91pc family businesses expect to grow in 2yrs

About 91 percent of family businesses in Bangladesh, mostly run by first generation entrepreneurs, expect to grow in the next two years as many of them posted double-digit growth last year, PricewaterhouseCoopers (PwC) finds in a survey.

“This optimistic perspective is grounded by two broad factors: the general resilience and stability of a family-run business in adverse conditions and the sustained growth of the Bangladeshi economy, especially on the domestic side.”

The family businesses in Bangladesh do not just expect to grow. The growth is expected to change some fundamental characteristics of the firm. Significantly, 75 percent of the family business owners are seeking professionals outside the family to help them run their businesses, it said.

The businesses also plan to pass the baton to their next generation but only 31 percent of them have an informal succession plan in place.

Although women constitute 25 percent of board members in the family-run businesses, it is 14 percent in the management team, according to the first survey on family businesses in Bangladesh conducted by the multinational professional services network.

Only 34 percent of the family businesses have a strategic mid-term plan in place, it said.

“Family businesses have played a key role in nation building, employment generation and wealth creation in Bangladesh,” said Mamun Rashid, managing partner of PwC Bangladesh, at the launch of the survey findings at a programme in Dhaka yesterday.

“These businesses have also been instrumental in driving foreign investments into the country. It is crucial that these organisations have a structured succession plan in place to ensure continued growth and help sustain the heightened entrepreneurial activity in the country.”

Of the family businesses surveyed, 84 percent reported growth in the last financial year. More than half of them have enjoyed double-digit growth.

Although there is a positive outlook on growth, certain challenges like access to skilled talent, increased competition, disruptive technologies, rising prices of energy and raw materials continue to remain the areas of concern for most family businesses today.

These companies feel the need to accelerate innovation to address some of these challenges and meet global standards, according to the survey.

According to the survey, only a fraction of family businesses understand specific technologies, with only 19 percent being aware of the implications of going digital, way lower than the global average of 30 percent. “In this case, hiring skilled talent and empowering the next in line family members could lead to a sustainable business model,” the PwC said.

“Family businesses globally are at the crossroads,” said Ganesh Raju K, entrepreneurial and private business leader at PwC India.

“They have to constantly innovate and transform themselves to keep themselves relevant, while holding on to their set of their values, which are at the heart of every such business. It's interesting to see that family businesses in Bangladesh are optimistic about the future.” The survey states that 97 percent of the family businesses have a clear understanding of values.

“These have given them a competitive advantage, positive reputation and helped in retaining talent. A strong value system drives growth for family businesses amid disruption fears and the fast-changing geopolitical environment.”

Tipu Munshi, commerce minister, said, "Bangladesh's economy is on a positive growth curve and it is expected to be one of the best-performing economies among the developing nations this year.”

“Family businesses in Bangladesh reflect the same growth story. Strategic partnerships, international exposure and adoption of global best practices will help these businesses mature further and drive the economy,” he said in a statement of the PwC.

The survey also found that around 72 percent of family businesses have some form of policies or procedures in place, slightly lower than the global average of 84 percent.

Some 63 percent of the business families say conflict is handled within the immediate family. Only 6 percent use a third-party resolution service.

Around 59 percent of the family businesses would consider bringing in private equity to help finance growth. “This is a particularly important point considering that the private equity market is poised to grow with major international players.”

Globally, only 26 percent of family businesses would consider going public as against 50 percent of their Bangladeshi counterparts who would consider doing so and 31 percent who consider it the most attractive option. “Family businesses in Bangladesh seem to have a large appetite for all types of funding, even at the cost of dilution of ownership.”

Compared to the global average of 65 percent, Bangladeshi family businesses have more next-gen family members working in the business at 75 percent. In addition, 63 percent of the next-gen working for the business is in leadership teams, which again is higher than the global average (43 percent).

On the other hand, about 34 percent of the next-gen do not work for the company but own shares.

Nearly 78 percent of the family businesses are engaged in philanthropic activities. However, only 38 percent try to measure the impact of the social assets they create.

The PwC is a network of firms in 158 countries with more than 236,000 people.

The survey included case studies of four successful business groups in Bangladesh: Rahimafrooz Group, Transcom Ltd, Ananta Group and the Meghna Group of Industries.