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A survey of PricewaterhouseCoopers: More than half of CEOs expect revenue growth in one year

The CEOs want stable public financial and taxation systems from their governments that do not change every year

The revenues of Czech companies are expected to grow in the following 12 months. Over half of the CEOs of domestic companies approached by the consulting firm PricewaterhouseCoopers Czech Republic (PwC) using a survey are quite sure about this growth. The leaders of Czech companies see better exploitation of existing markets and the potential of current customers as the main opportunities for growth. Furthermore, the CEOs perceive the protracted global recession to be their biggest threat.

“Limited access to financial sources as well as uncertain economic development in the Czech Republic and abroad has made many of the domestic corporations rethink their plans and concentrate on the environment they are familiar with,” says Jiří Moser, Country Managing Partner of PricewaterouseCoopers Czech republic.

More than a quarter of the CEOs (28 %) consider development of a new product or service the main opportunities for growth, a sign of their cautious optimism. The main leaders of Czech companies are very well aware of the risks they might be facing in the near future: 60% of the addressed CEOs have indicated low-cost competition as a significant threat in achieving their goals and more than half of respondents also fear permanent shifts in the behaviour and preferences of their consumers.

“Putting the customer first in terms of importance is not just an empty proclamation, but is, according to more than half of the CEOs, a real necessity for sustaining long-term growth. This means ensuring high-quality services for customers and the market, and engaging the right people to deliver what customers expect,” stresses Jiří Moser.

Efforts to improve the effectiveness of business and cost cutting will continue

PwC’s survey revealed that in the next 12 months the main task for the firms will be cutting back on costs. While in the previous 12 months, 63% of the companies have taken significant steps in order to comply with this goal, more than a half (55%) plan on implementing further changes in the future as well. Good news for the employees is that, in contrast to the previous 12 months, the number of companies that plan on reducing their headcounts in the next period should decline. While in the past 12 months 41.5% of the interviewed firms have reduced their headcounts; in the next 12 months “only” 21.5% intend to do so.

Additionally, there has been an increase in the number of companies that plan on hiring new employees. While in the past 12 months it was fewer than 5% of the companies, in the future 12 months almost 14% of the firms plan on expanding their headcounts.

“The drastic laying off is finally behind us. In addition, a lot of companies have found that they have laid off more emplyees than they could afford and still maintain their pace and so now they are forced to hire replacements. Efforts to improve the effectiveness will also encourage new forms of cooperation between the companies or they will try to outsource non-core activities. Consequently, outsourcing suppliers can look forward to some new commissions,” expects Jiří Moser.

Cash is king

Acquiring financial sources will remain a challenge for most of the companies in the future. More than half (55%) of the CEOs expect to fund their prospective growth with internally generated cash within the next 12 months. Only a fifth (20%) expect to borrow from a bank and a tenth (10%) are planning on relying on the loan market.

“Banks are remaining cautious. The debts of certain firms have reached such levels that a restructuring of a firm is needed in order to assure its further development or even the operation itself. Therefore, nowadays the most successful are the ones who have managed to sustain sufficient levels of capital,” stated Jiří Moser.

Stable public finance and a favourable business atmosphere

The survey of PwC has shown what businesses primarily demand from their governments: stable public finance (90%), stable taxation system (88.5%), reduction in the regulatory burden (78%) and more flexible labour laws (73%). The CEOs declared that untying their hands is more important to improving the competitiveness of Czech companies than supporting the export or regional initiatives.

“Governments all over the world are facing a conundrum – how to deal with increasing debt at a time when the needs of businesses and citizens for support are also rising, with the economic downturn having resulted in large numbers of unemployed and disadvantaged people needing state assistance. However, CEOs want to hear clear commitments from the government that it will maintain fiscal stability and will not harm the business environment or the perception of the country abroad,” adds Jiří Moser.

A good example can be a simplification of the administrative demand of the taxation system. While it may be difficult for governments to decrease tax rates, reducing the administrative burden can always be a win-win situation, delivering benefits to both governments and businesses.