Almost half of Canadian family businesses expect to pass management or ownership down to their younger relatives in the next five years. Yet, according to a new report from KPMG Enterprise and the Canadian Association of Family Enterprise (CAFÃ), over 80% of family businesses are currently without a formal plan to manage the process.
The report, entitled Family Ties – Canadian Business in the Family Way, also found that the biggest challenge facing future generations is gaining the right experience, skills and business knowledge required to run the business, while overcoming entitlement issues. They are also unsure about actually taking over the business, with a majority of the future-generation respondents saying they need open dialogue, mentorship programs and formal training and development to help them decide.
“Transition of the business from one generation to the next is an area where future business needs and family dynamics do not always align,” says Beverly Johnson, partner, national chair, KPMG Enterprise, Centre for Family Business. “The next generation will ultimately decide whether the family business and legacy continues, so managing the expectations of potential successors should be on everyone’s agenda.”
KPMG Enterprise suggests that family business owners focus on the following when preparing for a transition:
Engage future generations early on: Future leaders need to become part of the management team as soon as they have proven their abilities, making them wait can lead to lost opportunities.
Establish clear communication channels: More communication among family members can help ensure everyone involved understands the strategic growth plans of the business and helps to maintain a balance of continued business success and family harmony over the long-term.
Embrace and adopt formal business planning processes: Accessing professional assistance to help with the formal business planning process can help the family adopt practices to professionalize the business and refine their strategic priorities.