Source: CPA Canada
If you’re a family business owner, chances are you believe your family will continue to control the business into the next generation. Unfortunately, family succession planning statistics undermine this belief. According to the Family Business Institute, only about 30 per cent of family and businesses survive into the second generation and 12 per cent are still viable into the third generation.
Among the reasons that family businesses don’t survive: a lack of succession planning, a lack of a logical successor, and, the fact that the business can’t escape its owner.
Business owners avoid succession planning for many different reasons, including being too caught up in present-day business issues, subconsciously wanting to avoid thinking about the fact they won’t be running the business forever, and knowing how complex business succession planning is and not knowing where to begin. For family-owned or controlled businesses, succession planning also often introduces deeply emotional personal issues.
Daniel Hershcovis (CPA, CA), partner at Calgary-based 1917 Chartered Professional Accountants,recalls a recent conversation he had with a client—the owner of a highly successful construction company. At 65, he was still heavily involved in the business, and after years of pressure from his wife to get out of the business—because she was afraid he’d “drop dead” and she’d be left to deal with the company—he booked a meeting to discuss his options.