GRIT Ed. 9 | Family Matters - Flipbook - Page 21
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Today, family businesses are the backbone of the
Family cohesion leads to business growth, which
Canadian economy. At EY, we recognize the importance
influences business success. Sustainability contributes to
of entrepreneurship through our annual EY Entrepreneur
both family cohesion and business success.
Of The Year program, which shines the spotlight on
entrepreneurs across the country who are transforming
Protecting the family capital should be a key part of the
our world through unbounded innovation, growth and
business strategy. Siblings working together because of
prosperity.
their parents’ wishes may find themselves at odds when
their parents are no longer in the business. “I can’t work
There are certain advantages family businesses enjoy
with my brother, I can’t work with my sister. I’m just here
over public companies: patient capital, an emotional
because of mom and dad.” Likewise, a death or divorce
connection to the business, the personal desire for it to
may result in business partners finding themselves in
succeed and strong support networks.
business with their former partner’s spouse or children.
The
family
business
is
an
ecosystem
of
three
Leading family businesses have strong governance
components: the owners, those who work in the business
procedures and written agreements. These documents
and the family members. Unlike public companies,
align family interests with the business strategy and
family businesses must simultaneously focus on their
wealth preservation objective. They provide guidance
company’s success and their family’s interests, which may
when emotions run high and offer a path forward when a
not always go hand in hand. Family members — whether
crisis makes rational decision-making difficult.
they work in the business or own shares — can influence
both the ownership structure and the business. This is
It’s Never Too Early To Start Preparing For Your Exit
only heightened where there are two or more unrelated
Either by chance or by choice, at some point in the
founders.
future, you will exit your business. Whether it’s a partial
Consider a situation where a business is expanding and
exit by perhaps bringing in an equity partner, a full exit
establishing a new division in another province or country.
involving an outright sale or a transition over time to
Who should be put in charge of that division? The best
a family member, or a sudden exit because of a health
choice might be one of the founder’s children. But how
issue, being prepared is key. Therefore, it’s important for
will the other siblings react? And how will the parents feel
business owners to evaluate their business transition plans,
about their child moving away? What’s the best approach
prepare the next generation of leaders and implement tax
for the business? What’s the best approach for the family?
efficient strategies to preserve wealth for themselves and
future generations.
It’s easy to see how decisions made within the family
will impact the operating business and the owners. And
Let’s explore three key areas of focus that can be
how decisions made in the business or by the owners will
addressed today to help you prepare for a successful next
impact the family dynamics and family harmony.
phase.
→
Where Family Cohesion Is Absent, It Could Lead To:
| UNALIGNED EXPECTATIONS
| DISPARATE FAMILY INTERESTS & VALUES
| INABILITY OF SUCCESSORS TO GROW THE BUSINESS
| COMMUNICATION BREAKDOWNS
| LACK OF TRANSPARENCY OR TRUST
UNDEFINED FAMILY GOVERNANCE TO
| THE SUCCESSION PROCESS
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