Family businesses in Singapore rated “succession planning” and “the need to professionalise the business” as their two key challenges, pegging them higher than the global average.
These are the findings of PwC’s seventh survey of family businesses globally, which found 40% of global respondents agreeing that professionalisation of the business, as well as family, was a key challenge for the next five years.
Professionalising the family is “crucial for family wealth planning and for continued success of the family business,” said Ng Siew Quan, entrepreneurial & private clients leader at PwC Singapore.
However, this is particularly difficult for a family business to achieve as it involves two conflicting concerns – family concerns and business objectives – very much like the ‘heart’ and the ‘head’, noted the study.
So how does Singapore fare against its global peers?
While family businesses are faring reasonably well globally with 70% expecting “steady growth over the next five years”, respondents in Singapore are generally less confident about future growth.
Citing a tougher business environment in 2014, 19% of Singapore family businesses predicted consolidation or shrinkage of the business, as compared to only 10% in 2012.
Additionally, only 79% of them were confident of growth in 2014, significantly less than the 90% in 2012.
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The study identified nine processes the presence of which signifies a professionalised approach. Among these, Singapore respondents only did better than the global average in one procedure, “measuring and appraising performance”, at 49% against a global average of 39%.
“A plan that is not written down is not a plan; it’s just an idea. And this is an issue family firms must address with the same commitment and energy as they are devoting to professionalising other aspects of the business. Because without it, the whole enterprise is at stake.”
Another critical area of concern for Singapore is succession. Globally, 16% of family businesses say that they have a well documented, robust succession plan compared to only 11% in Singapore.
As a result, in Singapore, 32% of those polled plan to sell or float their businesses compared to only 20% globally.
“This could be why more family businesses surveyed here are indicating that they plan to sell. If the business owners are not confident of their succession planning, the easier option would be to liquidate and exit the market.”