Family-owned businesses are all over Canada, making business succession strategies especially important. Read on to learn some simple business succession tips from Edison Wen to keep your legacy alive!
When people on the job hunt complain about not being to find any worthwhile positions, they are often talking about the proliferation of family-run businesses in Canada, though they may not realize it. It can be hard to secure a position in a family business that usually plucks its members from the family tree. An estimated 4.5-million Canadians are employed by family businesses, with their work accounting for more than 40% of the national Gross Domestic Product.
Despite the number of family-run businesses in Canada, many do not last long due to poor succession planning. Regardless of their success, only about one third of family businesses carry on to the second generation, and a scant 10% extend their legacy into the third generation.
Though many are quick to blame complicated family dynamics for this attrition rate, the real challenge for business succession is felt when trying to navigate the pitfalls of tax law. Developing an appropriate plan takes hard work, research, and expertise drawn from tax law, property law, wills and trusts, valuations, and insurance. As the Baby Boomer generation enters into their golden years, more family business are passed on than ever, and so Edison Wen CPA’s tax specialists are needed more than ever.
5 Steps to Build a Business Succession Strategy
- Involve the younger generation. Don’t neglect the younger family employees during your succession planning; refusing to consider contemporary perspectives can discourage the next generation. You need to take the younger generation’s input seriously to develop engaged and invested successors.
- Be a lifelong student. You don’t know it all – nobody does. Remain open to suggestions. Not only does this motivate and acknowledge the input of the younger generation, but it prevents problems from being left perpetually unsolved, thereby compromising company efficiency.
- Consider abandoning intra-family management. Forcing family members into managerial positions can lead your company to ruin. Instead, let them focus on their passion. This gives you the option of hiring talented non-family members.
- Delegate, delegate, delegate! If you micro-manage every aspect of your business, your family will feel uninvolved. Delegate, build depth of management, and give your employees a sense of ownership.
- Don’t get hung up on equality. Many companies fall apart because they insist on equality. Don’t fixate on dividing management, ownership, and control equally between family members, as their competency and interest may vary.
These strategies are only the beginning! Contact the Edison Wen CPA team of professional for a free consultation on tax structure before taking any action, and keep your legacy alive!