Firms grow but acknowledge challenges.

• Author: Marshall, Jeffrey
• Position: FAMILY BUSINESSES

Almost two-thirds of the family owned businesses surveyed for PricewaterhouseCoopers' Family Business Survey 2007/08 experienced a growth in demand in the past 12 months, with nearly the same number expecting the value of orders or contracts to increase over the next year.

That's the good news. Elsewhere, challenges abound. While nearly 75 percent of family businesses have developed a strategic business plan, approximately 44 percent of all respondents have not created a formal succession plan for key senior roles, and almost four out of five companies have no procedures in place for dealing with disputes between family members.

While a majority of surveyed companies believe the main external challenges over the next 12 months will be market conditions (56 percent), competitive pressure (34 percent) and government policy (24 percent), they recognize that significant challenges arise internally as well. Leading their list are labor shortages (49 percent), cash flow management (25 percent) and the need for corporate restructuring to adapt to a fast-changing business environment (24 percent).

A labor shortfall is particularly acute in the U.S., where an entire generation is preparing to retire and the pool of younger replacement workers is smaller. "Employers must begin planning now on how to replace key personnel who will be retiring over the next three to five years," says Alfred Peguero, U.S. leader of the Family Office Services group of PwC's Private Company Services practice.

"Family businesses, in particular, need to carefully...