Family firms around the world are confident about their future prospects, but many aren’t doing enough to prepare themselves for the years ahead, according to a survey conducted by PricewaterhouseCoopers of more than 1,600 family business executives in 35 countries, including Malta.

Nearly half of the businesses still don’t have a succession plan and of those that do, only 50 per cent have decided who will take over the top job.

Family businesses in Malta are also confident about their future, according to the survey. Most are either adopting a growth strategy or consolidating. Very few are retrenching. Like their global counterparts, most Maltese firms aim to take their business to the next generation, but many are not dealing with the associated issues.

The survey was held between May and August this year. It was coordinated by PwC’s international survey unit in Belfast. The Times Business will be publishing a series of articles over the next few weeks highlighting the various challenges and expectations of Maltese family businesses that emerged from the survey.

The family businesses that were interviewed have a minimum of five employees and vary in size and industry grouping. More than 70 per cent of the Maltese participating businesses have passed ownership/management to the second generation and beyond.

One of the biggest risks facing any family-owned business is the transition from one generation to the next. More than a quarter of the survey respondents said they expect their business to change hands within the next five years, with half of these companies expecting the business to remain in the family. Yet almost half of all companies have no succession plans and of those that do have a succession plan, only half have decided who will take over the top job.

The Maltese family businesses reported a similar situation. Twenty six per cent of the businesses are expected to change ownership within the next five years. Almost two-thirds of the respondents expect the business to pass on to the next generation. Less than half of the respondents have as yet identified a successor for the top position and almost a third do not expect this to be filled by members of the family.

Norbert Winkeljohann, a member of PwC’s Network Leadership Team, said: “To ensure a smooth transition, family businesses must do some careful planning. Companies that survive a change of ownership are usually those that have developed a good plan, outlining how the succession will take place and what criteria will be used to judge when the successor is ready to take over the reins.”

Conflicts over which relative should take over control could be made worse by conflicts over money. A number of respondents don’t think they have enough resources to divide their assets fairly between all their heirs, including those who don’t work for the business. However, this issue is less prevalent among the Maltese firms surveyed.

Some of the other findings which suggest that many family businesses aren’t adequately preparing themselves for the future include:

• 62 per cent haven’t prepared for the possible sickness or death of a key manager or stakeholder.

• 56 per cent haven’t established any procedures for purchasing the shares of incapacitated or deceased shareholders.

• 50 per cent either lack the liquidity to buy out family members who want to dispose of their stakes in the business or haven’t considered the possibility.

• 37 per cent don’t know how much domestic capital gains tax they or their companies might be liable for, while 58 per cent don’t know the international implications.

The responses from the Maltese firms suggest that family businesses in Malta are also not adequately prepared for the future. Many are unaware of the financial and fiscal implications of changes in ownership and how these affect their succession possibilities.

The survey also revealed that few companies are prepared for dealing with conflicts between family members. Only 29 per cent of all respondents – 15 per cent in the case of Maltese firms - said they have introduced procedures for resolving disputes.

The percentage of family firms experiencing tension has increased significantly, particularly when it comes to the future strategy of the business and the competence of the family members managing it. Having good conflict-resolution mechanisms in place is crucial to the success of a family business. Any conflict between family members – be it over money or future leadership – will spill over into the way the business is managed and owned. If relations within the family are healthy, the business is more likely to be healthy, too.

Regulation, government incentives and corporate social responsibility are perennial concerns to family businesses. The vast majority of family-business managers, including those of the firms in Malta, said they would like to have a simpler tax regime. Most people in family businesses are much more upbeat about the growing emphasis on corporate social responsibility. More than three-quarters of the executives in Maltese firms said it had a constructive impact on their companies.

Kevin Valenzia, PwC senior partner in Malta said: “We are grateful to the several family-owned business owners who have participated in this survey. We are now sharing the detailed results with all participants to help them compare their own experience with those of their peers around the world. We are also pleased that The Times Business intends to report on this survey over the next few weeks, recognising the value of this survey to family businesses which are the mainstay of our economy.”

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 the 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.