Do Australian family businesses have an offshore complex?

When it comes to expanding offshore, family firms seem to have cold feet. In fact, Australian family businesses have one of the lowest international footprints in the world.

Australians are well known for their adventurous spirit and their love of travelling. Go to any far-flung point on the globe and it’s almost a given that you’ll find an Australian there.

In fact, last year alone, more than 8 million Australian residents travelled offshore -- almost a third of our total population.

But, it seems that when it comes to business expansion, most Australian family businesses have a fear of flying offshore. Rather than seeking out growth opportunities in other countries, trends suggest our family businesses are happy to stay at home.

Peter Englisch, the German-based Global Leader of EY's Family Business Centre of Excellence, says new research by the firm shows Australian family businesses have the lowest global footprint ratio of the world's developed countries.

On average, our family businesses operate in 2.3 other countries, according to Mr Englisch. But, compare that with the likes of German family businesses, which on average operate in 39.4 countries, Chinese family businesses, which on average operate in 19.8, and South Korean family businesses, which have an average global footprint of 15.6 countries.

“Globalisation is key,” Mr Englisch says. “The ability to expand your unique selling proposition, your business model, fast across industries, and across countries, becomes an important success factor for family businesses around the world.

“It seems to me that Australian companies are very much happy to be domestic, and that will be a challenge in the future.

“There’s no hunger, no ambition to grow very fast internationally … it’s very limited. There’s just a very strong domestic focus and they’re not clear on how to do it [expand overseas].”

He adds that Australia has a lot of immigrants bringing in new business models, including Chinese entrepreneurs, and existing Australian businesses will be challenged by their new ideas.

Another of Mr Englisch’s observations is that the family office concept is quite strong in Australia.

“There is a lot of ‘old money” looking at how to perpetuate wealth, rather than staying entrepreneurial.”

EY research also shows that there were just three countries in the world where family businesses decreased the number of employees over the last three years: Australia, Canada and Spain. The average number of people employed in family businesses dropped in Australia by 8 per cent.

By comparison, South Korean family businesses grew their number of jobs by 20 per cent.

“There is strong family business growth in Asia, where businesses are challenging across all industries,” Mr Englisch says. “In the US, jobs creation is mainly driven by domestic growth rather than international growth, but European countries are looking to export across the European Union and into emerging markets.”

Mr Englisch says that like corporates, family businesses are now much keener to run their organisations as long-term sustainable enterprises.

“The concept of family business has had a renaissance, as they adhere to the same values of not being short-term profit oriented but long-term legacy oriented, and that makes a huge difference.”

He says the number one common issue for family businesses all over is about how to maintain the entrepreneurial spirit and the success of the business over the long term.

“Managing this challenge becomes more of an issue for the traditional family businesses; not making short-term money and spending it, but creating a legacy and making the company successful over the long term.”

Yet succession remains a key problem. “The challenge of succession in family business is to manage the expectations of all the different stakeholders involved,” he says.

“Over the last decade the next generation has become more conscious about their own expectations for their own futures. Twenty years ago there was no doubt they would do their duty. Today it is different; today the young people in generation Y and other generations want to realise their own dreams and their own ambitions for their lives.

“They are looking for more work-life balance and the fair distribution of their share from the family business, not just from a wealth perspective but also from just being accepted and recognised for what they are doing.

“The question is how to manage these challenges and whether there are different ways to handle the challenges.”

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