There were two interesting articles recently in Canadian Capital magazine regarding business succession planning: “Third Generation Jinx” and “5 Tips to Protect your Legacy”.
The Third Generation Jinx article states that if you take 100 new Canadian businesses irrespective of what part of the country the business is located, what sector of the economy, how well financed or how profitable the business is, 90 of them will fail to reach the third generation. Not necessarily new news, but staggering stats anyways.
Judi Cunningham, executive director of the Business Families Centre at the University of British Columbia’s Sauder School of Business was quoted as saying that the common problem is that “no one teaches you how to interact or relate to each other”. “That’s just stuff we take for granted, and we just learn as we grow up.” As a result, many owners spend more time on business strategy than family strategy and think “it will just work itself out”. Normally, the opposite ends up being true and “it does not work itself out” as the “family needs just as much, if not more attention than the strategic planning in the business.”
A related article, “5 Tips to Protect your Legacy” offered the following suggestions to business owners to help ensure they pass on a legacy of wealth and employment and to ensure their legacy survives for generations:
Education: Learning and understanding the issues is important. There are numerous educational resources (courses; continuing education; books; websites; etc.) available to assist businesspeople looking to learn from successes and failures of other business families.
Keep Communication Open: Communication is key. The more direct conversations that owners have with their heirs and family members, the less chance of indecision, conflict, and/or rivalry.
Commitment to the Process: Owners need to commit to a process. It takes years of dialogue and planning to put a business succession plan in place. It is not something that can be done over a weekend or even several months.
Establish Rules: Formal process and ownership guidelines provide a roadmap for family members and heirs to diffuse conflict before it happens. It also sets boundaries and guidelines.
Talk to Others: Owners should talk to others who have faced succession challenges to help identify solutions and highlight problems.
Lesson Learned: Canadian entrepreneurs face daunting odds to pass their legacy on to future generations – that is assuming they want to!
Until next time