Navigation: Previous Page | Contents | Next Page
Chapter 3
The availability and reliability of information and statistics on family business
I am nervous about all of these numbers because I think
the only really reliable statistics are those that come from the ABS.[1]
For targeted policy on family businesses...if that were the
intention, the collection of consistent, reliable data on family businesses
would be very important.[2]
The availability of reliable information is essential to
make policy makers...aware of the importance of the family business sector, and
to advocate favourable action.[3]
Introduction
3.1
The second article of the terms of reference draws the committee's
attention to the availability and reliability of information and statistics
about family business in Australia. This chapter considers the data that is
available on Australian family businesses and makes some observations about the
dependability of these survey findings. Consistent with the recommendations in
chapter 2, the committee does not seek to define what official data should be
available: this is a matter for government.
3.2
The lack of reliable data is not unsurprising given there is no
official definition of family business. In the absence of a formal definition
and official data, consultancy and advisory firms have undertaken their own research
and analysis. The analysis of family business in Australia has therefore
developed in a fragmented way, through surveys that have produced interesting
but questionable findings.
3.3
This chapter has two parts:
- the first presents the findings of various consultancies' surveys
and some limited data from the Australian Bureau of Statistics (ABS); and
- the second part presents submitters' and witnesses' views on the
reliability and accuracy of this research and their opinion as to whether, and
if so what, official data is needed.
A patchwork of surveys
3.4
Over the past 20 years, an assortment of unrelated surveys has been
conducted into various aspects of family businesses in Australia. Even among
surveys conducted by the same research organisation, the methodology and even
the definition of 'family business' has changed over time; the questions have
changed from one survey to the next; the sample sizes have often been low; and some
of the data is quite dated while the newer official data has restricted access.
These factors compromise the reliability and utility of the findings.
3.5
Nonetheless, the committee believes it is useful to sketch in this
report some of the key findings of these surveys. The committee recognises that
while the reliability of the findings can be questioned, they do highlight the
areas that might interest and inform policy makers (see chapter 2). The
following section presents selected findings from:
- the ABS' Business Longitudinal Survey (BLS) and Business
Longitudinal Database (BLD);
- the MGI Australian Family and Private Business Surveys, conducted
by Professor Kosmas Smyrnios of the Royal Melbourne Institute of Technology
(RMIT);
- the Family Business Australia (FBA) surveys, conducted by Deakin
University and KPMG; and
- the 2012 PricewaterhouseCoopers (PwC) private clients family
business survey.
The Business Longitudinal Database
and the Business Longitudinal Survey
3.6
The ABS's BLS data was gathered for the years 1994–95, 1995–96, 1996–97,
and 1997–98 under the title of Business Growth and Performance Surveys. The BLD
was introduced in 2005 and has two independent samples or Panels:
- Panel One contains five reference periods of data (2004–05, 2005–06,
2006–07, 2007–08 and 2008–09) for 2,732 business records; and
- Panel Two also contains five reference periods of data (2005–06,
2006–07, 2007–08, 2008–09 and 2009–10) for 3,432 business records.[4]
The ABS states the aim of the BLD is to increase understanding
of the activities or factors that are relevant to business performance and the
associated business characteristics.[5]
3.7
In his submission to this inquiry, Mr Frank Barbera, a doctoral student
at the Australian Centre for Family Business at Bond University, noted that the
ABS's BLS and BLD both contained the following questions:
1) Do you consider the business to be a family business? Yes/No
2) If yes, why do you
consider this a family business? Family members are:
i) Working directors or proprietors. Yes/No
ii) Employed in the business. Yes/No
iii) Not working, but contribute to decisions. Yes/No
iv) Business acquired from parents. Yes/No
v) Close working relationship between management and staff. Yes/No
vi) Other. Yes/No [6]
3.8
Mr Barbera noted that of the family firms responding to question 2
(above) in the 1994–95 to 1997–98 BLS and the 2004–05 to 2009–10 BLD:
34.91 percent selected i only; 27.45 percent selected both i
and ii; 11.79 percent selected i, ii and v; 4.39 percent selected i and v;
3.18 percent selected i, ii, iv and v; and 3.18 percent selected i, ii and iv.
Based on this, and out of 64 possible permutations, nearly 95 percent of all
family firms at least selected i, which is understandable since we would expect
small to medium sized family firms to have a more operational classification;
however, not excluding these, approximately 37 percent also selected iv and v,
which is associated with the essence based classification of a family firm.[7]
3.9
Mr Barbera also expressed frustration that the options listed under
question 2 are not mutually exclusive, which makes intra-firm differences
across family businesses difficult. He argued that in order to better understand
the economic impact of family ownership in Australia:
...more effort must be directed towards collecting data which
distinguishes the intra-firm differences across family owned firms. In other
words, the current state of family business research necessitates a move towards
viewing family firms as a heterogeneous group. Information specifically related
to the structural, intentions, and family sub-system definitional approaches
will help in this regard.[8]
3.10
Mr Frank Barbera also drew the committee's attention to restrictions
with the availability of the BLD data. Unlike the BLS, he noted that the BLD is
'subject to rigid confidentiality restrictions' with access only via the ABS's
Remote Access Data Laboratory. He argued that the confidentiality of the BLD
data could be retained by removing reference to specific respondents while
releasing the dataset to sanctioned individuals.[9]
Recommendation 6
3.11
The committee recommends that the Australian Bureau of Statistics
inquire into whether the Business Longitudinal Database can be sufficiently
de-identified so as to be made available for research purposes on request.
