More than two-thirds of Canada’s private company owners are planning to either sell or transfer their business to the next generation, yet nearly half of those have no succession plan in place, according to a report from PwC Canada.
The Once in a Lifetime report, released today, said private and family businesses are a critical driver of the Canadian economy, representing nearly two-thirds of the country’s gross domestic product. It also said that the majority of jobs (70 per cent) in North America are created by private and family businesses — providing work for more than 12 million Canadians.
Private and family businesses contribute approximately $1.3 trillion to Canada’s GDP.
“The founding generation built the business with a unique combination of blood, sweat and tears. Now they are reconciling to a future in which someone else will be making decisions about the company’s future,” Bill McLean, partner, Private Company Services, Business Advisor, PwC Canada, stated in a news release.
“It’s important for owners to start thinking about what business continuity looks like and how they are going to proactively plan for this going forward. Doing so will enable the business owner to build a successful legacy that will continue for those next-in-line.”
A survey found that almost half of family business owners plan to pass on management and/or ownership to the next generation, according to the report. But 47 per cent of them don’t actually have a succession plan in place and 27 per cent have not involved the next generation in preparing for these changes.
“For many Canadian private companies, it’s difficult to set a price on your life’s work,” said Miriam Pozza, Partner, Quebec Deals Leader, PwC Canada. “Selling a private company takes time to plan, determine its value and find the right buyer/investor who will take it to the next level, but also uncover the right opportunities.”
The report also noted that age is not the only demographic indicator that will change during the current transfer of wealth. It noted that one-quarter of all board members for Canadian family businesses are women, and another 26 per cent have women on the management team.
“But women comprise more than a third of the next generation currently working in their family businesses,” added the report.
Mario Toneguzzi is a Troy Media business reporter based in Calgary.