63% of Maltese family businesses positive about future – PwC survey

The majority of Maltese family businesses are positive about how the markets where they do business will perform over the next year, according to the PricewaterhouseCoopers Family Business Survey 2010/11.

The survey showed that 63 per cent of respondents said they believe the market will get a lot better or a little better over the next 12 months, compared to 56 per cent of global respondents who said the same.

Twenty-one per cent of Maltese respondents said the market they operate in will stay the same while 16 per cent said it will get a little worse.

The PwC Family Business Survey 2010/2011 covers small and mid-sized family companies in 35 countries: Austria, Bahamas, Bahrain, Barbados, Belgium, Brazil, Canada, Cyprus, Denmark, Egypt, Finland, France, Germany, Ireland, Italy, Kuwait, Jamaica, Japan, Jordan, Malta, Netherlands, Norway, Oman, Russia, Saudi Arabia, South Africa, Spain, Sweden, Switzerland, Syria, Trinidad and Tobago, Turkey, United Arab Emirates, United Kingdom and United States.

Interviews with top executives in 1,606 companies operating in 15 industry sectors took place between May 26 and August 17 this year.

Half the Maltese firms said they were pursuing a strategy of growth and expansion over the next 12 months, compared to 60 per cent of the global firms who were going for this strategy. Forty three per cent of the Maltese respondents said they were focusing on consolidation while seven per cent said they were striving for survival.

All of the Maltese family business managers are confident that their companies can compete effectively with the market leaders in their sector and are mostly confident on the same three areas mentioned by their counterparts globally, namely the design and quality of their products, the strength of their brands and their ability to retain customers.

However, the proportion of Maltese firms being confident about their product design and quality is much higher than that reported globally, 43 per cent compared to 28 per cent, which indicates the direction that Maltese firms are taking to differentiate themselves in the market. Assertive or aggressive marketing was highlighted by 19 per cent of Maltese firms as the one key strength most admired in their leading competitor, followed by ability to win business or customer loyalty (11 per cent) and product design, quality or range, and competitive pricing (eight per cent each). Globally, the key strength most admired was a strong brand or market presence which was cited by 14 per cent of respondents.

Globally, two thirds of respondents said that being part of a family business helped them cope with the recession while in Malta the figure was 52 per cent.

Only 13 per cent of Maltese firms interviewed made significant changes to their business models over the past 12 months due to the financial crisis (14 per cent globally) while 39 per cent made minor modifications (26 per cent globally).Forty eight per cent of Maltese firms left their business models untouched, compared to a global figure of 59 per cent.

Asked whether they anticipate making further changes to their business model over the next 12 months, 13 per cent of Maltese firms said they did (same figure globally), while 42 per cent said they anticipate minor changes (30 per cent globally).

Many businesses, both locally and globally, said they had increased their capital expenditure in the last 12 months. In Malta, 37 per cent of respondents said they increased their investments (32 per cent globally), while 44 per cent said this had remained the same (42 per cent globally). Nineteen per cent of Maltese firms said they had decreased their capital expenditure compared to 25 per cent globally.

Seventy five per cent of Maltese family businesses claim to have business plans in place and most of these have been reviewed in the past 12 months, compared to 84 per cent globally.

Two thirds of the managers interviewed globally said they have access to additional cash if they need it to reach their goals. However, Maltese firms appear to have less financial resources available since only 45 per cent said they have access to surplus cash. Furthermore, 32 per cent of Maltese firms indicated a limited cash flow.

A huge majority of Maltese respon­dents – 73 per cent – said they manage their short term funding requirements through bank overdrafts (38 per cent globally). Their counterparts in other countries make use of other forms of bank finance.

Most investment, both in Malta and globally, is planned to be made in human resources, sales activity, marketing and IT infrastructure over the next 12 months. Of particular significance is the fact that 50 per cent of Maltese firms plan to invest overseas, compared to 33 per cent globally.

Market conditions, competition and government policy are considered to be the top external issues that most family businesses in Malta and globally expect to face within the next 12 months. However, competition appears to be more of a challenge in Malta with half the respondents expressing concern over this, compared to 26 per cent globally.

The top three internal challenges mentioned by respondents globally and in Malta were human resources, cash flow and cost control and company organisational issues. Labour shortages were mentioned by almost two thirds of Maltese family businesses and almost half of these firms expressed concern over cost control and cash flow issues. Of the lower ranked issues, Maltese firms appear to be more concerned on succession planning at a senior management level (19 per cent) than their foreign counterparts (six per cent).

PricewaterhouseCoopers considers a family business to be an enterprise in which the majority of the votes are held by the person who established or acquired the firm (or by his or her spouse, parents, children or children’s direct heirs); at least one representative of the family is involved in the management or administration of the firm; and, where the company is listed, the person who established or acquired the firm (or his or her family) possesses 25 per cent of the voting rights through his or her share capital and at least one family member sits on the board.