3.12
Noting the difficulty in accessing data from the BLD, the submission
presented a table showing 'a representative SME sample from the older BLS
data'. It shows that:
...just over half [the firms] are family owned. Further, family
firms employ more than 40 percent of all full-time equivalent employees, own
nearly 30 percent of all assets, and contribute nearly 32 percent towards
total output in all sectors.[10]
3.13
The committee notes that the earliest data on which the table is based
(1994–95) is now nearly 20 years old. Further, the table contains no
information on the representation of family businesses in the agricultural
sector. The committee was informed that the BLS does not include information on
this sector.[11]
MGI Australian Family and Private Business
Survey
3.14
Since the early 1990s, Professor Kosmas Smyrnios of RMIT has completed
seven surveys into family business in Australia. The surveys were conducted in
1994, 1997, 1999, 2000, 2003, 2006 and 2010.[12]
The last three of these surveys, commissioned and sponsored by MGI Australasia,
are called the MGI Australian Family and Private Business Survey. In its
submission to this inquiry, MGI described the surveys as 'the most
comprehensive longitudinal study of family businesses available in Australia'.
[13] It believed
that the data is reliable but the committee notes that the sample size is small
and the definition of 'family business' changed between surveys.
3.15
The key findings of the 2010 MGI Australasia survey are as follows:
- 80 per cent of businesses surveyed had a private company
structure (up from 73 per cent in 2006) while 12 per cent operated a family
trust structure (down from 19 per cent in 2006);
- the proportion of family business owners who 'would seriously
consider' selling their business if approached decreased from 75 per cent in
2006 to 61 per cent in 2010;
- the proportion of family business owners who planned to sell
their business fell from 53 per cent in 2006 to 44 per cent in 2010:
- of the 44 per cent who planned to sell their business,
20 per cent stated they wanted to retire while nine per cent said there
was a lack of a family successor. The percentage of respondents giving these
reasons was quite significantly down from the 2006 survey response;[14]
- in 2006 only 17 per cent of family business owners stated they
did not have an adequately funded retirement program—this increased to 31 per
cent in 2010;
- the average (mean) number of employees in the family businesses
surveyed was 37 in 2010, 39 in 2006 and 31 in 2003;
- the average age of the family business owner is 55 years, which
is very consistent across the three surveys;
- the average age of the family businesses surveyed was 32 years,
compared to 28 years in the 2006 survey;
- only 11 per cent of family business owners are female, up from 10
per cent in 2003 and 4 per cent in 2006;
- in the 2010 survey, 35 per cent of family businesses surveyed
noted that a spouse was involved in the day-to-day running of the business. The
same percentage noted that a son is involved in the day-to-day running of the
business;
- in all three MGI surveys, the majority of family businesses were first
generation businesses (58 per cent in 2010), roughly one-quarter were second
generation businesses (31 per cent in 2010) and a smallest proportion were
third generation business (11 per cent in 2003);
- in the 2010 survey, 47 per cent of family business owners were
tertiary qualified, compared to 52 per cent in 2006; and
- the 2010 survey was perhaps most notable for the results to the
question on respondents concerns for the future. Fifty-four per cent of the
family businesses surveyed indicated their concern with the 'financial
performance of the business', compared to only 31 per cent in the 2006 survey.
