37% of Maltese family firms saw margins shrink despite higher turnover, survey shows

Thirty-seven per cent of family firms reported a higher turnover but lower profits in 2022-25, a Malta Chamber of Commerce survey shows.

More than a third of Maltese family business increased their turnover between 2022 and 2025 but reported lower profits, according to the Malt Chamber Family Business Survey of 2026, announced on Thursday.

Malta Chamber Vice President Silvan Mifsud presented these results at “Turning Growth into Profit: Structure, Governance & Digitalisation in Family Business,” an event organised as part of Malta SME Week 2026.

The chamber’s cross-tabulation report sets the financial performance of 154 respondents from 2022 to 2025 against their sector, size, governance arrangements, strategic plans and priorities. It found that 57 firms, or 37%, reported higher turnover but lower profits. An identical number, also 37%, reported higher turnover alongside higher profits.

Growth was almost universal. In all, 142 of the 154 firms (92%) reported rising turnover, while 28 reported stagnant results and only 12 recorded lower turnover, ten of them with lower profits as well. The report calls the largest problem group “profitless growth”. It argues that the post-pandemic years gave family firms the chance to expand their market footprint, but that scaling up “fractured legacy cost structures and diluted margins”. The pressure is felt most acutely, it says, by mid-sized firms and by companies in importation and distribution.

The report concludes that growth without formal governance is a high-risk strategy. It says the dividing line between firms that create long-term value and those experiencing profitless growth is the move from informal, family-led execution to structured corporate professionalism, and that the businesses turning higher turnover into lasting corporate wealth are those that build independent boards, map out written strategic plans and pair automation with clean organisational design. It groups family businesses into two camps: a high-performing group it calls “offensive optimisation”, which it says is typically backed by regularly reviewed written strategic plans, often clustered in services and found in the largest size brackets, and a squeezed mid-market it calls “defensive structural engineering”.

The sharpest contrast in the tables was between firms with and without a formal plan. Of the 65 businesses with a written strategic plan that is regularly reviewed, 27 (41.5%) reported higher turnover and higher profits, while 17 (26.2%) reported higher turnover but lower profits. Among the 77 firms, half of all respondents, that said they did not have a plan but needed one, 36 (46.8%) fell into the profitless growth category and 26 (33.8%) reported higher profits. A further 12 said they did not need a plan. The report says operating without a formal blueprint severely damages a firm’s ability to capture financial value while scaling.

Performance also varied by sector. Services fared best, with 23 of 52 firms (44.2%) reporting higher turnover and higher profits. In importation and distribution, the largest group with 56 firms, 23 (41.1%) reported higher turnover but lower profits, which the report attributes to “competitive and inflationary compression”. It says service-oriented businesses are better equipped to turn top-line growth into profit, and that asset-light structures make it easier for them to preserve margins. Of the 16 manufacturers, five reported higher turnover and higher profits and five reported profitless growth.

Firm size also mattered. The report identifies a “scaling canyon” among mid-sized firms, where overheads rise before efficiencies materialise. Across the 10-to-30 and 31-to-50 employee bands, 28 of 64 firms (44%) reported profitless growth, although the tables show the share was higher still, at 47.8% (11 of 23), among firms with 101 to 250 employees. At the top end, nine of the 15 firms (60%) with more than 250 employees reported higher turnover and higher profits, the highest proportion of any size band, followed by 13 of the 24 firms (54.2%) with fewer than ten employees. The report reads the largest firms’ results as evidence of structural resilience and economies of scale.

Having a board did not, on its own, appear to protect firms from margin pressure. Some 109 of the 154 respondents (71%) said they had a functioning board that meets regularly to discuss performance and future direction. Yet 44 of them (40.4%) reported higher turnover but lower profits, compared with 13 of the 45 firms without a board (28.9%). The report says a board does not automatically shield a business from margin contraction, and suggests that larger, more mature firms, which are more likely to have boards, face stronger headwinds such as inflation and rising operational costs.

The make-up of the board appeared to make a difference. Of the 109 firms with boards, 55 included independent non-executive directors who are not family members. These firms were more likely to report stagnant profits (14 of 55, or 25.5%) than those with family-only boards (six of 54, or 11.1%). They were also less likely to report higher turnover but lower profits, at 36.4% against 44.4%, although slightly less likely to report higher turnover and higher profits, at 32.7% against 37.0%. The report says independent directors “seem” to introduce a stabilising framework that acts as a buffer against severe profit decay.

Respondents were also asked to rate a series of priorities from one to five, and the report reads the answers as a “reactive governance pattern”. Of the 31 firms that gave the top rating to improving corporate governance and adding independent non-executive directors, 15 (48.4%) were in the profitless growth category.

So were 24 of the 59 firms (40.7%) that gave the top rating to regular, timely reporting of financial performance and key performance indicators, and 20 of the 47 (42.6%) that gave it to running the family business on more professional lines. Professionalisation drew ratings of four or five from 98 of the 152 firms that answered. The report concludes that firms facing eroding margins are prioritising governance reform, digital investment and restructuring in response to negative financial results.

Digital transformation to automate processes and increase efficiency drew more top ratings than any other priority, with 56 of 152 firms giving it a five. Of these, 23 (41.1%) reported higher turnover and higher profits and 21 (37.5%) profitless growth. The report says high performers use automation offensively to unlock scalability, while margin-squeezed firms use it defensively to offset wage and logistics costs.

Among the 33 firms that rated investing in digital solutions such as CRM and ERP systems, rather than employing many more people, at four out of five, 17 (51.5%) reported higher turnover and higher profits. At the top rating, 14 of 39 firms (35.9%) reported higher profits and 16 (41.0%) lower profits, which the report says could reflect initial capital outlays and organisational changes compressing short-term margins.

On artificial intelligence, 16 of the 38 firms (42.1%) that gave the top rating to exploring its use were in the profitless growth category, and the report calls AI an exploratory remedy rather than an active driver of returns. Improving internal organisational structure drew ratings of four or five from 100 of the 152 firms, with higher and lower profit growth almost evenly split at the top two ratings (36.5% to 37.5% against 35.4% to 40.4%).

The findings are based on 154 respondents, or 152 for some questions, and several categories contain only a handful of firms. The tables show associations between variables rather than establishing cause.