High failure rate for Canadian family owned businesses

Canadian Association of Family Enterprise (CAFE) urges planning

The Canadian Association of Family Enterprise (CAFE) says a silent storm is brewing in the Canadian business community.

Eighty per cent of firms in Canada are family owned. These are not just mom and pop enterprises, but some of the largest and most successful business in the country.

Family businesses generate $150 billion annually, which is responsible for 70 per cent of Canada’s gross national product (GNP), and represents 70 per cent of Canada’s employment numbers.

With the aging population and retirement looming, many CEOs hoping to leave a legacy for their family, will watch the empires they built fade, soon after secession, according to CARE. An estimated 70 per cent of family businesses will not succeed to the second generation. An even worse scenario awaits the third generation where 90 per cent will not make it. (Family Firm Institute, Inc.) The majority of these failures will be the result of lack of planning by the current owners.

Jane O’Connor, executive director of the Vancouver branch of CAFE explained, “The reason for lack of success is lack of communication between generations – they don’t communicate their visions for the future of the family business and how this vision aligns with the present and future generation.”

CAFE warns that many firms today are not preparing properly. O’Connor said, “Family business owners are failing to make plans to resolve conflicts among family members in advance. They do not formulate a succession plan, they fail to develop a strategic business plan and they fail to develop a retirement and estate plan. Too many are too busy focusing on the here and now.”

CAFE is a member-based volunteer organization that offers peer assistance and advisory groups on many issues facing family businesses today. Some of CAFE’s peer advisors include financial planners, accountants and estate planning lawyers.

CAFE president Aeronn Zlotnik of ZLC Financial Group is one who has had firsthand experience.

“CAFE has helped my family to complete our succession plan. The programming and introduction to experts helped us avoid many pitfalls during the transition. CAFE has been an important partner in assisting our family succession planning which now involves the third generation.”

Family owned businesses endure or collapse depending upon how effectively senior family business owners plan for the future. With the help of peer advisors and CAFE, the next generation can be properly equipped to carry on a successful legacy of their family enterprise.

About CAFE: The Canadian Association of Family Enterprise (CAFE) is a national not-for-profit organization established in 1983 with the mandate to promote the well-being, understanding and success of families in business. Through 13 chapters across Canada, CAFE provides services, resources and support to those involved in family enterprise including both extended business families and the advisors that counsel them.

Through participation in peer groups, seminars and conferences, CAFE has provided a forum for families and their advisors to share ideas, learn best practices and build their collective skills. We offer an outsider’s perspective with an insider’s understanding of family business.

Visit cafecanada.ca/vancouver for more information.