Thirty-eight per cent of respondents identified the particular industry in
which they operated as a concern, up from 21 per cent in 2006 and 15 per cent
in 2003. Twenty per cent of family businesses surveyed identified 'funding for
growth' as a concern, compared with only six per cent in the 2006 survey.[15]
3.16
Notably, the 2010 MGI survey does not contain an estimate of the wealth
of family businesses in Australia. The 2003 and 2006 surveys estimated this
wealth at $3.5 trillion and $4.3 trillion respectively. Apart from questions
about the reliability of these figures, they are also now dated. The FBA relied
on the 2006 estimate in a September 2012 Media Release.[16]
3.17
The committee also notes that the definition of 'family business' varies
across the seven MGI surveys. For the 1994 and 1997 surveys, 'family business'
was defined as an enterprise for which:
- more than 50 per cent of the ownership is held by a single family
or more than one family;
- a single family group is effectively controlling the business; or
- a majority of the senior management is from the same family.[17]
3.18
In the 2003 survey, participants could self-identify as a family
business, while in the 2006 survey, the definition was not provided in the
survey report. In 2010, 'family business' was defined as an enterprise
involving two or more related individuals working together, or otherwise
associated, in a commercial enterprise that is controlled by one or more of
those individuals (see chapter 2).[18]
3.19
Clearly, the changing definition of 'family business' limits the utility
and accuracy of the longitudinal data. There is also the small number of
businesses surveyed. As the FBA noted of both its surveys and the MGI surveys,
'the reliability of the data in each case is limited by their relatively small
sample size'.[19]
In the 2010 MGI survey, only 5000 Australian family businesses were surveyed
from a sample:
...based on location by state, industry, number of employees,
and sales turnover [from]...selected companies in the proportions found in the
Australian population of employing small-to-medium enterprises (SMEs).[20]
3.20
With the relatively small sample size as a caveat, the surveys do
contain some notable findings. Most obvious is the respondents' concern about
the financial performance of their business and the adequacy of their
retirement program. These concerns are not surprising given the impact of the
Global Financial Crisis (GFC). The GFC occurred between the 2006 and 2010
surveys. As the report stated:
The survey reveals a less confident family business sector
post-GFC than pre-GFC – with family business owners more reliant on the
continuity of their business to fund their retirement and more concerned over the
future of their business.[21]
3.21
The capacity of family businesses to save adequately for retirement is
an issue of some concern for the committee. Although it has received little by
way of concrete evidence on retirement plans and superannuation savings, the
committee suspects there is significant under-investment in this area with many
family businesses opting instead to hold equity in assets rather than through
superannuation funds. The committee notes that government policy settings can
encourage family businesses to shift equity into superannuation funds.
3.22
Another point of interest in the 2010 MGI survey is that the average
number of employees is 37. In light of the discussion in chapter 2 of this
report, the figure seems high. If most family businesses are small business,
and small businesses employ under 20 employees, one would have expected the
average to be less than 20 employees. However, MGI used the mean rather than
the median to calculate this figure. The committee suggests that the mean is
not an appropriate measure of central tendency. If data on the number of
employees is collected, the ABS should consider a modal class to assess the
midpoint.[22]
The Family Business Australia
surveys
3.23
The FBA noted in its submission to this inquiry that it has commissioned
six annual surveys of the family business sector. The surveys were sponsored by
KPMG. The 2005, 2006, 2007 and 2008 surveys were undertaken by Deakin
University.[23]
The Australian Centre for Family Business conducted a further FBA survey in
2009.[24]
In 2011, the FBA and KPMG conducted and released the findings of a survey
described as a 'biennial survey'.[25]
3.24
In its submission to this inquiry, MGI Australasia noted that the FBA
surveys have extracted data 'from a limited sample size and therefore could be
considered as not significantly reliable'.[26]
3.25
Intriguingly, the FBA's submission contained only one reference to any
of these published surveys' findings. Perhaps this was intended so as not to
cloud the FBA's central message that official, reliable data needs to be
collected.[27]
It certainly is striking that having commissioned no fewer than six surveys in
a six year period, the FBA should be essentially silent on the findings.
Instead, the submission made several references to the findings of the 2006 MGI
survey.
The 2011 FBA survey
3.26
There are some findings of note in the most recent FBA–KPMG survey in
2011. The survey's focus was on 'internal dynamics of a representative cross
section of Australian family businesses'. 658 businesses were surveyed.[28]
Some of the key findings were:
- more than 60 per cent of respondents identified retaining control
of the family business as an issue of high or very high importance;
- nearly 60 per cent of respondents identified preparing and
training a successor before succession takes place as an issue of high or very
high importance;
- 51 per cent of respondents identified that selling the business
to an independent third party was a possible exit strategy in the next 12 months,
compared with only 13 per cent who identified passing the business on to the
next generation;
- 42 per cent of respondents identified that selling the business
to an independent third party was a possible exit strategy in the next three
years, compared with 17 per cent who identified passing the business on to the
next generation;
- 34 per cent of respondents identified that selling the business
to an independent third party was a possible exit strategy in the next five
years, compared with 24 per cent who identified passing the business on to the
next generation;
- 48 per cent of respondents identified experience outside the
business as a 'very important' attribute of a potential successor; 34 per cent
of respondents identified the attainment of formal business qualifications as a
'very important' attribute of a successor;
- 57 per cent of respondents identified distributing ownership
among family members as a low or very low issue of importance;
- 54 per cent of respondents identified establishing a family
constitution or code of conduct as a low or very low priority;
- 20 per cent of respondents identified the future strategy of the
business as the most common cause of conflict in the family business; only 10.5
per cent of respondents identified succession as the most common cause of
conflict;
- 32 per cent of respondents had no formal mechanisms to resolve
family conflict; and
- 61 per cent of respondents said the family members in the
business were paid the same as non-family members; 25 per cent noted that
family members were paid more than non-family members; while 14 per cent
indicated that family members were paid less than non-family members.
61 per cent of family businesses to
transition between 2006 and 2016
3.27
The FBA submission's single reference to a finding from a survey that it
had commissioned was to the 2006 survey undertaken by Deakin University.
