•The growth in Kenyan businesses is almost in line with the global picture where 71 per cent of family businesses grew while eight per cent had a reduction in sales.
•A number of businesses have been keen to expand regionally, mainly in manufacturing, retail, building and construction and financial sector.
Image: JACKTONE LAWI
More than 82 per cent of Kenyan family businesses expect to grow with territory expansion and increasing customer loyalty as the key priorities over the next two years, a survey indicates.
The PWC’s East Africa Family Business Survey 2023 indicates these businesses’ immediate focus is customers, shareholders and investors, with growth likely to be driven by internal decisions.
This could further be supplemented by mergers and acquisitions and, or strategic partnerships in the region or beyond, according to the accounting firm.
“Our survey shows that most family businesses set goals and targets for customer satisfaction and growth, but only a few focus on goals or targets for diversity and inclusion and social impact. Their strategies focus on business outcomes demonstrated through financial metrics and revenue growth outcomes,” the survey reads in part.
Such a focus can be limiting as it has the tendency to sideline the full potential of internal capabilities that could support growth.
This includes talent capabilities, sweating the assets, fully leveraging technology and the strength of the brand and others, PwC’s partners said.
Based on the survey, which also covered Tanzania, Uganda, Rwanda and Ethiopia, family businesses in Kenya experienced solid financial performance in 2022, with 70 per cent of the respondents achieving growth and only 18 per cent reduction in sales.
This compares with 52 per cent growth and 28 per cent sales reduction in 2021 (pandemic influenced).
The growth in Kenyan businesses is almost in line with the global picture where 71 per cent of family businesses grew while eight per cent had a reduction in sales.
“While Kenyan family businesses leveraged on trust from family members and their loyal customers, they still have an ambition for growth with over 82 PER per cent expecting to grow compared to the 77 per cent from global counterparts,” said Alex Murage, Associate Director, Business Strategy and Value Creation PwC Kenya.
These entities however remain exposed to common challenges such as conflict due to entitlement and individual opinions, informal culture and structure, biased employment of family members and lack of relevant training.
A number of businesses have been keen to expand regionally, mainly in manufacturing, retail, building and construction and financial sector.
According to PwC, East African family businesses have seen strong performance over the last financial year with 64 per cent experiencing growth compared to 46 per cent in 2021.
“ This key finding confirms that family businesses are resilient and keep rising above geopolitical challenges,” the firm noted.
It surveyed 95 family business owners to gauge whether current leaders and the next generation of family businesses are prioritising the most key issues to build trust and secure their legacy.
“Considering the optimism broadly shared amongst many family business owners, now is an opportune time to focus on one of the key strengths of East Africa’s family enterprises: trust,” said Michael Mugasa, Partner and Leader, Private Business Services, PwC East Market Area.
“ While family businesses have long relied on the trust premium they’ve built for ensuring strong relationships with key stakeholders like their customers, our survey showed many organisations have been slow to adapt to the evolving nature of trust today.”
Most East African family businesses believe that it is essential to be trusted by customers, employees and family members.
Among those who consider trust among each group important: 56 per cent are fully trusted by customers, 47 per cent are fully trusted by employees and 77 per cent are fully trusted by family members, which is slightly higher than the global results respectively. .
Most family businesses however set goals and targets for customer satisfaction and growth but only a minority set goals and targets for diversity and inclusion and social impact, according to Sunny Vikram, Partner, Tax and Private Business Service, PwC Kenya.
Their strategies end up focusing on business outcomes demonstrated through financial metrics and growth outcomes from an expansion perspective.
“Such a focus can limit the potential arising from other opportunities in the future,” Vikram.
Family members usually attach significant value to matters relating to legacy, membership and control of the business, continuity thus generational transfer, corporate governance, remuneration strategy, business model amongst others.
For long-term, cohesion among family members is key to ensuring ultimate business success, PwC notes, hence owners must have a strategy for the business that is connected or aligned with the family ambitions, vision and values.