Canadian family businesses groomed for growth

TORONTO—Family businesses in Canada are coming out of the downturn stronger than their global competitors, according to a new report from the consulting firm PricewaterhouseCoopers.

PwC’s survey sampled small and mid-sized family companies in Canada and 35 other developed economies worldwide.

In the past year, 66 per cent of Canadian family businesses said they saw demand for their products and services grow, compared to just 45 per cent of global respondents.

Only five per cent of Canadian companies saw a drop in demand compared to three times that many in mature global markets.

And the majority of Canadian respondents expect to expand this year, with 67 per cent saying they have access to surplus cash flow and 97 per cent feeling competitive in their segments.

The study found these companies are more comfortable with investment spending, especially in four key areas:

• Sales activity: 75 per cent
• Human resources and training: 73 per cent
• Marketing: 70 per cent
• IT infrastructure: 59 per cent

Although the majority of companies are still wary of the volatile global economy, 70 per cent say they survived the recession because they were a family.

“Family businesses are good at focusing on long-term relationships with employees customers, suppliers and service providers such as banks, and those relationships carry them through the tough times,” says Tahir Ayub, Canadian
leader of PwC’s Private Company Services practice

Family ties that bind

But with the majority of respondents lacking a formal strategic plan, being related can hinder as much as it helps.

Family members spend their whole lives in the company and so while they know the business inside-out and understand the strategy, they assume everyone else does too, says Yves Bonin, Montreal’s Private Company Services Leader.

“You have to make sure your entire team understands the strategy, their role and that you allocate tasks and follow-up to ensure you are executing the strategy,” he advises.

Look beyond North America

The report also found that 63 per cent of family businesses aren’t exporting to foreign markets.

Of those that do, 76 per cent are selling to the U.S., 22 per cent to Europe and 16 per cent to other global markets.

Only 16 per cent export to Asia and just three per cent sell to the Middle East, South America and Africa.

That could cost companies, Ayub cautions, pointing out that most of the growth in the next decade will come from emerging markets.

The war for skilled workers

Respondents also complained of being at a disadvantage when it came to recruiting skilled labour, citing it as their top internal issue.

“A public company will be able to offer such things as stock options. I think family businesses need to think less in terms of salary and more in terms of market-based compensation in order to compete effectively for key talent,” Ayub says.

The report also recommended businesses start succession planning well in advance of the transition.