Specifically, the survey found that:[29]
More than half the survey respondents (61%) noted that they
plan to retire in less than ten years. This is not surprising given that around
half (58%) are aged over fifty years. However, with the majority of family
businesses having no formal succession plan (78%) and not yet chosen a
successor (62%), these family businesses would appear to be at high risk. The
question of succession appears ambiguous given that the same number of
respondents indicate that their exit plan is to either pass the business to the
next generation or sell it (60%). With around a quarter (26%) of family
businesses indicating that they have a succession plan for the CEO and other
senior positions held by family members (23%), longevity of these family
businesses appears doubtful.[30]
3.28
This finding was a key reference point for the committee throughout this
inquiry. The committee sought comment from various stakeholders as to whether
they believed the figure was accurate and if so, what trends it could explain. In
particular, the committee asked whether the figure reflected the imminent
retirement of baby boomers who own family businesses.[31]
3.29
The committee notes that the 2008 KPMG survey found that 34 per cent of family
business CEOs are likely to step down within five years, and 27 per cent between
five and ten years. KPMG noted that this finding is 'consistent with the fact
that forty-three percent have been in the role for more than twenty years'.[32]
KPMG also drew attention to the age of respondents: 32 per cent were aged
between 46 and 55; and, 31 per cent aged between 56 and 65.[33]
3.30
Reflecting on its finding, KPMG told the committee that while the 2006
figure of 61 per cent of respondents planning to retire within ten years had 'shrunk
a little post GFC', the figure partly reflects the fact that the next
generation does not want to take over the business. As Mr Des Caulfield told
the committee:
...there is a change of the attitudes in the community or
perhaps in the younger generations. Once it was almost assumed that if mum and
dad had a business, the children would take over. That has certainly changed due
to a number of things including the fact that business has changed so much now.
The traditional business, the local supermarket or whatever, was never much
different. All of a sudden there are all these other things out there now so
people are finding that the next generation does not necessarily want to take
on mum and dad's business. That is the main reason I think there are more
people wanting to get out.[34]
3.31
KPMG also recognised that demographic factors are at play:
The situation is there is a whole heap of people in that age
category, between late 50s and late 60s, who are now finding that their
children do not necessarily want to succeed them in the business. They probably
should have known longer ago than now that that was going to happen but also probably
did not accept it because they thought, 'I have had the business and my kids
are going to take it on.' There is a bulge there of businesses that will have
to close or go on market if they cannot find a successor. That is going to have
an impact on the value of those businesses because the more businesses that are
available, the lower the price is likely to be. I do not know if there is
anything we can do about it but it is reality.[35]
3.32
The committee asked both the Reserve Bank of Australia and Treasury if they
could comment on the figure of 61 per cent of family businesses facing
transition between 2006 and 2016. Treasury recognised that the figure could
reflect the play of market forces, rather than a demographic trigger:
...many businesses will simply hit a point whereby they enter
into negotiations for sale. They will sell the business as an ongoing concern
to someone else. The point from a productivity perspective is that this may
result in a possible loss of corporate knowledge. That is going to be heavily
dependent on the transition between the new buyers and the existing sellers.
From an economy-wide perspective, if you make the assumption that these
businesses are viable, then, arguably, they should be being sold and you should
have a smooth transition.[36]
3.33
Treasury did point out that an accurate picture of the number of
Australian family businesses facing transition requires official longitudinal
data. It told the committee:
It goes back to the broader data question: the advantage of
an ABS time series or some RBA data is that you can look at it through time. In
the family business context a succession plan would normally revolve around a
family member taking over the running of that business. I do not know whether
or not it would be normal that within the next 10 years most family businesses
do not have a formal succession plan with respect to a particular family
member. I do not think there would be any data on it on a time series basis.[37]
3.34
In its submission, KPMG also noted that an estimated $3.5 trillion in
wealth held by family businesses is likely to be transferred over the next 10
years. Professor Ken Moores queried the reliability of both the 61 per
cent and the $3.5 trillion estimates. He agreed that it is not possible to
know whether the figures are accurate or not, adding:
I am nervous about all of these numbers because I think the
only really reliable statistics are those that come from the ABS...My centre,
KPMG and FBA have produced these [surveys] and had 600 respondents and things
like that, and we have interpolated from there, but I am always a little wary
as to making big, bold statements. Certainly, with 61 per cent, where is the error
in those sorts of things?[38]
Committee view
3.35
The committee shares Professor Moores's doubts about the reliability of
the 2006 KPMG survey's finding on the transition of Australian family
businesses. It may be that when interviewed in the 2006 and 2008 KPMG surveys,
roughly two in three family business respondents planned to retire (or step
down) within the decade. However, the sample sizes in these surveys were
relatively small and there is ambiguity around whether the respondent wanted or
needed to sell the business, or whether they wanted to pass it on. The
committee agrees with Professor Moores that only ABS data can provide the
requisite breadth and depth of data. It is concerned that Treasury does not
have any data on the succession plans of Australian family businesses over the
next decade. These issues of succession intentions are raised in chapter 5 of
this report.
