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Families confirm trading conditions are "bad" or "very bad"

The preliminary results of the Campden FB/Mishcon de Reya survey on the current economic climate confirm family businesses are not escaping the effects of the recession. Jonathan Berman, partner in the Families in Business Group at Mischon de Reya, believes this shows the recession is deeper and more biting than previously thought.

Fifty five percent of respondents rated the current trading conditions as bad or very bad, so although family businesses are seen as being better placed to see the recession through, there is no escaping the force of this economic downturn.

"The fact that family businesses are struggling tells us this recession is a big deal. It is real and having a huge impact," said Berman.

The negative trading conditions in turn cause businesses to make cutbacks, one of which is staff. Sixty one percent of the family businesses that have so far taken part in the survey have had to lay off staff in the past six months, shattering the theory that family businesses can afford to keep on staff when bottom lines are threatened. Berman believes this shows the recession is really biting.

Tensions within the ruling echelons of the business are bound to heighten during more difficult periods, and this was reflected within the survey. Thirty one percent noted increased tensions between active and passive family shareholders, highlighting the impact that increased pressure is having on family businesses. "It is probable that passive shareholders are becoming more interfering during these difficult times and so creating tensions," speculates Berman.

Mischon de Reya has seen these problems at work first hand when working with family businesses. "Tension if often the reason Mischon de Reya has to get involved, not just with big litigation cases, but also acting as intermediaries to help solve problems," said Berman.

On a more positive note, the economic climate also presents opportunities to those family businesses that can afford to take them. When asked if they had seen an increased opportunity to purchase companies in the last six months, 61% of respondents said yes. "This makes sense with so many businesses failing," said Berman. "Other businesses can become more predatory and potentially do very well."

Despite the difficult times very few family businesses are considering selling. Eighty four percent said their preference would be to continue the business under the current ownership structure, with only 14% saying the downturn has increased the likelihood of selling the business. The principal reason given for selling the family business by 55% of respondents was receiving an offer you can't refuse. Of this statistic Berman said: "Even in this climate families are never going to sell for the wrong money. This is one of the things that sets family businesses apart."

However it is always important in business to plan for the worst-case scenario, something the survey suggests is not happening within family businesses. Seventy nine percent have not planned for the possibility of selling the familybusiness. This lack of a contingency plan will only serve to make what would already be an extremely difficult time, much worse.

The responses so far suggest family business owners are giving an honest assessment of the problems they are facing, according to Berman. "Family businesses are fragile and the results are showing that there are problems. But it is positive they are able to highlight the issues and that they want to talk about them," he said.

The survey includes responses from businesses all around the world and has seen some of the largest family-owned companies give their view on the current situation.

Responses differ slightly from region to region and when the final results are in will show if family businesses in certain areas are finding the downturn easier to manage than those based elsewhere.

 

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