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Family businesses optimistic about future

About two-thirds of family businesses globally are optimistic and expect an increase in revenues and profit in the next 12 months, research by Deloitte Private reveals.

Deloitte Privateʼs Gábor Baranyi

"Family businesses need to keep a balance between business and family goals - between keeping family values and protecting the family fortune," says Gábor Kóka, partner at Deloitte Private. "These companies use a long-term approach, and this perspective is often difficult to coordinate with the short-term, impressive data in quarterly financial reports."

Despite such challenges, about 42% of respondents predicted an over 25% increase in revenues in the next year. Similarly, about 42% indicated the intent to buy out another company during the same period, with most planning to make the transaction with a direct domestic competitor.

"One of the most unique and critical challenges facing family businesses is the management of a generational shift," says Gábor Baranyi, director of Deloitte Private. "This is an especially complex question when someone without direct family connections gets appointed to a leadership position, with giving a share of ownership to these leaders out of the question because of family values."

Apart from strategic, financial, and operational risks, such companies face extra potential risk factors due to family ownership, such as lack of heir planning, divorces, deaths, and family conflicts, notes Baranyi.

About 43% of family businesses feel that the economic and financial risks are higher than last year, according to Deloitte Private. The five most significant risk factors named by respondents were increasing raw material and other acquisition costs; the ability to hire and retain workers; the competition generated by new challengers on the market; the tightening of regulations; and the fluctuation of currency rates.

Some 48% of the surveyed company heads said that their family businesses will be exposed to significant negative external factors due to non-conventional competitors. However, 64% said they believe that technological developments can open doors towards new opportunities, while 40% have negative feelings about the changes in regulations and the macroeconomic environment.

The research was conducted globally in the period of August-September 2017, and included Hungarian participants.