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Survey: Family businesses poised for growth

  A Family Business Survey by one of the Big 4 accounting firms, PwC, finds that U.S. family businesses are poised for post-crisis growth, despite ongoing concern about market conditions. Notably, more family businesses (88%) are concerned about market conditions than their global counterparts (68%), but they are also more confident about the future.

 The optimism of U.S. family businesses is evident in their belief that their core market(s) will improve over the next 12 months — an expectation voiced by 58% of U.S. respondents. Seventy percent say growth and expansion is a chief business strategy for the next 12 months. Most are well-capitalized: 76% of U.S. businesses say they have access to surplus cash, making them well-positioned to execute on their growth strategy. For 30% of respondents, that strategy involves investing abroad.

 “As key foreign markets continue to rebound faster than the US market, more family businesses may begin to seek sustainable growth abroad as a way to maintain a competitive advantage,” says Alfred Peguero, PwC’s U.S. Family Offices Services leader. “This is a trend we’ve seen among leading US private companies for the past couple of years. The economic buffer that international investment provides has become increasingly attractive as home-market conditions remain uncertain and domestic growth opportunities stay limited.”

 Although market conditions top the list of external challenges that confront U.S. family businesses, government policy is also a considerable challenge, cited by nearly one-third of respondents (76% cite tax policy, in particular, as a concern). Competition, too, is ranked high among challenges, but by fewer respondents than in the previous family business survey, which was conducted in 2007 (21% versus 34%).

 Finding qualified workers is the chief internal challenge for U.S. businesses (52%), up from 49% three years ago. In line with their twin objectives of improving productivity and increasing competitiveness over the next 12 months, survey respondents plan to invest more in IT infrastructure, HR/training, sales activity, and marketing. Other internal challenges reported by US family businesses include cash flow / controlling costs (42%) and capacity / meeting orders (37%).

 “The challenges confronting family businesses require owners to stay abreast of the changing economic, tax, and legislative environments,” notes Peguero. “Being actively engaged in the business will allow owners to plan for and address oversights that, if ignored, could lead to considerable and unnecessary expense. For instance, family business owners should create ways to attract and retain key talent. As career progression and work/life balance become increasingly important to today’s workforce, companies will need to adjust to meet workers’ expectations.”

 Looking ahead

 Reservations about the strength of the economy long-term and how well it can sustain family businesses are evident in the declining percentage of family business owners who say they intend to pass their business on to the next generation (55%), down from 72% in 2007. However, only one-quarter anticipate a change in ownership over the next five years. Forty percent of family business owners don’t have a succession plan in place, leaving their businesses vulnerable to conflicts over control.

 “In times of economic uncertainty, having a succession plan is critical,” says Peguero. “Timely succession planning protects a business and its value by eliminating potentially disruptive surprises and signaling to key stakeholders that the company has longevity. At PwC, we encourage our clients to develop and communicate a plan to family members sooner rather than later to reduce the likelihood of conflict and facilitate the transition process.”

 About the Family Business Survey

 The PwC Family Business Survey captures the views of 89 U.S. companies, which were interviewed June through August of 2010 via a 20-minute telephone discussion. The U.S. portion of the survey is one component of PwC’s global survey of over 1,600 companies in 35 countries. The research was coordinated by the PwC International Survey Unit, Belfast, PwC’s global center of excellence in market research, which designed the questionnaire in conjunction with PwC’s family business experts.

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