Tag: family business
Yesterday’s edition of the National Post highlighted the difficulties small business owners can have with succession planning for the family business.
In one article, Christine Dobby provides statistics for agribusiness owners from a 2010 survey conducted by the Ontario branch of the Canadian Federation of Independent Business. When asked if they had a plan to sell, transfer or wind down their business in the future, an astounding 52% had no plan at all and another 31% said that they had only had informal discussions with family. Only 17% said they had a formal, written plan.
Another article by Denise Deveau illustrates that an assumption that next generation will take over the family business can be a big mistake. According to a recently released Global Family Business Survey report from PricewaterhouseCoopers, 48% of Canadian business owners plan on passing their business to the next generation, which is a significant drop from 90% in 2007. Reasons for this include a change in demographics, where business owners are living longer and having fewer children. Parents who have never taken the time to discuss a succession plan with their children are finding out that the children they assumed would step in and run the family business are not interested in doing so.
These statistics illustrate the need for proper succession planning for the family business and the importance of discussing these plans with one’s family. It can avoid a multitude of problems that would inevitably occur for family, employees and customers alike, if the founder of a family business passes away without making proper provision for the business he or she worked so hard to establish.
Sharon Davis – Click here for more information on Sharon Davis.
When looking at the myriad of issues and problems that are created with succession planning for a family business, it is often forgotten that the family member who has been charged with (or readily accepted) the job of carrying on the family business is not him or herself particularly happy with the proposed division of the estate.
The question of "fair but not equal" is often a lifelong struggle for those who want to pass on a family business. In some cases, there is simply not enough money to fund a relatively equal division of the estate, as the core assets of the estate are tied up within the family business.
In certain situations, the non-participating family business members are treated in a "fair manner" by being given, for example, the proceeds of an insurance policy as opposed to the family business on death. The child who is charged with running the family business may not see that as being particularly fair. He or she may feel that for him or her to financially succeed, he will have to work in the business for the rest of his life, while the other siblings who are receiving fixed assets simply have to wait for the estate to fall in and they do not have the same lifelong work commitments to fulfill.