BDO Australia's Wealth Transfer
Survey
3.36
The Australian Centre for Family Business told the committee that it is
currently working with the accounting firm BDO Australia on what it called a 'wealth
transfer survey'. Mr Barbera explained that the survey relates to the transfer
of ownership (rather than management) and will include issues such as:
How is it going to be done? What are the tax implications?
What are the intentions of the owners: for example, are they needing this money
to retire, are they interested in maintaining the wealth of the family as a
whole or are they interested in selling and distributing that money amongst the
family and then have some sort of investment vehicle that continues to generate
wealth? There are all these sorts of questions as far as the modes of wealth
transfer, what are the motivations behind wealth transfer and when do they
expect to do this transfer of wealth? That is what we looking at right now.[39]
3.37
There were 320 respondents to the survey. BDO Australia has published
some preliminary findings from the survey. These include:
- 93 per cent intend to transfer business wealth within the family—seven
per cent outside the family; and
- 39 per cent have a complete succession plan that nominates a CEO
successor.[40]
3.38
At the time of writing, the final report on the wealth transfer survey
had not been made publicly available. The committee understands that the final
report is expected to be released in March 2013. It believes the findings will
be useful to stimulate discussion about the possible public policy objectives
on succession-related matters.
Recommendation 7
3.39
The committee recommends that as part of its deliberations, the Inter-Departmental
Committee (see recommendation 1) should examine the findings on the wealth
transfer survey conducted in 2012 by the accounting firm BDO Australia.
The PricewaterhouseCoopers private
clients family business survey
3.40
In its submission to this inquiry, PricewaterhouseCoopers (PwC) gave a
summary of its findings from an international survey of family businesses
conducted in July and August 2012.[41]
Fewer than 2000 businesses were surveyed of which only 50 were Australian.
3.41
PwC claimed that the results of the survey 'can be recommended as a
timely and accurate snapshot of family businesses in Australia'. The survey
found that:
- almost 40 per cent of Australian respondents intend to pass on management
to the next generation. The remaining businesses are 'twice as likely to sell
or float than to pass down but employ non-family management';[42]
- 58 per cent of Australian respondents indicated that they have
non-family members on the board, while 28 per cent of Australian respondents
indicated that they have non-family staff who have shares in the company;[43]
- in terms of the perceived challenges faced by the business in the
next five years, only 30 per cent of Australian respondents identified company
succession planning as a challenge;[44]
- 56 per cent of Australian respondents agreed that 'government
should make it easier for family businesses to access finance';[45]
- Australian respondents ranked 19th out of 28 countries
in terms of the perception of government in recognising the importance of
family business;
- 82 per cent of Australian respondents agreed with the statement
that family businesses 'do all you can to retain staff, even in the bad times';
- 78 per cent of Australian respondents agreed with the statement
that family businesses have a 'sense of responsibility to support employment in
areas where you operate';
- 68 per cent of Australian respondents agreed with the statement
that 'the culture/values tend to be stronger than in other types of
businesses';
- 62 per cent of Australian respondents agreed with the statement that
there is a 'sense of responsibility to support community initiatives in your
area';[46]
and
- roughly equal proportions of Australian respondents agreed as
disagreed with the statements that family businesses:
- 'take a longer-term approach to decision-making' (34 and 40 per
cent);
- 'take more risks' (32 and 38 per cent); and
- 'are less open to new thinking and ideas' (36 and 36 per cent).[47]
3.42
The committee draws attention to the very small sample size of the PwC
survey. It is very difficult from this sample to postulate about the views of
'Australian family businesses'. Indeed, if the survey is of any utility, it is
really only as a guide to the type of issues that might interest policy makers
should they decide there is a need for official data (see chapter 2).
Submitters' and witnesses' views on the availability and reliability of
data
3.43
During the committee's public hearings, several witnesses commented on
the lack of reliable data that is currently available on family businesses in
Australia. Some witnesses made these comments principally to caution that the
survey findings should not be endorsed. Others referred to existing data as at
least a good estimate. They argued that the data, while not strictly reliable, provide
enough evidence of the significance of the family business sector to warrant
the collection of official statistics.
3.44
The lack of official data was clearly frustrating for several witnesses.
