Entrepreneurship is an important indicator of the dynamics of the economy, regardless of whether it is about companies that have consolidated in the market or at the beginning of the journey, because initiative, innovation and creativity show the degree of viability and the potential for the development of the business environment in the country. In Romania, even if entrepreneurial activity is relatively strong, it is at an early stage. Thus, according to the Global Entrepreneurship Monitor report, the share of consolidated entrepreneurial enterprises is lower than in other countries, in 2021 9.7% of the population were start-up entrepreneurs and 4.1% were consolidated entrepreneurs. These figures show that many startups do not go beyond the seed stage, as is usually the case around the world, but also that policies to encourage entrepreneurship and innovation are insufficient. Otherwise, annual budget allocations for research, development and innovation in the amount of about 0.3-0.5% of GDP and the absence of state programs at least partly explain Romania’s placement in only 31st place in the ranking of the most innovative countries in Europe, according to the “Global Innovation Index “.

Thus, to move from the early stage to the stage of a consolidated company, an entrepreneurial business needs both favorable regulation and taxation, access to finance, technology, and an environment that stimulates initiative and innovation through special programs. If we talk about the conditions offered by Romania for the development of entrepreneurial business, our country ranks 32nd in the ranking of the 33 most attractive countries in Europe, the Middle East and Africa (EMEA) for private companies, according to PwC EMEA Entrepreneurial. & Private analysis Business Heatmap 2022. The ranking is based on scores in seven different categories, namely macroeconomics, business environment, fiscal and regulatory framework, ESG, public health, education/skills/talent, and technology and infrastructure.

In recent years, the ecosystem of entrepreneurs in Romania has expanded significantly, but a big challenge for entrepreneurial companies, as the mentioned data shows, is to maintain the market and grow in the medium and long term. The Romanian companies that now make a decisive contribution to the national economy, both through employment levels and increasingly stable financial results, are enterprises founded many years ago that have since reached maturity. In a stable economy, it is good to have an adequate balance of power between companies with a majority of national capital and companies with a majority of foreign capital, since each of them plays a role in the economy, particularly from the point of view of the country’s financial stability.

The analysis carried out by PwC Romania as part of the Business Champions project, which will award Romanian entrepreneurs at a special event on November 15, shows that among the first 5,000 companies with core domestic capital, 1,059 simultaneously meet three criteria that demonstrate that they have solid market activity , namely a turnover of more than 50 million lei, a profit of more than 4 million lei and more than 50 employees. Of them, 211 have a turnover of more than 250 million lei, and we can consider them very large companies. At the same time, all small and medium-sized enterprises (SMEs) play an important role in most economies, especially in developing ones. According to the World Bank, they account for approximately 90% of business and more than 50% of employment worldwide, and in developing economies they account for up to 40% of GDP.

So, from initiation to survival, growth, maturity, all the stages that an entrepreneurial business goes through are important to a country’s economy and should therefore be encouraged. If more new businesses can grow and succeed, then trust among the general population can gradually grow, encouraging a stronger entrepreneurial culture and ecosystem in Romania. And this is very necessary. For example, the Global Entrepreneurship Monitor shows that only 37.7% of Romanians knew someone who started a business in the last two years, and that only 50% believe they have the necessary knowledge, skills and experience to start a business. A lack of understanding of the role or activities of entrepreneurship discourages many from running their own businesses, which affects the entire economy.

Even in this context, entrepreneurial business must continue to evolve, and “business as usual” is no longer an option in an environment characterized by crises, economic disruptions, general uncertainty, conflict and climate change. An approach that continues the traditional way of doing business will no longer be sufficient. The key question is how will they develop and ensure business prosperity for future generations?

Family businesses will need new capabilities: digital technologies, expertise to address environmental, social and governance (ESG) issues, manage labor market trends, identify new markets and build trust among customers, employees and family members.

In addition, there is a close relationship between trust and profitability, a fact confirmed by the PwC Family Business Survey 2023 report, which shows that consumer trust is one of the main drivers of performance fluctuations and an important competitive advantage. The good news is that family-owned companies are trusted more than other companies in general, scoring 12 percentage points higher on this measure, according to the Edelman Trust Barometer. Higher levels of trust have a very high chance of being reflected in financial performance if sustained and continuously nurtured, contributing to the ambitious long-term goals offered by family businesses in Romania. According to the PwC Family Business Survey 2023, 76% of local family businesses expect to grow in the next two years, and more than a quarter of them even expect “rapid and aggressive” growth. The next priorities are increasing customer loyalty, launching new products/services and expanding into new markets or customer segments.

An aspect that Romanian entrepreneurs need to work on and that is increasingly on customers’ radars is ESG (Environmental, Social and Corporate Governance) policies. Managers of family businesses in Romania admit that ESG is not currently an area of ​​greatest interest to them, and that they focus on other goals: customer satisfaction and business development.

The family business ecosystem in Romania is still young, compared to other countries in Europe or the world, most companies belong to the first generation and only a small part to the second generation. The decisions they make today will have an impact for the next decade, and it is important to consider that they need to adapt to a society and economy based on knowledge, digitalization and sustainability in order to grow and develop, while at the same time their performance will help to stimulate the whole business system. The main long-term personal goals of family business owners in Romania are to protect the business as the most important family asset (87%) and to receive dividends for family members (84%), according to the Family Business Survey report. Uninterrupted succession thought out to the smallest detail is a guarantee that the future of the family and the company is and will be stable. The process is not only focused on simply transferring property to the next generation or securing wealth by establishing an appropriate legal structure, but also involves establishing communication rules, establishing proper family governance, and passing on knowledge, experience, and values ​​to the younger generation.

This article is part of PwC Romania’s Agenda for Tomorrow editorial project, which will run until the end of this year and aims to discuss the context and perspectives that can guide companies to make informed decisions in the midst of change. Previous articles of the series can be read here.

Article supported by PwC Romania

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