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European Family Business Barometer: Embracing Innovation

European Family Business Barometer

Family businesses continue to build on the momentum of past strong economic growth.

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European Family Business Barometer: Embracing Innovation

The new edition of the European Family Business Barometer reveals that Europe’s family businesses are confident about the future but must become more agile, innovate faster and attract top talent to remain competitive and continue to grow.

“Adapting to change is nothing new for family businesses which have traditionally taken a long-term perspective. Given the pace of change, they need to factor in the latest disruptive innovations, new competitors and political uncertainty. The foundation in their efforts to find success may be a renewed focus on their core values,” KPMG’s Zdravko Moskov, Director, Advisory, comments on the survey findings.

At a glance

Europe’s family businesses are planning for growth. Almost one quarter (23 percent) plan to expand and diversify their products to drive future growth and more than half (54 percent) plan to expand into new markets. One of the key strategies for growth is embracing innovation. Respondents are capitalizing on past growth and reinvesting profits into the business. The majority (86 percent) are investing in their core business, 83 percent are investing in innovation and technology, and 81 percent are investing in recruitment and training. This is also a direct response to the top two challenges the respondents are facing: skills shortage (53 percent) and rising cost of labor (36 percent).

Several highlights emerge throughout the reports analysis, including:

  • 73 percent of respondents report that they are confident or very confident in their family business’ economic prospects over the next twelve months. About one in five (19.5 percent) are neutral and 6.04 percent are negative or very negative about the future.
  • While overall confidence is up across Europe, the UK was a notable exception, with confidence dropping from 83 percent in 2017 to 68 percent this year. With Brexit negotiations ongoing and Brexit day fast approaching, UK family businesses are looking to the future with caution.
  • 64 percent of total respondents reported higher revenue over the past year. Only 11 percent of respondents reported decrease in revenue r in the past twelve months.
  • Improving profitability (49 percent); increasing turnover (38 percent); and attracting new talent (27 percent) are the top three priorities for the next two years.
  • The war for talent was ranked again as a top challenge facing family businesses. This year 53 percent of respondents identified the war for talent as one of their top three concerns. This compares to 43 percent in 2017 and 37 percent in 2016. Other top challenges this year included the increased cost of labor (36 percent) and political uncertainty (36 percent).
  • International expansion is being postponed. In this year’s survey, only 36 percent of respondents said they had increased their activities abroad over the past year – compared with 44 percent in 2017 and 65 percent in 2016.

On to the future: reinvesting in the business

Business families have long taken a specific approach to financing – preferring to reinvest their core business without seeking external financing. While this protects them from a certain level of risk, businesses that employ this approach run the risk of stunting growth by limiting the capital available to fund expansion.

Here is what family businesses are investing in:

Read the full report to gain access to the analysis of the results and trends identified from the responses of business families that completed the report.

About the Barometer

The European Family Business Barometer is an annual survey and a collaboration between European Family Businesses (EFB) and KPMG Enterprise. In its current seventh edition it received 1,576 responses from family businesses in 26 countries in Europe, including Bulgaria.

© 2018 KPMG Bulgaria OOD, a Bulgarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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