Owners Seek Profitability, Not Growth

By Family Business

Family businessowners are more concerned with improving profitability and reducing debt than they are with growing their companies, according to one of the largest surveys ever done of family business owners.

When asked to indicate what their most important goals were, 89 percent of the owners chose “Increased profitability” (top chart). Ranking second, at 76 percent, was “Increasing the value of the business.” The relatively low priority (37 percent) given to expanding the business indicates that owners “seem prepared to sacrifice growth in favor of restoring their financial health,” according to François de Visscher, president of the financial consulting firm de Visscher & Co. and an advisor to the survey group.

Financial Goals and Management tools charts

The results also indicate that many family firms have an informal management approach (bottom chart). Some advisors consider this problematical; only 42 percent of the owners surveyed have written business plans, and only 51 percent hold regular family meetings.

The survey, completed in September, queried owners of 614 family businesses with at least 10 employees and annual revenues in excess of $2 million. It was conducted for the Massachusetts Mutual Life Insurance Co., in Springfield, by the Gallup Organization, and was designed by Mathew Greenwald & Associates working with a panel of family business experts. Among the other findings:

• 24 percent of owners do not want to transfer the business to a relative.

• 74 percent of those who do intend to pass on the business to a relative do not have a written succession plan.

• 83 percent of those with more than 250 employees intend to pass on the business, but only 10 percent have a written succession plan.

• 30 percent have no trusted advisor outside the family.

• 40 percent have spouses who are involved in day-to-day operations.

• 21 percent consider cash flow their most important source of capital; another 63 percent consider it very important.

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Autumn 1993

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