There comes a time when family-owned businesses will need to transition into new leadership (after all, no one can lead forever). One important consideration of family business leaders is whether the next generation is ready to take the reins. The Ready, Willing and Interested – or NOT? report by the Family Enterprise Foundation, supported by KPMG Enterprise and KPMG Family Office, explores the answers to this question and delves into the transition intentions of family businesses in Canada.
The clock is ticking
It's more important than ever to start thinking about transition plans. It's estimated that within the next ten years, over 60% of family enterprises will be changing ownership. Within seven years, research is estimating that around 40% of family business will experience ownership transitions. The earlier you start succession planning, the better. After all, succession planning is a journey.
Expected date to transfer family business to the next generation
Family in or family out
Most Canadian family businesses intend to keep their business in the family. Just over 50% of families have indicated that they intend to transfer ownership of the business to family members. There are, however, leaders (around 36%) who are not opposed to transitioning ownership to non-family member, for reasons such as lack of interest and inexperience from family members.
Transition of the family business ownership
Why might ownership transfer out of the family? What are the causes for concern?
Around 51% of owners have cited 'lack of interest' as their main cause of concern when it comes to transitioning ownership to the next generation. This is also the main reason why ownership of the business may transfer out of the family.
As we have seen, there still exists a desire to transfer ownership to family members. The report outlines a variety of ways leaders can build interest in the next gen, including:
- Involving children early in discussions on family values, goals, the family business and family wealth
- Involving the next gen in family meetings about the business, as this can expose them to different roles
- Storytelling and highlighting actions that lead to the success of the family enterprise to help build pride and confidence
- Having candid conversations and figuring out what the intentions are of both generations
- Encouraging the next gen to follow their passions
- Having patience with the next gen and allowing them to make their own mark and work in their own way
"After spending most of their lives working to build a strong and successful family business, founders may assume that their children share their passion and drive, but this is not always the case. Having meaningful conversations about the future is a critical first step to family wealth and continuity planning."
- Richa Arora, FEA, Senior Family Advisor, KPMG Family Office
Download the full report for the comprehensive survey results and questions next gens and senior gens should consider in their journey through succession planning. You'll also find insights from Family Enterprise Advisors (FEAs) and the demographics of the businesses surveyed. If you would like to learn more or to speak to our professionals about the report, we welcome the opportunity to discuss how your family business can gain from these insights.
About the Family Enterprise Foundation
Family Enterprise Foundation (FEF) is the charitable foundation of Family Enterprise Canada. As the unified voice of family enterprise, FEF focuses on developing educational resources, conducting research, building a strong connected ecosystem and promoting the success and sustainability of entrepreneurial families and their enterprises, to ensure intergenerational longevity.
To learn more, please visit familyenterprisefoundation.org.
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