Family businesses in fight for survival due to Covid, warns study

Nine-in-ten family businesses may run out of cash this year, says DCU report

ALMOST a quarter of CEOs of family businesses have reported that the loss of control of their companies is a key concern over the next six months.

In ‘Surviving a Crisis as a Family Business: An All-Ireland Study’, which will be published by DCU’s National Centre for Family Business on Monday, researchers spoke to family business leaders and employees to understand the impact of Covid-19 and how family businesses respond to crises.

Findings from the survey aspect of the research revealed that 83pc of CEOs felt the pandemic would negatively impact their business. It also found nine-in-ten of the CEOs surveyed believed the family business would run out of cash within the next six months if the crisis did not abate.

The three key concerns reported by CEOs over the next six months were revenue loss, insufficient cash flow and family business continuity.

Researchers followed the progress of family businesses from the Republic of Ireland and Northern Ireland from mid-March 2020 until early November 2020. Data was collected across the seven months with input from 53 CEOs and 198 employees.

Researchers also surveyed business owners on what actions they took or had planned to minimise the pandemic’s threat. Over a third reported reducing management salaries or benefits, and a quarter said they had done the same for employees.

Nearly half reported they had already, or had planned to, lay-off staff temporarily. Over 28pc said lay-offs had been or would be permanent.

Over 81pc reported accessing supports provided by the Government. Nearly a third said they had turned to the banks for support.

The research found family businesses reported eight factors as being most influential to their company’s survival. These included benevolent leadership, effective communication, resilience and being able to both innovate and adapt.

Dr Catherine Faherty, an assistant professor of enterprise at DCU and one of the report authors, said the critical concerns reported by businesses were “really significant”.

“If you think about it in terms of the contribution family business make to the economy and society, and how many people these businesses employ across the island of Ireland, it is extremely concerning the impact the pandemic is having on these firms,” she said.

Despite the concerns, Faherty said the resilience shown by family businesses was one reason for optimism. She added business leaders were also more likely than employees to be more optimistic about the future, which highlighted the importance of communication.

According to DCU, 64pc of all businesses in the Republic are owned by families. Family businesses employ two-thirds of the workforce in Ireland.

The DCU National Centre for Family Business partnered with Ulster University, the Northern Ireland Family Business Forum and the University of Central Florida for the research project.