Planning During Uncertainty
The phrase “new normal” made a comeback after the financial crisis, suggesting a fundamental shift in the economic and business landscape. A few years on, many family enterprises are still struggling to define the new normal for themselves. It’s not surprising that many of those businesses remain hesitant to make bold moves.
This hesitation was evident in PwC’s latest Family Business Survey: Although they have plenty of cash to finance strategic changes (91% of respondents), U.S. family businesses are reluctant to commit their capital to major new initiatives in an environment of ongoing uncertainty. What leading family enterprises are recognizing, however, is that uncertainty may be a defining characteristic of the new normal, not a temporary condition. If so, waiting things out won’t do them much good. Instead, businesses will need to adapt to uncertainty for the long term.
Private companies in general appear to recognize this, and their focus has shifted accordingly. They’re paying less attention to areas of uncertainty that are likely to have a definitive outcome in the next couple of years, such as government policies, and focusing more on areas of possible long-term uncertainty, namely market conditions. Consider the numbers: 77% of private companies regard lack of demand as a potential barrier to growth, while only 34% see possible tax increases in this light, according to PwC’s latest Trendsetter Barometer survey.
The respondents to PwC’s Family Business Survey are in agreement with the Trendsetter participants: 88% cited market conditions among their top three external challenges, whereas just 32% cited issues stemming from government policy/regulation. Looking at the numbers, no one can accuse these companies of being shortsighted. Still, to acknowledge long-term challenges is one thing; to tackle them is another. If family businesses are to thrive in the new normal, they may need to abandon their wait-and-see approach and start making bold moves again. In short, they’ll need leaders with a clear vision of how to steer the business into a still-unclear future.