Private businesses can
create and retain value now.
Here’s how
Viewpoints from the conversation between Martina Crowley, National Business Leader, PwC Private, Dr Peter Bartels, PwC Global Entrepreneurial & Private Business Leader and Blair Sheppard, PwC Global Leader Strategy & Leadership
After the passing of Queen Elizabeth II and the ascension of King Charles III, the British royal family now faces its greatest challenge – and opportunity – in almost a century as they set out to preserve ‘the Firm’. In much the same way, Australian private businesses (many of them family affairs, too) face challenges – and huge opportunities – when it comes to preserving and creating value.
So how can businesses ensure value reigns?
Global landscape causing uncertainty
First, the bigger picture. The global economy is experiencing something of an ‘annus horribilis’ of its own right now, thanks to a set of forces never seen in combination before. From supply chain woes (exacerbated by the Ukraine war and the pandemic), to skills shortages – businesses are grappling with uncertainty. There’s inflation in some sectors, deflation in others, and volatility almost across the board. In short, it’s a complex economy, requiring businesses to be more sophisticated than ever about mitigating risk and generating value.
Significantly, many of these macro factors are symptoms of major underlying trends and, where possible, businesses are smart to address the long-term issues at the same time they deal with short-term disruptions. Those who get on the front foot now will likely reap rewards in future.
Challenges of scale and capacity
It’s not always easy for private businesses to access the expertise they need because they lack the scale and capacity of larger public corporations. Moreover, private businesses can’t necessarily coordinate in the way corporations do.
But – if you know where to look – there are still many ways to build and accrue value.
How private businesses can create value
Globally, we’re seeing a big shift in money from public to private businesses, and this is only likely to accelerate. In fact, the Financial Times calls this “a new era of growth for private capital”. In the US, for instance, an ever-increasing amount of capital is raised in private markets, and upward of 70% of new capital raised is now private. This shift from public to private capital presents a huge opportunity for private businesses.
At the same time, we’re experiencing global change at a speed we’ve never seen before. During the next decade or so, humanity is going to have to completely rethink how we feed ourselves, what energy systems we use – not to mention how we manufacture and trade. Again, this opens up new possibilities for proactive private businesses.
Our role with private businesses is often to help them prioritise. No organisation can do everything and, given the challenges of size and scale, private businesses must focus on the most material things.
Private businesses are starting from a great position. For instance, they don’t face the same managerial constraints as corporations, making for concentrated (read: nimble) decision-making. Private businesses are agile. Also, private businesses are generally superior at all things legacy-related. This is particularly the case in family businesses, which are typically focused on: How will the next generation benefit from our current assets? How are we positioning this business for the future?
Private businesses tend to have close ties to the local community and long-serving employees, as well as a strong sense of history or tradition. All of which creates a sense of collective purpose. And as we found in our Global Workforce Hopes and Fears Survey, having a sense of meaning matters to employees. Fulfilling work is important, and 75% of employees want to work for an organisation that makes a positive contribution to society.
Our data shows that integrating environmental, social and governance (ESG) considerations such as fulfilling work into your strategy improves access to finance and talent retention, and it leads to long-term value creation in deals, divestment and growth.
In short, when it comes to ESG – just as with the changing global landscape and the shift towards private capital – there could be the risk of damaging value and falling behind, but there's enormous potential for private businesses to create value.
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