Family Business Report 2024: Key challenges to business growth

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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 challenges, fluctuating exchange rates and cash flow concerns, many businesses are understandably concerned about the impact this will have on their ability to grow and innovate, both in the next 12 months and further down the line.

Key challenges for businesses in the next 12 months

Armstrong Watson’s latest Family Owned, Privately Owned and Owner Managed Business Survey Report 2024 found that inflationary pressures on costs was the biggest concerns facing businesses over the next 12 months, with 54% who said they are ‘somewhat concerned’ and 20% who are ‘very concerned'.

Key challenges for businesses over the next 3 years

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, and more than a third (35%) said staff recruitment was a major challenge.

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.

Cashflow, marketplace competition and staff retention were also seen as key challenges for some businesses.

Strategies to mitigate the impact of increased costs

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 increased costs, businesses 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 a business to retain its ability to adapt and innovate, whilst preserving its own unique family business dynamics which led to its success in the first place.

‘Cash is King'

Over the coming months the saying “cash is King” is more important than ever, as it will allow businesses to navigate the economic, political, and global challenges faced.

Staff Incentives

If having the right people in business is seen as a significant challenge, employers must consider how to attract and retain key employees as well. Offering salary sacrifice opportunities is one of several ways many businesses can incentivise their current and prospective workforce. Businesses could also look to employ apprentices and utilise the Apprenticeship Levy.

Adaptability and change are the key to success

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 both to retain customers and profitable price points.

View the full report.