Private Companies Optimistic Despite New Risks: Survey
Disruption in the marketplace is creating opportunities for private businesses, and executives are optimistic about their organisations’ growth prospects, according to a Deloitte Private’s 2019 of global private companies.
The private business leaders surveyed are cognisant of the widening array of challenges. The risks these respondents are most concerned with are trade barriers, potential cyberattacks, and the cost of raw materials. Trade disputes have upset commerce only at the margins for most companies to date.
By many performance measures, there has never been a better time to be a private company. Technological advances enable private companies to get closer to their customers, compete with larger public enterprises, and access new global markets. As disruption rocks traditional business operations, private companies also benefit from their agility and ability to respond quickly to market changes.
That helps to explain why private business leaders are steadfast in their optimism about their abilities and outlook. In its second annual survey on this market segment, “Global perspectives for private companies: Agility in changing markets,” Deloitte finds that, despite market challenges, roughly three-quarters of private business leaders express high or extremely high confidence in the success of their private firms over the next 18 months. Most of those surveyed anticipate growth in six of eight key business metrics over the next year, predicting the strongest improvements for revenue, productivity, and profits.
These findings suggest that private company leaders believe they have a strong foundation for managing in today’s dynamic and competitive arena and often view disruption as offering new opportunities for growth. Despite some concern about trade policy and geopolitical uncertainty, most executives surveyed indicate they are highly optimistic about growth.
Managing Risks, Anticipating Rewards
The beginning of 2019 did not bring much in the way of good economic news. Growth rates slowed across many major and emerging economies of the world, expectations for GDP have been scaled back, trade policies are in flux, and some countries are either in or on the cusp of recession.
The private business leaders surveyed are cognisant of the widening array of challenges. The risks these respondents are most concerned with are trade barriers, potential cyberattacks, and the cost of raw materials. Trade disputes have upset commerce only at the margins for most companies to date. Cyberthreats, however, loom large, and cybersecurity emerges as respondents’ top technology spending priority for the coming year.
Yet, only 38% of the 2019 survey respondents believe the level of uncertainty in their home country is higher than a year ago, down from 53% in the 2017 survey. This may factor into why 58% of respondents in the most recent survey say they have high confidence in their company for the next two years, with another 16% expressing very high confidence.
Private business leaders have a similarly positive outlook about their prospects for improvement in important key performance indicators over the next year. Nearly two-thirds (65%) anticipate revenues will grow, 62% predict profits will increase, and 57% expect increases in gross profit margins. In addition, nearly half expect to add to their full-time headcount.
Furthermore, half of the respondents project that their company’s revenues will rise by at least 26%, and more than one-quarter see their revenues rising by at least 51% – both representing gains from the 2017 survey.
The Benefits of Being Private
There seems to be a broad sense of confidence among the surveyed executives despite the challenges of the current business environment. This could be due in part to the fact that private companies have the freedom to maintain a longer-term perspective. In general, they face fewer short-term pressures from shareholders, analysts, and other key stakeholders than their publicly held counterparts.
What’s more, competitive advantage today often accrues to those who are fast rather than first, notes the survey report. Private companies tend to be more agile and can adapt more quickly to shifting market conditions. Technology and globalisation help many of these companies scale up without bulking up.
Indeed, technology both reduces private companies’ costs to compete and enables them to move from idea generation to execution more quickly than in the past, as illustrated by several companies profiled in the report. With the playing field now more level, private companies are looking to gain a competitive edge through an increased focus on innovation and efficiency.
It’s clear, however, that no company can afford to be complacent. Effective private company leaders will need to understand not only where their companies excel, but also where they need help. They can do that by considering, for example, how best to adjust their business models in response to new competition, what organisational changes may prepare the company for anticipated disruption, what role technology will play in the innovation processes, and what they’re doing to develop future leaders and attract talent.