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Success and succession: addressing strategic planning for family businesses

We’re launching our eighth Family Business Survey today – with over 2,800 participants it’s a fascinating and truly global picture of one of the most important and vibrant business sectors. The ambition, resilience, and drive of family firms never fail to impress, and the world needs more of them. But it also needs more of them to succeed for the very long term. The number of family businesses that make it beyond the third generation is still stuck at around 12% - meaning that too many bright, ambitious and innovative firms aren’t turning all that great potential into a sustainable, successful business across the generations.

So why is this happening? Problems with the succession process are one obvious answer, and one we’ve focused on in both this, and previous, surveys. It’s a particular feature of the family business model, and often proves to be a serious fault-line too. But as this year’s report shows, it’s becoming more and more clear that succession is only one example (though a major one) of a much deeper issue.  The real problem is what we’re calling the ‘missing middle’: businesses that think in generations are not planning well enough for the medium term.  This means having a clear strategic plan that links where the business is now to the long-term and where it could be.

Two statistics from this year’s survey illustrate what this means in practice. For the last few surveys, family firms have been making about a quarter of their sales overseas, while confidently predicting that exports will be closer to a third of sales within five years. And yet the actual level of international sales is still stuck at around 25%. In 2012, 67% told us they were trading internationally, and 74% expected to be doing so in five years. But four years on, the numbers are almost the same. Something is holding these businesses back. It’s not determination or diligence they lack, but a robust and professional strategic plan.

We look at this in much more detail in the survey and at the ongoing professionalisation agenda which we focused on in 2014, which is still a work-in-progress for many family firms. But the big message this year is very clear: family businesses have the qualities they need to succeed, and they’re more than capable of carrying out a strategic plan once they have one. It’s the process of putting that plan together in the first place that’s the missing piece. The good news is that with the right tools and skills, and some discipline, the ‘missing middle’ gap is easily filled. In our experience, families often benefit from the help of non-family members, such as the professional CEO, to bridge the gap or indeed the next gen.  And outside advisers can also play a critical role. Increasingly family firms are thinking strategically about the skills they need in their boards and hiring truly independent board directors who will help provide the challenge and strategic perspective needed.

We want to see far more than 12% of family firms succeeding past their third generation, and with this survey we aim to shine a light on the opportunity family firms have to achieve this.

Stephanie sits on the PwC Global Leadership Team as Entrepreneurial and Private Business Leader and is also a member of the PwC UK Executive Board, as Head of Regions. The Global Entrepreneurial and Private Business segment works with over 100,000 businesses, and contributes over 20% of PwC’s global revenues. Starting with the firm in 1995, Stephanie became a partner in 2006 and joined the Executive Board in 2011. Read more

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  Peter Bartels has been a Member of the Board of PwC Germany since 1 July 2010 and is in charge of the business units "Family Businesses and Middle Market" and "Public Services". Before being appointed to the Board, he headed the business unit "Valuation and Strategy". Read more

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