MGI Australasia told the committee:
...we have become more and more aware that there is very little
reliable statistical data available that can act as a foundation for ensuring
that this sector of our economy is properly serviced and gets what it needs.[48]
3.45
Mr Yasser El-Ansary of the Institute of Chartered Accountants, put
a similar view:
...there is no broad based research platform or statistics on
which the government can rely at the moment. There is some very comprehensive
private-sector research that has been undertaken...but from an Australian Bureau
of Statistics point of view we certainly agree that there is not sufficient
information collected about the size or composition of the sector in Australia
at this point. That is something we think is worthy of further consideration
and, if appropriate, we would certainly support designing a framework to
improve the quality, breadth and depth of information that could be collected
about family businesses and the contribution they make to the broader economy.[49]
3.46
MGI Australasia also drew the committee's attention to the cost of the
surveys it has conducted, their infrequency, how quickly the findings date and
the small sample size that was used. Mr Des Caulfield explained:
I guess the way that we look at it is that it is an expensive
exercise for us to undertake. Whilst we are a medium-sized accounting group, we
are certainly not up there with the big boys. We therefore conduct a survey in
detail only once every three years. The world is growing at a fairly fast rate
these days...and it becomes obvious that the data can get out of date fairly
quickly. We do not believe that we are in a position to fund to any greater
extent than what we do, and we are very grateful to RMIT for providing their
people to undertake the stuff for us. But the situation is that we are only
doing this once every three years, which I believe is not often enough. Our
view would be that it would be good if there could be a mechanism in place
where people could be encouraged to do regular, properly research study into
family business in a more significant manner than what is done at the moment.
In our last survey we asked 5,000 people to respond and we had responses from
about 1,000, give or take.[50]
3.47
The committee asked PwC if it was confident with the accuracy of the figure
that 70 per cent of Australian businesses are family businesses. Mr Paul
Brassil, a partner with the firm, was frank in his response:
No, certainly not. It is a bandied-around number at the
moment, which seems to have a fair bit of traction. One of the questions goes
to: what is the reliability of information about family business? There are all
sorts of ways of slicing and dicing it, none of which are accepted as gospel
truths, but there is a consistency about it, I suppose. That is what I am
getting a sense of...Is it more than half? Yes, I would have thought so. Is it
60, 65 or 70 per cent? I do not know.[51]
3.48
The committee probed for the reasons why official data on family
businesses is necessary. Mr Michael Claydon, the Managing Director of a
Perth-based corporate training business, emphasised the importance of accurate
and more complete information to assist government in its decision-making. He
explained:
The one thing I know is that we deal with government a fair
bit in terms of funding and other things, but the government does not make
decisions based on having no information. The more information you have, the
better the decisions that you can make. I can confirm that most businesses who
start out as individual operators would still consider themselves family
businesses. You look at the impact on family: what happens when you go home?
You talk about your family business constantly, because you are trying to grow
it in the initial stages. Then as its gets bigger you actually just incorporate
more members of the family, but you still talk about it a lot inside the
business. But from a government perspective, you cannot make decisions based on
having no information. At the moment, the definition is up in the air; the
number of businesses is up at in the air. But I would surmise that there would
be a complete surprise about how many people actually consider themselves to be
part of a family business. It would be a very high percentage.[52]
3.49
Mr Stephen Sampson, Director of the Lionel Sampson Sadlier Group, put
the case for better data collection on family businesses in terms of
understanding a significant sector of the Australian economy. As he told the
committee:
Because of the sector employing half the population of
Australia, there is a growing need to make sure that you get good information
about something so significant. I actually spoke at a conference overseas in
June. It was run by IFERA, which is the International Family Enterprise
Research Academy. They are all about getting information and working with
academics to find out what makes this part of the market sector tick. It is
critical that you get good information. Without information, you just cannot
make any judgements or any determinations. For something that covers such a
broad sway of the Australian economy, it is amazing that we do not have good
information.[53]
3.50
Mr David Smorgon of Generation Investments also put the case for
collecting official data in terms of quantifying assumptions about the
contribution of the family business sector:
...we are reliably told that today, family businesses make a
major contribution to our society, although we do not have the data to put a
figure to that. We are also told today that 70 per cent of all Australian
businesses are family businesses—not 83 per cent as it was in 1994—and they
employ 50 per cent of Australia's workforce. That is outdated data. I think
those reports were done in 2006 and 2009. But, if you think about it, it is
staggering that family businesses would employ 50 per cent of all Australian
workers. We still do not have the facts. As a former editor of the Manchester
Guardian once said: 'Comments and views are free but facts are much more
expensive to obtain.' I think it is about time that the money was spent on
getting the data, because we have to know. We need clear and comprehensive
data, and then strategies and policies can be established where the
contribution by family businesses to our society can be further enhanced.[54]
3.51
The Chamber of Commerce and Industry Queensland expressed interest in
identifying the competitive advantages enjoyed by small and medium sized family
businesses over SMEs generally. Mr Nick Behrens put the Chamber's view as
follows:
...being a small or medium sized family owned business presents
opportunities that are unique to family businesses. For example, being a family
business often has a competitive advantage attributable to family values
influencing business values and by being able to offer a boutique product or service
that differentiates them from other market players. However, what is also clear
is that there is insufficient research to inform the current discussion about
the importance and significance of family businesses in Australia and their
contribution to the economic and social fabric of Queensland and Australia. The
