Europe’s small family businesses could be at risk of falling behind competitors as the economy becomes more digital, new research from Mastercard has found.
SMEs as a collective account for 99% of all European enterprises. The majority are family-run, according to the European Parliament, particularly micro businesses with less than 10 employees.
Despite their huge presence, just 37% of family-run SMEs feel very prepared to operate in a digital economy according to the study.
Mastercard is a key enabler in the digitalisation of Europe’s SMEs, serving four out five small businesses or approximately 18 million small enterprises. It carried out the research in 15 countries to understand how small businesses are responding to Europe’s increasingly digital economy and society. The study polled 10,500 respondents from both family- and non-family-run SMEs, demonstrating that new strategies are needed to better help smaller family firms.
Barriers to digital adoption
Family businesses have rapidly adapted to the digital-first world ushered in by the pandemic, with nearly half (47%) increasing their use of digital payments. However, the research reveals that family firms are still uncertain about which digital resources and technology would work best for them.
More than two-fifths (41%) said they wanted new digital tools to modernise their businesses, but a significant number (28%) were unsure of which solution would best support them.
Other factors holding them back were concerns around privacy and security, which was less of a concern for non-family-run firms suggesting they may have better guardrails in place and therefore feel more reassured.
Surprisingly, close to a third (30%) of family businesses said relying on an internet connection was a barrier preventing new digital solutions that could support their commercial activities.
The role of family dynamics
Being family-run presents distinct challenges for running a business that may also make modernising more complicated. One issue uncovered was resistance to change, with some employees thinking their family firm had a closed mindset to adapting with the times and trying new things (27%), with older generations seen as less likely to want to do so.
Navigating relations between family members is also a unique factor at family businesses, with a fifth saying that personal relations with their relatives was the biggest hurdle to overcome at work. Interestingly, succession-planning was a key flashpoint for some, with a fifth reporting there was conflict over who would take over the business in the future.
There was a strong desire amongst family-run firms to have more education, training and mentorship to help their businesses grow. More than two-fifths wanted to modernise the business through the better use of digital tools. This demonstrates that small family businesses have an appetite to upskill and move with the times, but need more help in order to do so, presenting a clear opportunity for support.
“Small businesses are the driving force of Europe’s economy, employing 82 million people and have shown remarkable resilience in tough times. However, many SMEs, especially those that are family-run, need additional support to thrive in a changing world,” says Mark Barnett, president of Mastercard Europe.
On the whole, respondents were positive about working with their relatives and family firms were more optimistic they would grow in the coming year than non-family run businesses. However, the uncertainty of if and how to modernise, coupled with family dynamics, could increase the risk of some small family businesses eventually being outpaced by more adaptable competitors.