Family business
Operating in almost every corner of the economy, family enterprises have proven to be one of the most enduring types of businesses.
Powering economic activity
They are local shops, regional companies, and industry leaders – dynamic enterprises that collectively employ millions of workers, anchor communities and power the economy.
Canada’s family businesses are a formidable lot, with a reach and impact that extends beyond the boundaries of commerce. The numbers paint an impressive picture: family businesses account for 50 per cent of the country’s productivity and provide employment for about half of the Canadian workforce.
On a global scale, family-controlled enterprises make up 80 per cent of all businesses and create an estimated 70 per cent to 80 per cent of aggregate GDP.
“If you look at family businesses, they are an engine of economic activity,” says Judi Cunningham, founder of the Institute of Family Enterprise Advisors (IFEA), a Vancouver organization that promotes service standards and provides support and education for professionals and organizations that advise family businesses. “But what’s unique about this group is that when families start and build businesses, they’re not just creating wealth for themselves; they’re generating and regenerating prosperity in all kinds of ways.”
Ms. Cunningham cites just a few examples of how family-owned companies can have a direct impact beyond their business: asset acquisitions such as real estate, investment portfolios that yield benefits for other companies and individuals, and philanthropic giving.
The latter is especially noteworthy, says Ms. Cunningham, a family enterprise consultant who is currently a visiting scholar at Kennesaw State University’s Cox Family Enterprise Center in Kennesaw, Georgia. Family foundations – many of which are backed by family businesses – are a significant source of charitable donations.
Even families that sell their company will often drive more business activity by investing in another family business, adds Ms. Cunningham.
“They have money from the business they just sold and so they decide to invest in their kid’s or nephew’s business,” she says. “Or they put money in another business that their family might get involved with eventually.”
While the importance of family businesses has long been widely acknowledged, recent years have seen an even greater recognition of their significant contributions and impact – and of their unique needs. As a consequence, advisers and other service providers are increasingly enhancing their offerings and refining their approach to address the particular challenges and opportunities faced by family businesses.
“What we’re seeing right now are advisers and financial services firms standing up and realizing the need to really service this audience,” says Karen Laprade, founder and CEO at LEAD, a Vancouver-based, interdisciplinary team of family advisers that covers a wide spectrum of areas – from insurance and legal to governance, communication and philanthropy. “The opportunities in this field are really significant, but you need to have a solid understanding of the dynamics and issues.”
Family businesses have many advantages over non-family-owned companies, says Ms. Laprade. These include the ability to develop stronger and more nimble leaders, make decisions quickly, and stay focused on long-term growth.
“But we also know that they’re somewhat handicapped when relationships are not flourishing well,” says Ms. Laprade. “So if you’re providing advice or services to a family business, you also have to know how to help them manage these relationships.”
“...when families start and build businesses, they’re not just creating wealth for themselves; they’re generating and regenerating prosperity in all kinds of ways.”
Vince Cardella, a principal in the strategic wealth planning practice at Vancouver-based Promerita Group, agrees. Two years ago, he completed an IFEA course for advisers – a move that has helped him work more effectively with his clients.
“I’ve always dealt with family businesses, but I have to say that the level of wealth in the family businesses I’m dealing with today has scaled up considerably and the complexity is greater,” says Mr. Cardella. “Many of the issues within a family business definitely exist because you have family members working together, and even those who aren’t working in the business are directly affected by it. As an adviser, you have to understand these issues and be prepared to offer privacy, integrity and empathy to the family.”
The importance of truly understanding family businesses is driving recent initiatives at Grant Thornton LLP, a national audit, tax and advisory services firm. Bill Brushett, a national client services partner at Grant Thornton, says the company is boosting training for its family business advisers.
“We’re very deliberately investing in enhancing the skills and capabilities of our people who advise family business,” he says. “We’re training them to be better advisers and we’re actually refining our services to be more focused on the owner and family, not just the business.”
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