Transcript Document
“Preserving an Endangered Species… A Presentation By Gordon Wusyk Of Predictable Futures Inc. - The Business Family Centre If you think… Retirement & Death Are “OPTIONAL” EVENTS You’re in the WRONG room!! FAMILY BUSINESS SUCCESSION PLANNING . . . “70% of all Family Businesses never make it to the second generation And 90% fail to reach the third.” Family Enterprise in Canada • • • • • • • • Canada’s family businesses employ 4.7 million full-time and 1.3 million part-time workers Total annual sales of Canada family-owned businesses: $1.3 trillion Most family enterprises are highly dependent on their current leader Major leadership change in Canadian family businesses – 27% of family business leaders will retire in next 5 years – 29% will retire in 6-10 years – 22% will retire in 11-15 years Most have no contingency plan covering the death or the disability of their leader Only 29% have a succession plan Unlike US counter part, Canadian family business owners see the generation of wealth as the primary role for the business. Keeping business in the family is a lower priority Source: BDO Dunwoody/ Compass Report on Canadian Family Business (2003 & Survey of Canadian Family-owned Business by Deloitte& Touche for Tax Education and Research at the University of Waterloo (1999) From ‘FAD’ to ‘FIELD’ of study • • • • Research over the last 25 years provides new understanding of family business & their issues Growing number of family business advisors coming from a variety of disciplines – Family Firm Institute: Founder in 1983 by 22 professionals, now has 1200 members – Certification program now available for professionals Clients are more knowledgeable and sophisticated than 10 years ago: – Families have access to many different educational opportunities – Families have access to many networks: • • • • • • • PFI Family Business Network (FBN) CAFÉ BFF ABFI CEFE FFI Clients now expect advisors to be well informed Source: CALU May 2005 – Evolution of the Family Business Field All about PERSPECTIVE The Interdependence of our Family, our Ownership and our Business Entities Family Business Ownership Perspective of Each Entity Business Needs / Priorities: •Strategic Planning •Market Value Compensation •Results (targets) •Profits (retained earnings) •Competent, Competitive Staff •Systems for Management & Control •Marketing •Quality Product/Service •Accountability •Regular Reviews •Solvency •Cash Flows •Entrepreneurial Perspectives •Fast, Efficient Decisions Family Perspective Needs / Priorities: • Nurturing • Communications • Affection and Love • Equality of Affection • Individual Needs • Personal Development Family Ownership Perspective Ownership • • • • • • • • • • Needs / Priorities: Return on Investment Return of Investment Equity Growth Stewardship of Assets Reputation of Owners Diligent Management Timely Reporting Responsible Board Selection Neglect one… Family Business Ownership and risk destroying the whole system FAMILY BUSINESS SUCCESSION PLANNING A “Multi-Dimensional” Process Family/Personal Relationships Tax Planning/ Minimization “Death Tax” Liabilities Estate Equalization Your Family Your Business Legal Documentation Wealth Management “Game Plan” Retirement Strategies Protection From Family Law Creditor Protection Charitable Gifting IMPORTANT PLANNING DECISIONS Are Often Made One At A Time … But Even A Series Of What Seem To Be Quite Reasonable Decisions, Taken In Isolation, Can Produce A Result That Is Unacceptable When They Are Combined … What You Wanted What You Got The Enigma of the Business Owner The Four Part Personality* 1) The Owner – ROI – Growth – Income – Exit strategy 2) The Aging Male/Female – Physiologically – Psychologically 3) The Best Employee – First in, last out 4) The Manager – Hires – Fires – Organizes The 7 F’s of Balance Family Fun Fitness Friends Faith Finances Firm The Natural Conflict… The Family The Business Goals: Support Family members Goals: Profits, revenues, efficiency & Growth Rules: Informal expectations Rules: Written & Formal w/rewards & punishment Evaluation: Rewards for who you are – unconditional Succession: Caused by death, divorce or illness Relations: Deeply personal, of primary importance Authority: Based on family position of seniority Evaluation: Support conditional on performance Succession: Retirement, promotion or departure Relations: Semi Personal or impersonal, of secondary importance Authority: Based on formal position in the organization’s hierarchy Conflict is healthy… Unresolved conflict is not Roots/ Principles • • • • • • • • • • M A X I M I Z E R S Make Things Happen Achieve Significance (vs. Success) X out the Negatives Internalize Right Principles March to a Mission Integrate all of Life Zero in on Caring for People Energize the INNER Life Re-align Rigorously Stay the Course If you don’t have PROCESS you have a PROBLEM The Process 1. Clarification of founder’s dreams of the future 7. Building the Legacy – review of estate plan 2. Clarify family member’s personal vision – for business & at a personal level 3. Aligning the business 6. Choosing and Training the New Owners strategically to support family & founder’s dreams and goals 5. Choosing The New Leader 4. Prepare the successors A Game Plan.. Or it’s GAME OVER Role of the Family Business Consultant Ownership/Governance System Lawyers Accountants Estate Planners Family Business Consultants Business Systems Business/OD Consultants Family Systems Family Therapists WISH BONE JAW BONE BACK BONE How to Contact PFI Predictable Futures Inc The Business Centre Suite 1211 10104 103 Ave Edmonton, AB T5J 0H8 www.predictablefutures.com [email protected]