Family businesses might be in better hands with the next generation than we think

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The future of family business in Canada may be in better hands with the younger generation than the older generation believes, a new survey suggests.

Research released today by the Family Enterprise Foundation, a not-for-profit organization, found that 97 per cent of next-generation respondents consider it important to sustain their family business, while only 74 per cent of the senior generation feels the same way.

“There is a generational shift occurring that challenges conventional thinking,” says Olivier de Richoufftz, the Montreal-based general secretary for the Family Enterprise Foundation, which conducts research and provides educational resources to support the success and sustainability of family enterprises in Canada.

While it’s a common perception that younger owners aren’t ready or interested in keeping family businesses going, “our research shows that younger owners have as much, if not more, interest in retaining family control and preserving the business for their children,” de Richoufftz said.

The new report, Who are the Guardians of Family Legacy?, is the second part of a national study of family offices in Canada providing a comprehensive survey of transition intentions in Canadian business families. The foundation’s research was supported by KPMG and conducted by Abacus Data. The survey was conducted with a random sample of 300 Canadian business owners involved in family-owned businesses with 20 or more employees, between June 3 and 11, 2021. The margin of error for a comparable probability-based random sample of this size is +/- 5.65, 19 times out of 20.

The new survey found that senior family members are not the sole guardians of family business legacy in Canada — the “family” part of the business is important to all of its members who are involved in the enterprise. More than nine out of 10 (91 per cent) of all family members think it’s important to build an economically sustainable family business, while 88 per cent say it’s important for the family to work together, and 77 per cent hope a family member will take over the business when it’s time.

But there’s somewhat of a split between younger family members (age 18 to 44) and those older than 45 when it comes to succession and retaining family control. Among younger respondents, 87 per cent expect family ownership of the business to carry on, while only 70 per cent of older respondents share this expectation.

Similarly, 95 per cent of under-45s think it’s important for a family member to take over, while only 65 per cent of older family members consider this important.

“The family business is important to all generations, but what’s interesting is how strong the desire to continue the business in the family is in the next generation,” says Richa Arora, senior family advisor for KPMG Family Office.

The new data is important because many senior family members now consider transitioning their businesses at earlier stages in their lives than in the past, and the survey suggests that their children and grandchildren are more ready, willing and able to take over than their elders might realize, Arora says.

“It’s good news for families to know that the next generation wants to play a part in the business. The next big question, of course, is how the younger generation can go about doing this,” Arora added.

The information is also important because family-owned businesses are such a key part of Canada’s economy, Arora said. Statistics Canada’s most recent data on family-owned enterprises found that in 2019 they accounted for 63.1 per cent of all private sector firms in the Canadian economy and generated 48.9 per cent of Canada’s real GDP in the private sector, or $574.6 billion.

The survey shows that younger family members are ready to take on the challenge, says Bill Brushett, president and CEO of Family Enterprise Canada.

“They’re excited about the opportunity to take over leadership of what their parents and earlier generations created, grew and nurtured, and they’re motivated,” said Brushett, who is based in Oakville, Ont.

“While many of the senior generation are concerned that the next generation is not prepared or interested in taking over the family business, the research shows that most young family business owners are optimistic, committed and are even thinking further ahead about passing the family enterprise to their own children one day.”