What is Succession Planning?
A detailed Succession Plan affects all three areas (circles) of a family business and is therefore the focal point of the overlap area. While it serves to protect the ownership and wealth of the business, it also involves the financial plan of the individual owner(s). Additionally, the strategies for management of a family business are reliant on an appropriate succession plan.
Once such a plan is in place, it becomes a great foundation for determining what else needs to be done, and what training or education will be required, to move the business along.
Family businesses in this country are coming into a new phase of their evolution. In a recent study on family businesses it is estimated that 75% of the leadership of family businesses in Canada will transfer from one generation to the other within the next 10 years.
Small and family-owned businesses are an integral part of the North American economy. However, a variety of studies have indicated that most are not as prepared for managing the future as they should be.
- Over 90% of North-American business is family-controlled.
- They deliver 64% of the Gross Domestic Product.
- They employ over 60% of the workforce.
- They create up to 85% of all new jobs each year.
- 80% of families surveyed feel that the business has a definite impact on their family identity.
- 84% prefer to pass the business to next generation family.
- 65% expect the next generation leader to be female.
- Only 10% successfully transition to the third generation.
- 41% of family businesses are expected to change leadership in the next 5 years; 71% in the next 10 years.
- More than half of SMEs have no succession plan in place.
- Less than half have even identified a successor.
This evidence highlights the importance of small and family-owned business while illustrating the future challenges and the need for planning that this sector will increasingly face in the coming years. Our SuccessCare® Program deals with the creation of a suitable succession plan, one that protects the family unit from the rules that automatically affect the estate when the owner dies intestate.
What Makes a Good Succession plan?
As entrepreneurs, our vision of "succession planning" is generally focused on wills, tax strategies, estate structures and financial planning tools. However, it is important to first identify your personal goals and then ensure that your succession plan, and the business itself, is structured around them. Find out more about creating an integrated succession plan.
For more information on how to set up your Succession Plan, contact Daphne McGuffin at (800) 598-6400 or email her at: Daphne McGuffin.
For further insight into the importance of Succession Planning, pick up a copy of Great Expectationsby Grant Robinson.
|Great Expectations (Grant Robinson, Porcupine's Quill, 2000) will strike a chord of familiarity with each and every harried entrepreneur. It is an entertaining, true-to-life story about the owners of a small town printing firm facing transition issues. It illustrates the challenges and unrealistic expectations that are common to family-owned businesses.|
Grant wrote the story of Thom and Sophie Penmaen, typical small-town Canadian business people, to illustrate the pressures and complexities family-owned companies are faced with when the principals are no longer able to manage their businesses.
You can pick up a copy of Great Expectations at the Bookshelf in Guelph, at our Guelph Head Office, or online from the following site:
More Reading on Succession Planning
To learn more about succession planning in general, we invite you to read any of the books we have selected.