A third of leaders fear that companies will become unviable – 05/10/2023 – Market

About a third of directors of family and non-family businesses in Brazil say they do not believe that their companies will be economically viable in up to a decade, if they do not make changes and maintain the current path — this proportion is lower than the global average (39%) .

32% of family business leaders think so and 33% of Brazilian entrepreneurs, in general. To preserve his company, the executive director says to concentrate investments and promote innovations, such as greater contributions in process automation and training and improvement of employees.

The data comes from an exclusive PwC study, which interviewed 250 people in Brazil, including family and non-family business leaders. In total, 4,400 executives around the world were interviewed.

In the current scenario, the rise in prices —which takes away the profitability and predictability of business—, the bumps in the Brazilian economy and the war in Ukraine seem to weigh on the assessment of family business executives.

Among the factors of greatest concern, executives point precisely to inflation (for 38% of family leaders and 39% of Brazilian directors, in general), macroeconomic instability (32% against 38%) and geopolitical conflicts (25% against 23 %).

For global leaders, these percentages are, respectively, 40%, 31% and 25%.

In April, the inflation preview, the IPCA-15 (National Consumer Price Index – Extended 15), slowed the pace of increase to 0.57%. Food prices gave consumers a break and signal a loss of steam for inflation.

The result, however, was not enough for the Central Bank to reduce basic interest rates, and the Selic was maintained at 13.75% per year, which also affects long-term consumer purchases.

According to the survey, the executive directors of family companies say they are more optimistic about the future of the Brazilian economy in the next 12 months than the other directors of companies around the world.

According to PwC, 35% of directors of these family businesses say they believe in growth in the country over the next 12 months. Among the other directors of Brazilian companies, 27% think the same, and the answers include those of family companies.

“What we noticed is that one of the main questions that businessmen pose is how to face the present and the future at the same time, most share the same expectation regarding the growth of the global economy. Family members are in fact more optimistic about the country’s growth”, points out Helena Rocha, partner at PwC Brasil.

Family business leaders are the ones who most fear changes in consumer demands and preferences, with 65% saying they are concerned about this issue — 63% of Brazilian executives gave the same answer and 56% of the total number of respondents in Brazil and abroad.

“How companies are going to prepare for the future and what is the necessary agenda to reach that balance is what will define the future of family businesses, which are more sensitive to changes. Leaders will need to turn these difficulties into opportunities” , says Rocha.

When asked about investment forecasts for the next 12 months, family executives highlight, above all, the contributions in automation of processes and systems (87%), the increase in employee training and skills (78%) and the implementation of cloud technology and artificial intelligence (72%).

By comparison, Brazilian leaders in general expect to contribute 84%, 74% and 76% to these items, respectively.

On the other hand, the shortage of labor or skills deficit is a problem pointed out by 60% of family businesses, by 57% of Brazilians in general and 52% of respondents in general.

For Edgard Barki, coordinator of the Center for Entrepreneurship and New Business at FGV EAESP (Fundação Getulio Vargas School of Business Administration in São Paulo), if on the one hand it may not seem very good when a third of leaders think they have the risk of break, on the other hand, this slice is aware that it is necessary to innovate to maintain the company.

“Being a family business or not, being in Brazil or abroad, the pace of changes in the market is increasing. Even Apple, if it stops modernizing, runs that risk in ten years. Having this concern in seeking modernization is fundamental . If they don’t change, they will be swallowed up by the competition.”

He points out that about five years ago, little was said about diversity and today a company that does not talk about it is already outdated. “Not just the technology, but the mindset also needs to be constantly renewed.”

Also according to the data, family business executives have a greater expectation of the impact of climate risks on the supply chain: 27% of leaders fear a large or extreme impact in the next 12 months, compared to 22% of the Brazilian average.

With the changes caused by the pandemic in supply chains, family businesses also say they seek more alternative suppliers (65%) than other national companies (53%).

“The post-pandemic brought these executives the need to reinvent their businesses, balancing priorities and resources. When we observe, family business leaders have concentrated investment in process and system automation, new technologies”, says the PwC Brasil partner .