Succession remains the biggest challenge for family businesses in Cyprus and around the world, according to Renos Ioannides, managing director and head of the family business group at KPMG Cyprus.
Speaking to Philenews, Ioannides said that fewer than three in ten such businesses manage to transition successfully to the second generation, with even fewer surviving beyond that.
He explained that despite their crucial role in the development and stability of the Cypriot economy, family businesses are navigating an increasingly demanding environment that makes sustainability more difficult than ever.
Ioannides stressed that family businesses are not merely economic entities but “carriers of values, culture and social cohesion.”
He also pointed out that “our country has always relied on family businesses for its development and the prosperity of the economy,” describing them as “the backbone of the business fabric of Cyprus.”
As he explained, Cyprus currently counts around 125,000 registered businesses, of which 95 per cent employ fewer than ten people, while another 4 per cent employ fewer than fifty.
In total, over 99 per cent of Cypriot enterprises are small or very small, and predominantly family-owned, employing nearly 60 per cent of the country’s workforce.
Ioannides said that beyond the numbers, the true value of these businesses lies in their people, “in the stories and values that are passed down from generation to generation, and in the responsibility for the continuation of the business.”
Yet, as he observed, smaller family firms are facing mounting pressure after years of economic instability, from the financial crisis to the pandemic and the ongoing geopolitical turmoil.
He explained that the effects of these challenges are still visible across the real economy, as non-performing loans remain high, at around 44 per cent, meaning nearly one in two private sector loans is at risk.
This, he said, restricts liquidity and makes access to new capital even more difficult, particularly for smaller firms that depend almost entirely on bank financing.
According to Ioannides, today’s family businesses face five major challenges: high debt, restricted access to capital, global competition, technological transformation, and succession.
“The transition of leadership without losing the identity of the business and without intra-family friction is a decisive factor for its sustainability,” he said.
He added that global data show only 30 per cent of family businesses survive the handover from the first to the second generation, less than 15 per cent reach the third, and fewer than 5 per cent continue beyond that.
“This phenomenon,” he said, “is also observed in Cyprus, as there are statistical studies that confirm similar rates.”
When asked what the solution might be, Ioannides said it lies in proper professional guidance. “At KPMG Cyprus, we approach each family business individually, taking into account its specificities,” he explained.
He noted that the firm provides strategic planning, tax and legal advice, wealth management support and succession planning, but that the process goes beyond technicalities.
“We also emphasise the dynamics of the family,” he said, “because behind every business there are relationships, emotions and values that must be taken into account.”
Ioannides also described family businesses as “an inseparable part of Cypriot society and the economy,” emphasising their social contribution.
“They are the bearers of values and traditions that support employment, development and cohesion,” he said.
“The great challenge for the future is to ensure their continuity and to successfully transfer them to the next generations, maintaining their dynamics and identity”, Ioannides concluded.
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