current lack of qualitative and quantitative data needs to be progressively
improved upon.[55]
3.52
Mrs Genevieve Power, Managing Director of the Canberra-based family
business Iken Commercial Interiors, suggested particular areas that needed
official data to test the anecdotal evidence about family business. As she told
the committee:
If the statistics could differentiate or arrange questions
that would allow us all to determine small, medium and large and the sector
into which they fit. Are they a public corporation? Are they a private
corporation? Are they a family business? Or do they consider themselves a
family business? That would then allow some long-term look at the anecdotal
evidence that we all talk about—60 per cent of Australia is run by family
businesses...I think that one of the ways the government could definitely help is
by annual—or biannual [surveys]; whatever it is—statistical collection or by
doing some core sampling of businesses.[56]
3.53
The committee notes that some government departments have seen merit in
collecting better data. This is of particular importance given the
recommendations in chapter 2 of this report. The Department of Regional
Australia, Local Government, Arts and Sport told the committee:
One of the constraints on the conversation about family
business in regional Australia, as we look at it, is that there are no readily
available ABS statistics on family business in regional Australia, which makes
it difficult for us to speak authoritatively about the regional versus
non-regional aspects of it; there is not that solid data set.[57]
3.54
The lack of reliable data at present was apparent from several
submitters' reliance on SME data to indicate the dimensions of Australian
family businesses. In reference to its submission, the RBA told the committee:
We would not profess to have any specialised knowledge on
family businesses. In fact, to a large degree that is actually why we have
focused on small and medium-sized enterprises: it is about availability of
statistics.[58]
3.55
Deloitte Private's submission refers to a CPA survey of small business.[59]
It also notes that the ABS and the Australian Taxation Office (ATO) have data
on household income, household expenditure, employment and business counts
which is 'somewhat aligned to family business'. Deloitte Private recognised
there is little data available on the extent to which family businesses contribute
to Australia's GDP, employment and other economic indicators.[60]
Mr David Hill, Managing Director of Deloitte Private, told the committee that
the need for data collection on family businesses in Australia reflects the
diversity of these businesses. He argued that government has a role to make the
voice of these businesses heard by collecting reliable data on the sector. In
terms of what data should be collected, Mr Hill told the committee:
Information on the definition, the number, the employees,
issues such as growth—are they experiencing growth?—and the contribution to the
broader GDP of the country is very important. We have highlighted a number of
issues that I believe would be really interesting to know. For example, how
many of them operate across state boundaries? How many of them have expanded
internationally? For family businesses those two things are quite considerable
constraints. I would love to know about things like their investment in R&D
and their focus upon innovation. I think it is a very long list; it is a wish
list. At the moment we are starting with a very minimal base. I think the other
very good idea would be to go out and consult with people like David [Smorgon] and
other leading family businesses to say, 'What would you like to be able to
say?' and drive it from the market back.[61]
Farm sector data
3.56
While there is no official data on family businesses, there is data on
family ownership in the farm sector. The Australian Bureau of Agricultural and Resource
Economics and Sciences (ABARES) told the committee that its farm dataset is collected
through face-to-face interviews with farmers, which enables the Bureau to
construct 'a comprehensive picture of the economic performance of farm
businesses'. It elaborated:
ABARES's farm surveys collect some information on the
ownership of farm assets and the distribution of farm profits of farm
businesses. On the basis of this information, more than 95 per cent of
Australian broadacre and dairy farms are estimated to be family operated, and
at least partly family owned. Broadacre and dairy farms account for about 68
per cent of Australian farm businesses, and surveys conducted in recent years
of vegetable industry farms and irrigated farms in the Murray-Darling Basin
indicate a similar proportion of family farms in these sectors. Major
challenges faced by family farms are similar to those faced by all farms in
Australia, including the long-term decline in farmers' terms of trade; the
important role of productivity growth to maintain cost competitiveness; the
relatively high volatility in yields and prices on agricultural markets; and
the economic impact of the resource boom.[62]
3.57
The committee asked ABARES how it distinguishes between family farms and
non-family farms. ABARES responded that this distinction is not made given that
more than 95 per cent of all farms are likely to be family farms. However, it
added:
There are issues around how we classify farms in the sense of
what is family owned versus operated. I think our definition is probably closer
to a family operated farm as opposed to family owned. You might very well have,
for example, a farm which might be leased by a family. They are operating the
business, but they are leasing the land. We might still regard that as a family
farm, even though the land might be owned by someone else.[63]
...If we were pressed we could do a segregation of family farm
specific information, but, as I indicated, I do not think it would vary that
much from the overall farm numbers in any case. For farming we already have a
very good set of information and data on farm family businesses.[64]
3.58
ABARES told the committee that the quality of the information it
collects on farm statistics—of which family farm data is the substantive
component—is based on the quality of its collection processes. It explained
that:
For ABARES to have credibility in terms of the work we do—the
analysis and research that we do—we need to have a relationship with the
businesses that we are working with, and we do that in a number of ways. One is
the direct relationship that we have through collecting information from
individual farmers but we also do things like our regional outlook conferences,
where we have a regional conference in each of the states and the Northern
Territory each year. This is where we actually get out and talk directly to
people who attend those conferences. Often we get a mix of local and rural
businesses and farmers and so forth. We invite our survey participants along to
those conferences for free. I think part of our social licence, our
credibility, if you like, is about making sure that we have those connections
with the people that we are doing analysis for and that we are providing
analysis to the government on.
