21.04.2022
ENTREPRENEURSHIP: HOW DO FAMILY COMPANIES SUCCEED IN BULGARIA?
The long-term perspective of management is the key factor for the success of family companies in Bulgaria according to ¾ from the owners of family businesses in our country. The entrepreneurship and adaptability of the founders, as well as the long-term focus on the high quality of the products are the next most important criteria that determine the success of family companies. 100% of the participants share the statement that it is prestigious to be part of a family business.
This is shown by the data from a survey of EY Bulgaria among family business owners, conducted recently in Bulgaria. It includes first and second generation family business owners from various industries. Between 3 and 5 people from each family are involved in each of the businesses.
In Bulgaria, most family companies were established in the 1990s. They are already actively managed by second-generation owners, whose age is close to that of businesses. According to the data of the National Statistical Institute, by the end of 2020 the companies in Bulgaria that self-identify as a family business represent about 25% of all active enterprises in the country.
"At EY, we are working on various programs to support family companies in their quest to develop sustainably and long-term in both the Bulgarian and international markets. We already have many successful examples of family businesses that have gone through various crises and become market leaders. We have selected some of these inspiring stories in the third edition of the Book of Family Business in Bulgaria, because we believe that family business can be the backbone of the Bulgarian economy in the long run," said Diana Nikolaeva, partner and head of „Strategy and Deals“ In EY Bulgaria.
"Based on our experience, I can say that no matter what business opportunities they have and whatever business proposals they receive, family companies always strive to keep the core business and property within the family." According to her, this gives the Bulgarian economy a core of sustainable businesses, which in most cases always remain Bulgarian property with well-established relationships with local communities.
83% of respondents in the survey deny the likelihood that the family will sell the main operating company, but at the same time 2/3 of them say that in the future they would look for a partner to further develop their business. Only 17% believe that there is a high probability that the family will make the main company public to the next generation of owners.
EY experts' observations show that family-owned companies often retain company management within the family. Interestingly, however, most of them lack a clear "family constitution" to show how business will be run over time. 75% of businesses admit that family members and the next generation are not fully prepared for continuity, but initial talks are already underway in the family. The remaining 25% believe that they are prepared to some extent, relying on the assistance of external advisers.
Undoubtedly, the most important skill and quality for involving the younger generation in the family business is leadership. It was mentioned by every 9 out of 10 participants in the study. Preservation of family values is highlighted by 82%, and development strategy, management skills and entrepreneurship are ranked immediately after in the rankings.
The growth of business in Bulgaria and the increasingly active presence in international markets go hand in hand in the business goals of family companies in our country. 73% of the participants in the survey say that they already operate outside the country.
Despite the challenging economic environment, the family companies are optimistic about the development of their business and expect in the next 12 months growth in their revenues and the number of employees. In the short term, they plan to invest in research and development of new products and services, production capacity and human capital.
To improve the efficiency of companies in recent years, owners have introduced improvements in management processes, including digitalization. The other main investment was focused on policies to retain employees and start working with more external consultants.
The biggest challenge for business development and a catalyst for significant changes in the first place is the shortage of qualified staff (91%) and rising costs of wages and raw materials - 73%.
The COVID-19 pandemic has affected family businesses to varying degrees, depending on the field in which they operate. However, the measures taken by them to deal with the situation are similar, shared by 2/3 of the companies - adapting financial plans and increasing the focus on the culture of solidarity and empathy in the organization.
