Succession, sustainability, growth, women in business main concerns of Family Business Study

EY and the Cyprus Chamber of Commerce and Industry (KEVE) conducted the first Family Business Study, where the main issues of concern were the challenges that Cypriot family businesses face in management leadership, long-term succession, increased competition, economic and financial risks, taxation and bureaucracy.

The study, based on the views of 95 executives from major Cypriot family-owned businesses, aimed to understand and analyse the key issues, challenges and difficulties, also looking at areas such as what drives their decisions, the role that government incentives play and how effective these incentives are.

The survey, conducted from November 2016 to March 2017, found that family businesses (49% of the sample) consider an established brand and customer loyalty as the most important success factor for their company, followed closely by a long-term management perspective and focusing on high quality.

Key factors influencing decision making for significant business model changes were the general economic environment (63%), financial risks (59%) and increased competition (53%).

Nearly half (46%) of family business owners and managers surveyed indicated they actively improved business performance by cultivating their companies’ knowledge transfer process and introducing better management systems, while 44% and 42%, respectively, indicated improved working capital management and i mproved cooperation arrangements with suppliers as decisive factors for improved performance.

On average, maintaining a short cash conversion cycle proved to be a key determinant of success for Cypriot family businesses. Bank loans and retained earnings are the preferred financing options for the vast majority of the sample, at 67% and 53%, respectively. The majority (59%) also believe that in order to grow their business they should focus on new products and that embracing new technologies, such as social media, CRM systems and production automation, is of utmost importance in achieving their business targets.

Meanwhile, respondents stressed the need to have strong and more proactive support from government agencies to realise robust growth. Taxation seems to be a major issue of concern for family businesses in Cyprus, as 72% of respondents cited increased tax reliefs and other incentives would adequately bolster their growth. Nearly 45% believe there needs to be a simpler and accelerated process for issuing permits from government bodies while 35% stated they lack support in promoting local products and services overseas.

Among the most critical issues, succession is of the upmost importance; 88% of survey participants stated transferring the business to the next generation is vital. Few family businesses pass the company to the second generation and even fewer to the third or beyond.

The majority (52%) combat this issue by planning for succession early and training and educating the next generation to prepare them for ownership and leadership. Current family business owners are willing to employ and seek guidance from senior experts and managers outside the family. Both genders are equally interested in taking part in the family business, with women participation increasing over the last few years. In fact, family owned and family controlled businesses have a higher percentage of women in senior positions and on the board of directors compared to non-family businesses.

“Family businesses are the backbone of the Cypriot economy. The survey explores how much they have been affected by the economic crisis, local and global competition, internal issues as well as a number of other factors,” said KEVE President Phidias Pilides

The full survey is available www.ey.com/cy.

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