The new digital realities of today’s economy have most Canadian family business owners focused on transition, with nearly eight in 10 (78 per cent) developing a succession plan or expecting to transition the business to the ‘next gen’ within three years, finds a recent KPMG in Canada survey.

“We are seeing a demographic shift to a younger generation of family business leaders, as a result of the increased reliance on digital technology driven by the pandemic,” says Yannick Archambault, National Family Office Leader, KPMG in Canada. “Technology is dramatically shifting the way businesses need to operate and current leaders are increasingly turning to the next generation to lead going forward.”

KPMG research, in collaboration with the STEP Project Global Consortium, revealed that family businesses require more transformational leadership going forward. Indeed, seven in 10 leaders surveyed said they believed a more tech savvy generation of leaders was needed to succeed in the future.

Family business en

“Growing recessionary pressures may further accelerate the pace of this transition as family businesses adapt to new economic realities,” adds Mr. Archambault. “Many incoming leaders bring a growth mindset. They tend to have deeper knowledge and exposure to new technologies and innovations and a willingness to integrate social and environmental issues into business planning to make their businesses more resilient and sustainable.”

Opportunities in a downward cycle

A significant number of family business leaders also see opportunities for growth in a downward economic cycle. Seven in 10 (71 per cent) plan to raise capital. Nearly six in 10 (59 per cent) have plans to acquire a new business within the next three years and nearly two-thirds (64 per cent) are looking to expand outside of Canada.

“Family businesses that have a strong balance sheet, with cash on hand or access to capital, may consider making acquisitions at more favourable prices, or make the necessary investments to bolster organic growth,” says Dino Infanti, National Leader, Enterprise Tax, KPMG In Canada. “This can translate into exciting new opportunities for family businesses to leverage existing and emerging strengths in order to diversify, generate wealth and create jobs.”

Lack of succession plans driving some to sell

Not all founders plan to pass down the family business. More than a quarter (26 per cent) plan to sell their business within the next three years.

“The desire to sell may reflect those ‘next gen’ leaders who are less interested in running the existing family business as they are in managing the family wealth, setting up new businesses or pursuing philanthropy,” says Mr. Infanti. “In some cases, the founder may want to sell to fund their retirement plans and to free-up family members to be enterprising in new ways.”

Increased focus on ESG

Seventy per cent of Canadian family-owned businesses report having an environmental, social and governance (ESG) strategy, and virtually the same number (69 per cent) believe their ESG programs have a positive impact on the financial bottom line.

Two-thirds (66 per cent) say the drive to increase their ESG commitments is coming from their next generation leaders and employees.

More than six in 10 (63 per cent) say their management pay is now tied to these environmental and social targets. Overall, women are more likely to tie pay to ESG targets with more than seven in 10 (72 per cent) making it a factor compared to only 51 per cent of men.

“Women family business leaders aren’t waiting for the environment to change around them,” adds Mr. Infanti. “As transformational leaders, they are representative of the changes they want to see in their business, the family and society.”

Other Findings

  • 70 per cent of family-owned businesses report having an environmental, social and governance (ESG) strategy
    • 73 per cent of women vs. 67 per cent of male respondents
  • 69 per cent have social and environmental targets in their business plans
    • 74 per cent of women integrate social and environmental targets in business planning vs. 63 per cent of men;
  • 63 per cent say their management pay is tied to social and environmental targets
    • 75 per cent of women, vs. 51 per cent of men
  • 66 per cent of respondents said their ‘next-gen’ leaders and employees are prompting them to increase their ESG commitments
    • 75 per cent of women owners vs. 57 per cent of men
  • 69 per cent of family-owned businesses say their ESG programs positively improve or boost their financial performance
    • 72 per cent of women vs. 66 per cent of men
  • 66 per cent believe progress on diversity and inclusion is moving too slowly in the business world
    • 70 per cent of women vs. 63 per cent of men
  • 92 per cent of women business owners are confident in their company’s long-term growth prospects vs. 80 per cent of men
  • 89 per cent of women are more confident now than a year ago compared to 72 per cent of men.

About the KPMG in Canada 2022 Business Outlook Survey

KPMG in Canada surveyed 503 business owners and executive level C-suite decision-makers at 503 small- and medium-sized Canadian companies between August 16 and September 1, 2022, using Schelsinger Group’s Methodify online research platform. Thirty-two (32) per cent of the companies reported annual gross revenue of over $500 million; 26 per cent between $300-$499 million; 18 per cent between $200-299 million; 16 per cent between $100-$199 million; and 8 per cent below $50 million. More than half (57 per cent) of the SMBs are family-owned businesses. Of the 286 family businesses surveyed, 139 respondents are female and 147 are male business leaders.

About KPMG in Canada

KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs more than 10,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada's top employers and one of the best places to work in the country.

The firm is established under the laws of Ontario and is a member of KPMG's global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see kpmg.com/ca.

For media inquiries, please contact:

Nancy White
National Communications  & Media Relations
KPMG in Canada
(416) 876-1400
nancywhite@kpmg.ca