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A recent survey, the 2020 Family Enterprise USA Family Business Survey of family businesses (conducted between late and January and mid-April of this year), found that they’re remaining somewhat optimistic about their future despite an unprecedented first quarter due to the COVID-19 pandemic.
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It’s important to keep in mind that some of these expectations may have already shifted as we now enter the second half of the year with new cases of the disease raging out of control throughout parts of the United States. Because the industry believes that the Tax Cuts and Jobs Act of 2017 did little to help the many family-owned companies organized as “pass through” businesses, such as Sub S corporations, limited liability companies, limited partnerships and sole proprietorships, who pay individual rather than corporate tax rates, the survey also found that income tax policy remains of key concern for these business owners.
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The majority of the respondents are either sole or majority owners of a business, 84% of said businesses being in operation for 30 years or longer and 82% being companies with 2019 gross U.S. revenues of $6 million or more. The top three industries of these businesses are manufacturing; real estate; and construction, machinery and homes. More than half of the businesses have 100-plus employees.
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When asked about their plans to add new jobs, 63% plan to add between one and 50 new employees over the next five years, with the remaining 37% intending to add anywhere between 51 and upwards of 500 new jobs. Though the 50 or less category saw a drop of 12% from the number of actual jobs added the year prior, it seems that the commitment by these family businesses to continue to add jobs remains in place despite the current state of our economy. Some of the obstacles to job creation voiced by the respondents include economic uncertainty, finding qualified workers and high costs of a new hire.
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The job predictions are correlated with the data showing that 79% of these businesses saw revenue growth in 2019. However, it once again needs to be underscored that even though revenue expectations for 2020 almost equally parallel those seen in 2019, uncertainty has started to creep in. Fewer business owners this year report they’re “very confident” in their ability to increase revenue each year—26% report as such now versus 33% reporting similarly last year. And, for the 16% who don’t expect revenue to grow in 2020, the top reported reason is the impact of COVID-19.
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Not surprisingly, a majority of respondents believe that the biggest impediment to growth is a recession or market downturn, driven largely by COVID-19. Other potential impediments include cost of labor, the virus itself and tariffs/trade restrictions.
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Please stay safe and healthy,
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pmsoldano@family-enterpriseusa.com
712 H Street NE Suite 1330
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