Family-owned businesses under threat

A new study says demographics, tax policy and a lack of trained advisers threaten the continuity of family enterprise

Mario ToneguzziFamily-owned businesses have a significant impact on Canada’s economy, accounting for for 63.1 per cent of all private sector firms in the country, according to research released on Tuesday.

The Family Enterprise Xchange Foundation (FEX-F) partnered with the Conference Board of Canada to study the economic weight, regional impact, industry presence and business performance of family-owned enterprises.

The Family Enterprise Matters: Harnessing the Most Powerful Driver of Economic Growth in Canada report also found that family enterprises generate 46.9 per cent of private sector employment; they account for about 65 per cent of the output and 90 per cent of the jobs generated by small and medium-sized companies; and they perform better on some important business metrics, such as longevity – 70.1 per cent of family-owned enterprises in operation in 2007 were still in operation in 2013, compared with just 65.2 per cent of other firms.

“Rooted in communities across our diverse geography, successful family enterprises can sustain a multigenerational commitment to job creation and to the social cohesion that builds community and national prosperity,” said Jim Burton, chair of FEX-F, in a news release. “In many Canadian communities, family enterprises are the biggest employers, particularly in small communities. Yet demographics, unintended consequences of tax policy, and a lack of trained advisers are threatening the continuity of family enterprise.”

Michael Bassett, director of research impact and content strategy at the Conference Board of Canada
Michael Bassett
Conference Board of Canada

“This first-of-its kind study in Canada highlights the crucial role family enterprises play in our economy as well as the need for more in-depth data to be collected,” said Michael Bassett, director of research impact and content strategy at the Conference Board of Canada. “The research clearly shows that family-owned businesses exhibit characteristics that are different than non-family-owned. Given demographic trends and the looming succession of many family enterprises, the data gaps in our understanding of this important part of the economy are worrying because policy-makers are largely in the dark regarding an important driver of the Canadian economy.”

Burton said the Family Enterprise Xchange Foundation believes passionately that Canada’s economic future can be made stronger by empowering and inspiring family enterprises to greater heights so they can have an even more substantial impact on Canada – enriching our culture, reflecting our values and powering our economy.

“Improved access to empirical evidence and advisory services will help these businesses reach their full economic potential, leading Canada into a more prosperous future.”

Mario Toneguzzi is a Troy Media business reporter based in Calgary.

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