In spite of moderate economic growth and political uncertainty in Europe, family businesses in Latvia and Europe feel confident about their future perspectives, according to results of KPMG’s family business monitoring study.
Nearly all interviewed family businesses in Latvia mentioned having confidence about the future. In Europe, such a positive outlook was mentioned by 72% of respondents. «Higher optimism of Latvian businessmen can be explained with the country’s economic growth, which remains ahead of most European member states. Latvian family businesses are also more focused on the internal market, which makes them less sensitive to fluctuations on other European markets,» notes KPMG Baltics corporate financial services manager Gints Sloka.
The study shows that family companies prefer stability and sustainable growth, not faster and less stable business opportunities. «Stability should not be confused with stagnation in this case,» Sloka emphasized.
He notes that often family businesses reach for higher profitability, not turnover increase, when choosing in favour of moderate risk tolerance. «57% of interviewed European family businesses mentioned improvement of profitability as their goal. 34% mentioned plans to increase turnover. Latvian family businesses also most often mentioned increase of profitability,» Sloka said.
Unlike Europe, however, interviewed families mentioned export expansion further outside the local market as a priority more important than profitability – the majority of interviewed family businesses in Latvia mentioned it as their priority for the next two years.
Only 20% of interviewed European family businesses mentioned exploring new markets. «Latvian businessmen’s interest towards exports can be explained with the relatively small local market and desire to diversify business activities,» Sloka said.
As the main obstacles for family businesses towards long-term accomplishments in Europe, respondents mentioned the lack of talented workers, unstable political environment, increased competition and decline of profitability. Latvian family businessmen also mention declining profitability and the fight for talents. Nevertheless, the most often challenges mentioned by them include increased employee costs and taxes. Businesses interviewed in Latvia would like to see more stable and predictable tax regulations, as well as reduced administrative burden, which could help improve business growth opportunities.
Company culture and values, as well as flexibility and quick decision-making, were mentioned as the main work principles among the majority of interviewed respondents in Europe and Latvia. Compared with other business types, decisions in family businesses are made faster and more efficiently. This lets them react to different market developments and legislative changes more dynamically.
Sloka explains that very often family businesses turn out more successful because they use family experience and values in everyday work. They do not blindly follow latest trends. «This does not mean family businesses are less creative and innovative. It is exactly the opposite – family businesses are often capable of finding creative solutions. It is important for those businesses to remain loyal to themselves and form their innovations in accordance with company traditions,» Sloka said.