The looming succession crisis facing Canada’s family businesses

Canada is facing the largest transition of businesses and wealth in its history, with six out of 10 family enterprises set to pass ownership and control onto the next generation within the next decade.

Concern is growing that the country may be ill-prepared for this significant generational shift in the Canadian economy, according to Peter Jaskiewicz, founder and academic director of the Family Enterprise Legacy Institute (FELI) at the University of Ottawa.

“We have a looming succession crisis for most Canadian family-owned businesses,” says Mr. Jaskiewicz.

”We are lagging in preparing the next generation of responsible owners across Canada and in supporting thousands of business families in their continuity planning. It is vital for us to address this crisis to ensure a thriving future for Canadian business owners, communities and the country as a whole.”

High stakes

The stakes are high for the upcoming changing of the guard in family enterprises. Family firms of all sizes own nearly two-thirds of all businesses in the country, and together, they employ more than half of the country’s workers and generate nearly half its private sector GDP.

“The economic and political uncertainties currently facing Canada – tariffs, inflation and the affordability crisis, for example – make this moment all the more perilous,” Mr. Jaskiewicz says. “We have a collective responsibility to equip entrepreneurs and family-business owners with the resources to successfully navigate generational transitions and guide the economy through serious challenges. Make this a pull quote accompanied by the headshot of Peter and his title – founder and academic director of the Family Enterprise Legacy Institute (FELI) at the University of Ottawa.

“The period of transition for a family business is a particularly vulnerable time, with research suggesting that only 30 per cent of family-owned businesses make it to the second generation, and 12 per cent make it to the third generation,” he says. “That said, some of those that do not make it to the next generation might thrive under new owners if the sale process is well done.”

During ownership transfers, traditions and systems are disrupted, and there is no guarantee that productive new systems are put in place.

When transitions lead to business failure, the result is lost jobs, investments and tax revenues.

Mr. Jaskiewicz cites the example of a small electrical business that ends up closing due to lack of a suitable successor. “The five people they employed lose their jobs, and the business is no longer around to help sponsor the local hockey team or pay taxes for the local library. So the closure is also harming the social fabric of the community.”

Even if a business continues after transition, the next generation may be unable to continue the trajectory of success built by their predecessors. “We may have a company growing by 25 per cent a year, and post-transition, it stagnates or sees a decline in growth. The new owners may not be able to build on the founder’s hard-earned legacy.”

Need to fill the gap in next-generation knowledge

Founders of family businesses who fought for success in the lean years often believe the next generation will simply figure it out – as they did. Or they try to prepare their children or other family members on their own and find themselves unable to easily navigate the dynamics that occur when business and family interests are intertwined.

“We know that more than two-thirds of family businesses don’t have a formal succession plan and process,” says Mr. Jaskiewicz. “Taking on the task of preparing the next generation without support is risky because running a business and successfully transferring ownership are two very different skill sets.”

The core mission of FELI is to boost the skills and knowledge of family-owned businesses to help them transfer ownership in a productive way. It conducts research including through focus groups with family enterprise members to gain insights on the pitfalls of generational transitions and on policies, governance structures and other best practices proven to work. FELI also studies successful transition models from around the world.

A prime goal for the institute is to then disseminate the knowledge it builds to family businesses through training, so they have practical business solutions.

“We know which best practices are out there and we see they work,” Mr. Jaskiewicz explains. “However, the problem is that many business families don’t know about them, so knowledge transfer is critical.”

While FELI focuses on building the connections that will put solutions in the hands of family enterprises, it is also making an appeal to the national government to get more involved.

“Prime Minister Carney frequently speaks about the importance of intergenerational investments – how critical it is to make investments now that will yield benefits for the next generation,” he says. “Given that family businesses are the lifeblood of the Canadian economy, investing in tomorrow’s leaders of these businesses is a crucial national endeavour.”

Among the federal government actions that FELI advocates are the following:

1. Build more comprehensive national data on the state of Canada’s family businesses.
2. Support creation and delivery of multilingual programs to train potential successors.
3. Build a hub of excellence. Canada already has world-class family business researchers, advisers and peer networks, but they are disconnected and underfunded. What’s missing is a federally supported institute bringing together associations, institutes, centres, foundations and organizations to pursue a co-ordinated strategy.

“Strengthening the family business ecosystem will help us create the problem-solvers of tomorrow,” Mr. Jaskiewicz says. “These transitions are not just about transferring ownership, but also the wealth that comes with it. If we can pass on wealth to people who know how to use it to make a better society that offers prosperity for everyone, our investments will yield benefits for generations to come.”

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