The survey showed that trust in the future is coming back – 70% of them are expecting growth in revenues
PwC Czech Republic (PwC) addressed the owners of important privately owned Czech companies and asked how they adjusted to the recent economic crisis and what their intentions were. The survey entitled “Reality Check: How will private Czech companies use past lessons to build a successful future?” showed that, although almost 60% of respondents recorded a decrease in revenues in 2009, almost 70% expect their revenues to grow this year. Owners call on the new government to reduce the administrative burden and make the labour laws more flexible.
The survey clearly showed the strengths and challenges for private Czech companies: on the one hand, flexibility and an improved ability to find market opportunities even in a time of crisis; on the other hand, a stronger dependency on a company’s own financial resources and many times also the existence dependency on the business owner. This is fully demonstrated when the company reaches a specific size or should the owner be seriously ill or die.
Crisis - the best time for innovations
Czech companies confirmed hundreds of years of knowledge and experience which stated that a crisis is the best time for innovations and courageous practices. Many of them were thus successful in fields, otherwise hardly accessible, predominantly led by global corporations.
This also results in the level of confidence of the owners about the market position of their company in comparison with their competitors: on a scale of 1 to 10 (the strongest position against competitors), most of the companies would rank themselves between1-4.
“The optimism of Czech companies is, paradoxically, primarily a result of the economic crisis. Many of these companies were managed reasonably well even before the crisis and used the crisis as an opportunity to reduce unnecessary costs, think about the core of their business and realise what their long-term sources of value are. Now, they are ready for future growth and expansion", says Jiří Moser, Managing Partner in PwC Czech Republic.
Entrepreneurs have a written mid-term strategy, but two thirds of them do not know who would take over the company in case of serious illnesses or even the death.
The fact that the private companies surveyed have a written mid-term strategy is a pleasant surprise. We expected that most owners would manage their business more or less intuitively. Nevertheless, it seems that formalisation of management in private Czech companies has reached, at least in terms of strategic planning, the standards of West European firms. Almost two thirds of respondents have a written business strategy, predominantly for a 3-year period.
“For long-term success and the ability to handle future economic fluctuations and difficulties, it will be important that the lessons from the crisis also endure in times of growth and expansion. Growth will also bring new challenges – the need for greater formalisation and setting up functional structures and processes. It is perhaps paradoxical but, according to our experience, many private companies have more difficulties managing their growth than dealing with the economic crisis”, says Věra Výtvarová, Partner responsible for Private Company Services, PwC Audit.
The PwC survey showed that the most important motives for running one’s own business are mainly the desire for decision-making freedom, and passion for entrepreneurship. Money, success or social status only follows these. Many private Czech companies and their owners are relatively young, so it is understandable that selling or handing over a company to a successor is not planned in the near future – only16% of respondents are considering an ownership change within the next two years. In the longer term, almost half of owners expect a change in ownership. For those who are thinking of handing over their business, 39% are considering selling to a strategic partner and 35% are considering it via succession within the family. A rather unsettling finding is that only one third of owners have an emergency succession plan in case of serious illness or even death.
“This is clearly an area that owners should pay attention to, as a lack of preparation may seriously impact their business partners, employees and families. Also, a situation in which an owner’s future development plan for the company is unclear may cause a considerable degree of uncertainty for the potential successor, management and employees”, warns Věra Výtvarová.
Trust in the future is coming back – almost 70% of Czech owners are expecting growth in revenues within the next year.
The growth is going to have rather an organic character in the near future – gaining new customers and increasing penetration of existing ones are the main growth strategies.
Costs will continue to be under strict control – the majority of the companies plan to decrease costs even during this year.
Besides the economic crisis, the biggest threat to growth is competition, especially low-cost competition.
Product quality and customer care are considered to be the main competitive advantages of privately owned Czech companies.
More than 80% of owners call on the government to lower the administrative burden.
Companies rely on their own resources to finance growth.
Two thirds of the owners surveyed do not have a plan about the future of their companies should the owner become seriously ill or die.
The owners are not planning to sell or hand over their companies in the near future – only 16% are thinking about it with a 2-year time horizon.