all the time, that "innovation, digitalisation and even sustainability come way down their list of priorities, in comparison to the basics. and the big boys might as well be in another galaxy, not just a different planet. Wake up and smell the coffee, and understand and work with what the typical small business owners need, and stop trying to create a "want" that you would all like to satisfy, to make yourselves feel better, hit some targets and get richer!

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