...I would just add that the surveys are voluntary. We invite
farmers to participate in our surveys, and so I guess we do need to demonstrate
value back to them for being willing to allow us to visit their properties and
spend several hours collecting that information. Part of that is being able to
hand back something that might help them in their business planning.[65]
3.59
ABARES explained that its current survey covers 1,600 broadacre farms
and 300 dairy farms. It noted that this is 'probably about the right number' to
provide a statistically valid sample. ABARES told the committee that the larger
the sample size, the more regional level information it can provide. The current
sample of 1,600 farms allows for some state regional numbers as well as state-based
information.[66]
3.60
The committee was informed that the ANZ Bank and the University of
Adelaide Business School are currently conducting a joint three-year study into
the issues impacting the future of Australia's family-run farms. This project
is focussing on succession planning for family farms, the development of
options to ensure their sustainability and farmers' access to credit and
appropriate financial management practices (see chapter 9). The project's
researcher, Mr Andrew Harrison has observed:
Currently there are limited statistics on issues surrounding
the sustainability of Australian family farms. ABARE [sic] does collect
statistics on Australian farms through its annual survey but it focuses mainly
on financial performance. There is a lack of data on other important issues
such as succession planning. Given the fact that the farming industry is
unprepared for succession and transition, more research needs to be conducted
in this area.[67]
3.61
The committee notes that this work is in its early stages and it looks
forward to the research findings.
Data on trusts
3.62
Chapter 6 of this report details with the use of trust structures by
family businesses. The 2010 MGI survey found that 12 per cent of respondents
surveyed operated a family trust structure. This was down from previous MGI
surveys (19 per cent in 2006 and 15 per cent in 2003).[68]
3.63
The committee asked the ATO if it had any data on the number of family
trusts currently operating in Australia. It responded:
We have some data. We do not actually have data in relation
to family trusts. There is no such definition as such in terms of the data we
use. But we have data in relation to discretionary trusts, and, by and large,
because of the nature of discretionary trusts, they are quite likely to be
owned by families, albeit they could be quite extensive families.[69]
3.64
The committee then asked the ATO if it could indicate the number of
discretionary trusts as a proportion of all trusts. It gave the following
response:
...we have data in terms of discretionary trusts where the main
source is from trading and therefore you might think of it as being a family
business trust. We have about 225,000 operating, from figures in 2009–10. We
have a total figure of trusts in the system of 700,000.[70]
Data on culturally and
linguistically diverse communities
3.65
The committee also asked the ABS whether it had data on family
businesses formed by new migrants and within culturally and linguistically
diverse (CALD) communities. The ABS responded:
Not directly. In the past collections focusing on immigrants
per se have often been followed more by the Department of Immigration and
Citizenship. That said, there is potential work on our future work program
which may open opportunities. We have recently negotiated access to personal
income tax information and are investigating opportunities to match that with
the immigration data base so that would give potential opportunities to follow
that up. That in turn could then be linked with business information where we
find what businesses employ which individuals through the old equivalent of
group certificates and the like. There are future analytical possibilities on
the horizon but they would need to be investigated.
...The ABS Census provides information on the year they arrive
in Australia, their employment, their education and the like. These details are
collected in a detailed census to a small granular level. That can be supported
with other information such as that which can be matched to immigration
statistics and the like on immigration in each year.[71]
3.66
The committee believes that the establishment rates and contribution of
family businesses from CALD communities could be an area of particular interest
for government agencies. It recommended in chapter 2 that the proposed IDC
consider the need to identify the number and type of family businesses
established from CALD communities.
3.67
The committee also draws attention to the dearth of academic research
into issues affecting family businesses in CALD communities in Australia. It
believes that official data collection will spur academic interest on a range
of issues relating to these businesses. This includes the owners' level of
education and that of their children, the location and sector in which these
businesses operate, and their capacity to access professional services such as
financial advice and accounting services.
Committee view
3.68
This chapter has presented the findings of several surveys into various
dimensions of family businesses in Australia. Although the nature of the
research is important and the findings are interesting, the usefulness and
reliability of the data is questionable. In terms of the consultancies'
surveys, the sample sizes are small and the research lacks independence. Any
comparison between the surveys—even those conducted by the same consultancy—is
difficult given that different definitions of family business are used and
their questions and methodology vary over time. While there is some ABS data,
the most recent data is confidential while the BLS data is now at least 15
years old.
3.69
Nonetheless, this chapter has drawn attention to the type of issues that
may be worth exploring should the IDC decide that official data on family
businesses is needed. Most obviously, there is the number of Australian
businesses that are family businesses. Of course, this will depend on the
definition of family business: whether it is based solely on governance
structures or whether it also includes an intention and/or a plan to pass the
business on. The committee does emphasise that the IDC should consider the
types of issues and concerns related to inter-generational transfer of wealth,
and the benefit to policy makers of clear data on these issues.
Navigation: Previous Page | Contents | Next Page
Top
|