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Family Business Series – 9 – The Australian Survey

How are Australian family businesses doing, cents and (Australian) dollars?

After the official Australian governmental report was issued: Parliamentary Joint Committee on Corporations and Financial Services: Family Businesses in Australia — Different and Significant; Why They Shouldn’t be Overlooked [March 2013], The accounting firm of KPMG/Australia partnered with Family Business of Australia [FBA] to conduct a survey of Australian family businesses. After issuing 6000 detailed questionnaires, and receiving about 10% responses from all industries across the board, the results were compiled and analyzed by the University of Adelaide’s Family Business Education and Research Group (FBERG) to give a current snapshot of the reality of family owned and operated enterprises in Australia.

Most family businesses were under 200 employees [considered small or medium sized] and size was indicated by annual sales, ranging from under $500,000 to over $200m. The majority of annual sales fell between $2m to $20, [Australian] Even then, some results were insightful:

Continual Innovation — 69 % of family businesses reported they surpassed their key competitors by a less intensive approach to innovation—gradual and sustained. This put them in a position of being able to respond to consumer trends, changing customer needs and improve efficiency ahead of their competitors. Proven technology, such as route-optimization software, maximizes the use of a company’s fleet, or streamlines the internal logistics of their operations, with minimal investment. With full access to analytics gathered from using routing software, such as Route4Me, a family business has information to decide the next step in innovation.

Product and Service Quality — 88% of all family businesses reported they surpassed their key competitors by best performance in product and service quality. A matter of pride, “service” and “quality” were two terms most used to describe their business goals.

Sales Growth — All firms reported 66% more sales growth, compared to their key competitors.

In addition, the family businesses surpassed their key competitors in productivity, cash flow, net profit, return on sales, market share and return on assets. They only fell below key competitors in international sales. Balancing family and business issues was listed as the biggest challenge, along with succession issues.

Succession with Australian family businesses is complicated by the CGT [Capital Gains Tax] and a strict Rule Against Perpetuities in Australian law. As a result, unlike in the United States, assets and control cannot be easily transferred without consideration of the effects of these restrictions. Trusts are an integral part of the structure and governing of Australian family businesses and are used to allow for multi-generational continuity.

Placing a real dollar value on the components of the Australian family business, the KPMG survey listed the top 7 competitive strengths of the family business, in order of importance:

  • Shared Values
  • Strong Support Network Amongst Family Members
  • Vision and Strategy
  • Strong Brand and Market Presence
  • Customer Service
  • Ability to Make Decisions Quickly
  • Taking a Long-Term Perspective

[“Performers: resilient, adaptable, sustainable”, KPMG and Family Business Australia, Family business Survey 2013]