There are more than 1.4 million family firms operating in Australia, representing 70% of the country’s businesses, and employing 50% of the nation’s workforce. Small businesses and family enterprises account for over 32% of Australia’s economy.
Leading accounting and business advisory firm, Grant Thornton Australia, recently released the results of its 2023 Family Business Survey. Over 280 of Australia’s business owners, CEOs, and key decision-makers in the nation’s family business community shared insights about their operations, company structures, and demographics. The Survey also focused on key themes affecting all family businesses today: leaving a legacy, future growth, and embracing diversity.
Respondents of the Grant Thornton Family Business Survey included 43% first-generation businesses, and 34% second-generation businesses, with the remaining 23% representing third-generation family firms and beyond. Over 57% of the businesses surveyed have been operating for over 30 years.
Bracing for Economic Challenges
Fuelled by the current economic climate and the uncertainty it has generated through increased costs, rising interest rates, and high inflation, 91% of survey respondents indicated that improving cash flow was a concern for their organisation, making it the top challenge facing Australia’s family businesses. Connected to pessimism about the economy and the possibility of an approaching recession, 86% of family businesses specified recruiting, retaining, and upskilling family members and employees as a complex area to address. The potential for an even greater slowdown may require a reduction in employees.
Ensuring Continuity
Of the family businesses surveyed, 71% identified succession planning as the third most important issue confronting them. The results showed that succession planning is of greater importance to members of the owning family who don’t serve in a principal decision-making role. It is also significant for the second, third, and fifth generations — further underscoring feelings about an uncertain future. Survey responses revealed that 81% of family businesses have, or are working on a succession plan.
Grant Thornton’s Survey concludes that there is a notable difference in generational mindsets concerning ownership and stewardship in Australia’s family businesses. This shift often occurs as the company transitions from its second to the third generation, with 67% of third-generation family firms viewing themselves as stewards for the business, versus 37% of the second generation. The trend continues with the fourth generation; 58% of whom also see themselves as stewards with a strong focus on carrying on the legacy of the family business and preparing it for the next generation. Only 41% of those who consider themselves stewards felt preparing the business for a potential sale was significant, compared to 50% of the total survey participants who thought it was a priority.
A Spotlight on Growth
The 2023 Family Business Survey calls attention to Australia’s focus on growth and the nation’s objectives of developing new products and extending its market reach. However, the country’s family businesses fail to take full advantage of the resources available to catalyse growth in their organisations. Most of the family businesses surveyed indicated that accessing government support was generally not important to assist with their operations’ growth strategies.
The country’s family firms maintain a strong growth focus, 53% of which stated that accessing funding in the next 24 months was important to aid their company’s expansion plans. Despite the characterisation of risk adversity that family firms are often associated with, 47% of the survey’s family businesses are contemplating an acquisition in the next 24 months. Nearly 70% with revenues over $100 million, or more than 300 employees, consider acquisition a key milestone within the next 24 months.
Family businesses surveyed who feel bullish about Australia’s economic outlook view the development of new products and expansion into global markets as critical contributing factors to their organisations’ growth. Overall, 70% of the businesses surveyed indicated that developing/launching new products was a significant and challenging priority for their companies, with 69% expressing a strong desire to overcome barriers preventing them from entering new markets.
Long-Term Outlooks and Fresh Opportunities
Survey responses suggest a connection between innovation and sustainability in the minds of Australia’s family firms. Of the 62% of businesses who feel ESG and sustainability strategies have an extremely positive impact on their operations, 52% of the same businesses consider expansion into new markets very important. Moreover, 59% of surveyed businesses expecting significant revenue growth embrace ESG and sustainability strategies. 66% of survey participants perceive ESG and sustainability measures as moderately important.
Although family businesses are significant in the country’s ESG and sustainability activities, the survey suggests several obstacles that prevent them from fully developing their social and environmental strategies. 34% of respondents have apprehension about the perceived cost and unknown cost-benefit of incorporating ESG and sustainability into their operations. Closely linked is a lack of clarity and misconception about sustainable practices that 31% of family businesses reported. Some businesses (26%) feel an absence of government policy supporting sustainability initiatives impedes their progress toward more environmentally friendly actions.
Leveraging diversity remains an untapped opportunity for most family businesses surveyed, with 76% stating they do not have a gender diversity strategy. However, 67% of respondents between the ages of 18 and 24 expressed an interest in developing a diversity strategy, hinting at the future progress that will probably emerge for family firms in this area. Of businesses operating for 71 to 100 years, 50% are pursuing gender diversity strategies. These results further highlight the shift in mindset that subsequent generations feel about their responsibility as stewards and their goals of creating positive outcomes for their businesses and their communities.
Room for Improvement
The Grant Thornton Australia 2023 Family Business Survey illustrates the need for the country’s family firms to better understand and ultimately align with their members of different generations and facilitate succession planning to ensure a smooth transition in generational governance. Results from the survey also underscore the significant growth potential for family businesses that can incorporate sustainability goals with their operational objectives. Grant Thornton’s survey suggests family business leaders will take advantage of diversity practices to expand and strengthen their operations in the future.
