NEW DELHI:
89% of family businesses in India expect to grow in the next 2 years, with 44% of them looking at growing quickly and aggressively and the rest expecting steady growth, finds PwC India’s Family Business Survey 2019: Powerhouses of Opportunity. 58% of them have achieved double digit growth in the last year, which is significantly encouraging when compared to global figures of 34%. Increasingly, a lot of Indian family business owners are also looking at private equity/ venture capital funding and in certain cases listing all/part of their business on stock exchanges and exploring private placements.
The survey also reveals that Indian family businesses are increasingly looking at diversification and exploring newer markets to fuel their growth ambitions. 78% of Indian family businesses currently export their goods or services and 89% of them plan to do so in the next five years. Over the next couple of years, 64% businesses expect to make major inroads in terms of their digital capabilities and 63% companies are looking at bringing in experienced professionals to help run the business.
However, as businesses expand, they will need to navigate continuous challenges. Even as companies look to professionalise, 43% of family businesses feel that access to skilled talent is a major challenge and 54% of businesses see the need to innovate to stay relevant. Economic environment, digitalisation, regulatory concerns and cyber security threats are some of the other challenges cited by business owners.
On the occasion of the launch of the survey, Ganesh Raju, Leader – Entrepreneurial and Private Businesses, PwC India says, “Indian family businesses, be it the large conglomerates or mid-sized businesses, face interesting times today. The megatrends shaping the economy, disruptive technologies, and changes in the overall business ecosystem brings in both challenges and opportunities to the table. It’s interesting to see how business owners are moving away from traditional approaches of doing business, exploring new markets, diversifying into new segments, embracing technology and are opening up to newer avenues of funding. However, more and more business owners need to better appreciate the impact of digital disruption on their businesses and treat the company’s ‘digital needs’ as an enabler of business growth.”
The survey, which covered 2,953 family businesses globally, including 106 from India, finds out that 89% of family businesses in India have a clear sense of values and purpose as a company. This can be attributed to the strong Indian family value system and a belief that values are the foundation on which family businesses are built and are the biggest differentiator for growth. However, what is missing is that Indian businesses do not have a documented value and purpose statement in place which would help in to maximising returns.
The PwC Family Business Survey also contains further insights:
The need for succession planning: 73% of Indian family businesses have the next generation working in the business and 60% plan to pass on management and/or ownership to the next generation. However, only 21% have a strategic, documented and communicated succession plan in place. The report talks about the business imperative for proper succession- both within the family and in the business.
Strategic planning: Nearly half the family businesses have a costed, formalised and documented plan for the next 3-5 years while 43% have a plan but the same isn’t formalised and documented. 65% of family businesses with any sort of plan have the next gen contributing to the plan.
Handling conflicts: 88% of Indian family businesses have some sort of policies/ procedures in place to deal with conflicts. In two thirds of cases, conflict is handled within the immediate family.
Diversity and inclusion: Women average 15% of the Board in family businesses and 13% of management teams. Of the next gen working in the business, only 12% are women.
Building a legacy: Nearly four fifths of family businesses in India would like to build a legacy while creating an environmentally sustainable organisation in the long term.
Engagement in philanthropic activities: 89% of Indian family businesses are engaged in philanthropic activities, which is over and above contribution of money. This is much higher than the global average of 68%.
“Partnering with the right talent might help family businesses to adapt to the changes and we see more and more companies looking at professionalising their business functions, thereby distinguishing between ownership and management. Additionally as family businesses mature, given the interplay of relationships, expansion in families, the induction of next gen, it is equally important to have a family constitution/charter to define protocols, clarify roles and responsibilities from an ownership and management perspective and plan for business continuity across generations,” added Ganesh Raju.
