Funding remains a key concern for most family businesses
We are pleased to announce the results of The Annual Family Business Survey 2016: Access and barriers to funding for growth, run in collaboration with Family Business Place and Lamont Pridmore.
There are some key highlights from the research but in terms of the overall findings, we can see clear evidence from this year’s report that family businesses feel their biggest challenges relate far more to business issues rather than family ones, with 90% citing this to be the case. Interestingly, we have seen a decline in the number of families willing to sell their businesses over the same period, down 19% from 2014, to 42%, with only two thirds admitting to having no exit or succession plan in place. In terms of Brexit only 12% say it is likely to have a positive impact on their business.
We look here at three particularly challenging areas being faced by the respondents in running and managing their businesses:
- Over 30% of respondents stated that access to funding has become harder since 2008, with their approach to sourcing funding appearing to be largely through traditional models.
- The survey showed that a surprising number of respondents (63%) felt sources for growth needed to come from self-generated sales, with less than 10% looking to bank overdrafts; 23% to asset finance; 36% to bank loans; and only 5% considering venture capitalist or angel investment.
- Encouragingly, over two thirds of business owners have a formal business plan in place, which should assist with sourcing external funding, should businesses seek more innovative means to raise it.
- While the survey showed that the number one barrier to securing funding was excessive and time-consuming paperwork, reassuringly, confidence in the professional adviser’s role has risen, with half of those thinking their professional advisers understand their unique challenges.
- 36% are investing new funding into premises, equipment and improving infrastructure, rather than new revenue streams or expanding overseas – only 10% have opened offices overseas, yet 45% export their goods and services around the world.
- Encouragingly, despite the concerns of seeking funding from external sources, family businesses do appear to be appointing non-family members to the board. Of the 75% who have a formal board of directors, over half have non-family board members and one third have embraced non-executive directors.
- Families still wish to keep hold of equity, with 75% of family firms holding at least 75% of the shares within the family.
- The external influence appears to be reaching the next generation as well, with 90% having experience working outside the family business.
- Despite the rise of the millennial age and their involvement in their family’s business, only 25% of those respondents surveyed stated that challenges with the next generation are the most difficult thing facing their business.
Sally Ashford, Private Client Partner at Charles Russell Speechlys, said “ It is no surprise that the lack of formal governance continues to be a major challenge for most family businesses but encouraging to see that a greater proportion are now alive to the issue and keen to act upon it. We know from our deep insight into family businesses that having the right advisers and facilitators is critical to the on-going success of a governance structure. “
Corporate Partner, Andrew Collins, commented “We were interested to see that so many businesses felt the need to self-fund their growth strategy. We are keen to help support businesses with alternative ways to fund and support their growth strategy.“
This was a national survey of family businesses across the length and breadth of Britain. Of those surveyed almost half have been going for more than 30 years and a third are now in their third generation. The survey follows on from the success of the 2015 report, which can be accessed here.
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