What is more challenging: understanding the complexities of your family or managing your own business? Now imagine how those complexities may be magnified if are operating a family business that is being transitioned to your children or is to be co-owned with your siblings or cousins.
Welcome to the world that many business families are faced with on a daily basis.
Statistically, about 80% of all businesses in Canada are owned by families with those family-owned businesses accounting for 60% of Canada’s GDP. To further exemplify the importance of family-owned businesses to the Canadian economy, these businesses have about 6 million full-time and part-time employees; are responsible for the creation of 70% of new jobs; and contribute approximately 55% of all donations raised by charities. Sadly, however, these same family-owned businesses have a 70% failure rate when transitioning the business from the first generation to the second generation and that failure rate increases to 88% and 97% when the business is passed to the third and fourth generations, respectively.
Canada boasts some of the world’s most wealthy business families (for example: the Weston Family – Loblaw/Superstore; the Thomson Family – Thomson Reuters) that have been able to make successful transitions, with the Molson Family (Molson Coors) being Canada’s oldest business family. While some of the successes of these family businesses can be attributed to the nature of their businesses and the industries they are involved with, their intergenerational business transfers occurred successfully because they addressed issues involving their families, in particular the creation of plans and the use of advisors to address issues involving:
- succession and estate planning
- corporate governance
- leadership development
- conflict resolution
- and other issues
While few family-owned businesses are likely to be come as well-known as Canada’s wealthiest families, the development of a family plan, their use of advisors and the creation and implementation of processes can be used by every family-owned business to ensure both the prosperity, succession and longevity of the business and the harmony within the family.
With a plan in place, a family can address the needs and values of their family, define the requirements of the owners of the business, and provide the operators of the business with a roadmap that facilitates the day-to-day operation of the business and, in turn, bring their family together with the focus and dedication to their enterprise.
Setting a Plan
While the creation and adoption of a plan is critical in managing a family enterprise, having a process to develop such a plan is equally important. Simply sitting down with your spouse and imposing your combined thoughts on your children or siblings is a recipe for disaster for both the business and the family. Likewise sitting down with these other family members without a process in place is daunting, problematic and likely equally disastrous.
Fortunately, however, there are organizations available to assist families in the operation of their family enterprise, including:
In joining these organizations, you will have the opportunity to discuss your family business with likeminded business families and learn from their experiences and from keynote speakers at their seminars.
There are also individuals who have received the accreditation as a FAMILY ENTERPRISE ADVISOR (FEA). These individuals have been trained in assisting families with their family enterprise issues and in the development of plans for their family enterprise clients. Further, as an FEA, these individuals have been trained to work with the lawyers, accountants, insurers, financial planners, psychologists and other professionals relied upon by a family so that all of the needs of the family and their enterprise have been fully addressed in the development of their client’s family plan and the adoption and implementation of the defined processes.
This column was written to introduce readers to the area of Family Enterprise Advising and the challenges that family business owners face. In subsequent columns, it is my goal to expand on topics related to this field. If you have a question or issue that you would like to read about in future columns, please feel free to email me at email@example.com.
Until next time,