Throughout Saanich, established family businesses employ thousands of local staff, sponsor community events, stimulate economic growth and provide a sense of pride and continuity—generation after generation.
“Family businesses have a very valuable and sustaining role to play within our local economy,” says Mike Thompson, associate professor, Faculty of Management at Royal Roads University, who has studied the topic extensively. “There’s a vibrant family owned-business community here that I’ve observed. There’s a lot of local camaraderie.“
Thompson is co-author of the book Business Diagnostics, which provides a framework for sizing up the health of a company and developing proper financing and planning strategies. He has recently completed a white paper that explores succession planning in family enterprises.
“They need to have a plan in place that gives the necessary focus to stay on task for the eventual succession,” he says. “The first component is that they need to build an advisory team. They need a good lawyer, banker and accountant that will help them out with their planning process and they need to involve the family with all these conversations.”
Thompson notes that there are often many attractions in “keeping the business in the family” as long as the successor generation has the ability and interest to take up the reins of leadership.
With professional help at hand and family members who are actively engaged in the process, succession planning can go smoothly, helping to ensure continuity and to minimize disruptions to staff and customers. “They have to do a detailed evaluation of their personal financial situation, both the selling generation and the buying or inheriting generation. It’s really important to make sure that they’re ready for all the change that will be coming their way—change management practices need to be investigated.”
According to the 2014 PwC Global Family Business Survey, the future looks bright for Canadian family enterprises. 85 per cent of Canadian family businesses plan to grow in the next five years and nearly 100 per cent of those predicting growth are confident that they will achieve it. The main challenge ahead is the expected retirement of a large number of baby boomers. PwC suggests that staff recruitment will pose a challenge for family businesses over the short to medium term.
“It does take time for a family business succession to take place—to get the right people, the right family members in place,” says Thompson, who notes in his research that preparatory measures such as external and internal training, education and years of progressive experience working within the business should ensure a comfortable transition. “I think it’s worth the wait because the resulting entity is far more sustainable.”
According to the 2014 Deloitte Family Business Survey of 120 family-owned Canadian companies, only 17 per cent have a formal leadership succession plan in place. While half have an informal plan, 33 per cent have no plan at all.
In such cases, peer groups such as the Family Business Association of Vancouver Island can provide support. Throughout the year, FBA-VI hosts educational events and provides professional advice to family businesses. “One of the biggest benefits of these associations is that members hold each other accountable and they do peer to peer mentoring,” says Thompson.
As established family firms focus on a smooth transition to the next generation, it’s important for them to stay apprised of shifting market conditions. Thompson recommends they take active measures to avoid falling into the trap of thinking what has worked in the past will necessarily work in the future. “It’s important to stay in touch with current business trends, changes in technology, and high level trends with regards to the way that people buy goods, such as e-commerce.”
Around 80 percent of all Canadian businesses are family-owned. Collectively, they account for 60 percent of Canada’s annual GDP, 50 per cent of employment and 65 per cent of tax revenues.