In a rapidly changing world, it is important for businesses to actively innovate, improve and move forward, otherwise they risk falling behind as competitors progress.
But with a challenging economic backdrop of ever-increasing business costs, higher interest rates, constraints in attracting and retaining talent, supply chain issues, fluctuating exchange rates and cash flow concerns, many business are understandably worried about the impact this will have on their ability to grow and innovate, in the next 12 months and further down the line.
Armstrong Watson’s latest Family Owned, Privately Owned and Owner Managed Business Survey Report 2024 found that inflationary pressures on costs was the biggest concern facing businesses over the next 12 months, with 54% who said they are ‘somewhat concerned’ and 20% who are ‘very concerned’.
Looking ahead, 44% of the survey respondents cited increased costs impacting business viability as one of the main challenges to business growth in the next three years.
Richard Andrew, Armstrong Watson’s head of accounting and business services, said: “We are living in a challenging economic climate, and as consumers face higher prices their discretionary spending drops, leading to reduced sales and tighter profit margins for our respondents.
“To mitigate the impact of these increased costs, our respondents must balance what they can afford and pass on to the end consumer whilst maintaining competitiveness. In an environment of constant change this is not an easy feat, and key to this is understanding your business both operationally and financially.
“By maintaining accurate management information/cash flow forecasts it will allow businesses to retain their ability to adapt and innovate, whilst maintaining its own unique family business dynamics which led to its success in the first place.
“Over the coming months the adage of ‘cash is king’ is more important than ever as it will allow businesses to navigate the economic, political, and global challenges faced.”
Over the next three years more than a third (35%) of business owners also said staff recruitment was a major challenge, meanwhile cashflow, marketplace competition and staff retention were seen as key challenges for some.
When it comes to financing their plans for the next three years, most businesses said they are looking to use working capital or their own capital, however 24% of respondents – 9% more than in 2018 when the last survey was undertaken – are considering bank loans.
Richard added: “Many businesses owners will recognise the phrase, ‘if you stand still, you are going backwards’ which emphasises the importance of adaptability, and initiative-taking change – all of which are key differentiators for family-owned businesses, however, there are obstacles that must be overcome to be successful in the future.
“When considering profit margins, family business owners also need to balance up achieving efficiencies through cost savings and lean processes, with maintaining customer experience.
“Family businesses are normally built on a personal and bespoke service for their customers and maintaining this this is essential to retain customers and profitable price points.”
