Family businesses have generally managed through the global pandemic better than non-family businesses, a new survey has found.
The survey by KPMG, titled Mastering a Comeback, found that family businesses are particularly well positioned to lead the economy, both in Canada and abroad, as lockdowns ease.
Its findings in Canada show that Canadian family businesses fared even better in some respects than many of their global counterparts during the pandemic. For example:
- While 53 per cent of Canadian respondents experienced an initial decline in revenue in early 2020, the number was 69 per cent globally.
- Revenue increased among 17 per cent of Canadian firms, compared with 9 per cent globally, while 30 per cent saw no change in revenue, compared with 22 per cent globally
- Only 8 per cent of Canadian family firms surveyed reported layoffs, similar to the global average among other family businesses around the world. This compares to non-family firms globally, which reported an average 10 per cent reduction in work forces.
- Much of the success of family firms both in Canada and globally came from the ability to pivot quickly. The report says that globally, family businesses were 42 per cent more likely to deploy a business transformation strategy than non-family firms.
“The results of the report reinforce ideas about the benefits of family-run businesses,” says Mike Finger, a business transition advisor and founder of Exit Oasis, based near Minneapolis-St. Paul, Minn.
“For example, when the report shows that family businesses responded more successfully to COVID, it’s a response that’s recognizable to any of us who have sought out family when we found ourselves in a time of personal crisis,” he said.
“In the same way that we are strengthened by those close relationships during a time of outside ‘attack,’ family members in a shared business benefit from a common purpose, goal and foundation. That unity of purpose gives family-run businesses an edge during a time filled with so many external challenges.”
The COVID-19 family business survey was conducted by KPMG Private Enterprise and the Successful Transgenerational Entrepreneurship Practices (STEP) Project Global Consortium. The team collected confidential data from nearly 2,500 family businesses, including 76 business leaders in Canada, and more than 500 non-family businesses from 75 countries and regions in Europe, North and South America, Asia-Pacific, the Mideast and Africa.
The global and Canadian survey data was collected between June and October 2020, and bolstered by additional input from business leaders, advisors and academics in early 2021.
Family businesses fared relatively well during the pandemic because they tend to take a long-term view, says Yannick Archambault, partner and family office national leader, KPMG Enterprise.
“Many leaders took the opportunity of a slowdown to fully understand business and industry impacts, carefully leverage their patient capital, and explore new business models and markets,” he said.
“Family businesses have succeeded during the pandemic by focusing on business transformation, corporate social responsibility and by showing patience,” Archambault added.
“Family business owners tend to look beyond short-term profits and measure success by the ability to sustain and protect the longevity of the business and succession plans for the next generation.”
Canadian family firms that reported the most significant revenue boosts said these came from the acceleration of technology and the digitization of their business models.
Eva Khabas, accountant and founder of Tax by CPA in Vaughan, Ont., says one advantage that family-run businesses often have is the ability to make quick decisions.
“Decision-making can be easier for family-owned businesses because with no external owners, they can bring about necessary transformation fast,” says Khabas, a tax specialist who works with many family businesses.
“It’s also easier to cut salary costs if the cuts are to yourself,” she added. “Family businesses that rely on the business as their one source of income often have no choice other than a fast response to crisis.”
It is true that sometimes family dynamics can cause internal disruptions, but when an outside force like a pandemic poses a threat, families tend to stick together, Finger added.
“The family bond can create an intense and focused response, which can greatly benefit the business,” he said.