Family business more optimistic about corona crisis consequences

July 21 2020

Many family businesses come out of the corona crisis stronger than they thought they would at the beginning of the crisis, a comparison of the research results of the RSM-Nyenrode Family Business Research Panel shows, which study was carried out in July. More than 65 percent of the same group of respondents said they were more optimistic about their company's chances of survival in July compared to the situation in April 2020. In April 2020, family businesses feared an average loss of turnover of 36 percent compared to April 2019. Now, in June 2020, it appears the loss of turnover will only be three percent compared to the same period last year.

In April 2020, respondents still expected the number of employees in the company to decrease by an average of 8.2 percent compared to a year earlier. It now appears that the number of employees at those same family businesses has decreased by an average of 0.5 percent compared to last year. The same applies to the profitability of the companies. In April, family businesses still expected annual profits for 2020 to fall by 42 percent, while in July that expectation was adjusted to a fall of five percent compared to the previous year. 35 percent of family businesses even expect annual profits to grow compared to 2019.

Lasting innovations

Roberto Flören, RSM Professor of Family Business and Business Transfer, is pleased with the optimistic outlook that emerges from the study. He explains that family businesses are characterized by flexibility, financial independence and quick decision-making: "As a result, they often come out of crises better than non-family businesses. Winston Churchill's advice to 'never waste a good crisis' certainly applies to Dutch family businesses. For example, 61 percent of family businesses indicate that the corona crisis has led to lasting innovations within the company."

Sufficient government measures

The majority of family businesses consider the government measures at the time of the corona crisis to be sufficient. However, the seriousness of the crisis is evident, as 13 percent of the directors assess the measures for supporting their company in the corona crisis as being insufficient.

Exactly half of the participating family businesses have made use of the so-called "NOW-regeling 1.0”, the first Dutch emergency measure to bridge the employment gap. 48 percent indicated that the actual realized turnover was higher than the estimate previously made in the application for this emergency measure. A quarter of the family businesses also expect to apply for the “NOW-regeling 2.0”, the measure set to replace the first. In this respect, an overwhelming majority of family businesses support the conditions set for the “NOW-regeling 2.0” that no bonuses and dividends may be paid out.

Risk spreading

Laura Bles-Temme, Head of Tax at RSM, says to be positively surprised and inspired by the results of the study: "The results show the drive of family businesses to keep their heads above water in times of crisis. This immediately clearly shows the pride of the family business and has an inspiring effect. Thinking in terms of opportunities rather than threats, emanating and giving confidence, and continuing to innovate and do business even in difficult times are strengths of family businesses that we are happy to support wherever possible."

In recent months, it has also become clear to the boards of family businesses that risk spreading is even more important than previously thought, according to insights gained by the entrepreneurs during the corona crisis. Bles-Temme: "This makes sense because, after all, in order to safeguard the future of your company, it is essential to focus on exploiting your current products and services on the one hand and exploring new opportunities and possibilities for the future business strategy on the other hand.” Flören adds: "This is typical of family businesses. The companies and their owners can handle uncertainty well. Thanks to their short lines of communication and fast decision-making, they are agile enough to create new security and stability in crises."

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About the RSM-Nyenrode Family Business Research Panel
In 2019, RSM and Nyenrode Business University launched a research panel focusing on family businesses. Presently, 70 larger family businesses are taking part in the panel and the number is steadily increasing. 86 percent of the respondents actually own the family business, while nine percent of the respondents are family members of the owner. The general data for the RSM-Nyenrode Family Business Research Panel was collected in April and May of 2019, the data for the corona study in the week from March 30th to April 3rd 2020 and from July 2nd to July 12th. In this extremely short data collection period, 50 directors completed the questionnaire in full. Especially in this period difficult for both families and companies, we are very grateful to all respondents for their quick response. We would not have been able to write this report without their cooperation.

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