Family businesses remain some of the most important lifelines to our country’s economy. With parts of the economy struggling these days, we were wondering how the family businesses we work with are doing.
So, we asked them.
We sent a survey to Alabama-based, family-business owners and their executives to see how the pandemic has affected their businesses and how they operate now in this “new normal.” The results of our survey reflect responses from June 6 to June 30, 2020.
Nothing could have prepared us for the first half of this year! Our day-to-day jobs and how we do them have changed drastically since January. But, overall, the results of the survey were more positive than we expected. That’s some welcome good news, and we’re happy to share it.
Here are our findings:
- Overall health of their family business compared to the beginning of 2020. Almost 70% said their business was “about the same,” “healthy” or “doing much better today.” Only about 30% said they were underperforming or extremely underperforming.
- Concern and worry about today’s challenges. Over 70% said they were somewhat or very worried about the short-term challenges of operating right now. About 25% said they were neutral, optimistic or very optimistic about the new normal.
- Employees working from home. We had answers in every category on this question, and that tells us that the workplace is in transition. Most respondents (45%) said 81-100% of their people are back at the office now. About 5% said only a small number of their employees are back. It appears that employees are steadily returning. About a quarter of our respondents said between 21-60% are back; another 9% said 61-80% of their people are back. Surprisingly, about 15% of respondents said they have remained at the office, not working from home at all during this pandemic.
- Profitability of their family business. We asked respondents to predict / forecast how profitable they believe their family business(es) will be by the end of 2020, and we were encouraged by their answers. Roughly 85% predicted they would be somewhat profitable or very profitable at year’s end. Just under 15% said they’d be unprofitable, very unprofitable or it was simply too early to tell.
- Layoffs / furloughing employees at the end of the PPP loan. We wanted to see what family businesses would do after their PPP loans expired. An encouraging 45% said they don’t plan on laying off / furloughing anyone. About 20% said they would have to resort to furloughs, but it would be less than 10% of their employees. Another 5% indicated that they would be laying off between 10-20% of their people. Only about 5% of respondents expect to lay off more than 20% of their workforce.
- How long until the economy recovers? This question is trending throughout the wider business community. Only 7% of those responding to our survey thought they’d see significant recovery within 1 to 6 months; About 25% said 6 to 12 months; 25% expected noticeable recovery in 12 to 18 months. Nearly 24% said recovery would take more than 18 months, and about 15% didn’t hazard a guess or thought it is too early to tell. Bottom line: It appears that the longer the pandemic goes on, the longer executives seem to think it will take for the economy to bounce back.
- Family relationships. We asked whether family and extended-family relationships have been affected during the pandemic, since these relationships are inherently crucial to a healthy family business. One family-business owner told me recently, “Families tend to come together during adversity—and the pandemic is no exception.” Over 90% of our respondents said relationships at their family business were unchanged, doing better or even healthier. Just under 7% said relationships were somewhat strained. No one reported increased dysfunction and strain.
- Value of family-business advisors during the pandemic. We asked how family-business owners and their executives feel about the help they are getting these days from their advisors. Most (nearly 60%) said their advisors were helpful or extremely helpful. About 30% were neutral, and only 2% thought their advisors could have helped more in navigating the pandemic. Interestingly, 10% didn’t need or seek outside counsel from advisors.
- Lifestyle / travel. We threw in a lifestyle question and asked how they feel about flying from Alabama to the West Coast of the U.S. or to Europe and staying in a hotel with their families. Turns out, people are still pretty cautious about traveling: More than 50% said they were uncomfortable or very uncomfortable with this idea. Only about 5% are ready to book trips right now. Another 20% said they are “comfortable” with the idea but not “very comfortable.” Just over 20% said they were not sure, or it was too early to know.
Overall, though, the family-business owners and their executives who responded to our survey were more positive and felt better prepared to handle the plethora of challenges during the pandemic, as compared to reports we’ve seen on the general business community.
There are several reasons for a positive outlook.
First, many family businesses are well capitalized, and they have strong balance sheets. Their businesses have weathered ups and downs in the economy before, and they feel they can continue to do so now and in the future.
Next, being privately held, these businesses don’t have the short-term pressures of performance that publicly held companies do. They can keep people employed and gain loyalty when publicly traded companies are more prone to layoffs or furloughing employees. Founders and next generation leaders are not thinking only about next month or even next year. They are focusing on getting the business to the next generation—and the next. That’s a huge difference in mindset.
Family businesses are entrepreneurial and agile. That entrepreneurial spirit is like “kryptonite” to adversity. Family-owned businesses tend to find opportunities in challenging times. They are quick to seize those opportunities, and they often have capital to make things happen. Family businesses invest in the long run.
And finally, I believe family businesses are more accustomed to handling adversity. It’s one thing to have an executive in your company with an addiction to alcohol, drugs, sex or gambling. But when it’s your brother, sister-in-law or parent who’s also an owner in the family business, you learn to handle adversity differently and better. You work through things if at all possible. After all, you still have to see these people at holidays, family dinners or at the lake house.
For more details on the survey responses, click here: Family Business Owners Survey
If you are a family-business owner or executive and would like to discuss your unique situation, you can contact me at marc@corsini.com.