Surveys
Most Canadian Family Businesses Don't Plan For Succession
Around 90 per cent of businesses in Canada are family-operated, and yet many families lack a succession strategy, according to a survey by Nicola Wealth Management.
As many as 60 per cent of family businesses don't survive the transition from founder to second generation, said David Sung, president of Nicola Wealth Management. Meanwhile, only around one in four business-owning families have succession plans that all family members agree to.
The survey revealed that the majority of family businesses (67 per cent) ranked succession and retirement planning as their number one internal business concern. This is particularly pressing given that three-quarters of the businesses surveyed expected a generational transition within the next five years.
Particularly, many families lacked a shared vision for the future of their businesses and, as Sung pointed out, the matter was complicated by “relationships and emotions,” as well as the discomfort people felt in talking about the issues surrounding transition.
Another problem to emerge was a lack of clear understanding about ownership: only 36 per cent of people in the survey “clearly understood” who will own the family's assets and/or the business in future.
The elder generation generally recognized the need to set aside money to retire from the business, with around half saying they had worked out how much they would need. And yet only 41 per cent had started saving that money outside the family business – indicating little urgency in acting on such plans.
When it comes to the next generation, the challenges that most agreed they needed to address on taking the helm were: resolving family conflict (59 per cent), strategic direction (58 per cent), training future owners (54 per cent), roles and responsibilities (54 per cent), how decisions will be made (49 per cent), setting clear expectations (46 per cent), exit strategy and liquidity (43.5 per cent), and competitive pressure (33 per cent).
The findings were based on 75 responses to surveys at an event called "Fire Proofing Your Family Business" held in Vancouver on November 14.
