Canada's primary business ownership model is fundamentally sound, but
needs to embrace new technologies, innovation and client diversification,
according to comprehensive Grant Thornton LLP report.
VANCOUVER and VICTORIA, Nov. 13 /CNW/ - At a time when foreign ownership
of the nation's businesses is a growing issue, many Canadians would be
surprised to learn that the vast majority of businesses in the country remain
privately-owned family enterprises. The most comprehensive report to date to
focus exclusively on mid-market Canadian family enterprises, The Grant
Thornton Family Enterprise Insights 2007 report found that mid-sized family
enterprises remain fundamentally sound. The report is based on findings from
The 2007 Grant Thornton Family Enterprise Survey, whereby business owners and
senior executives were interviewed at 201 mid-sized ($15M-$500M) private
Family enterprises represent a major force in Canada's business
landscape. In their 1998 article, "Securing the Future of the Family
Enterprise: A Model of Offspring Intentions to Join the Business," appearing
in Entrepreneurship Theory and Practice, Stavrou and Swiercz present data that
family owned enterprises represent 80% of the nation's businesses, making
their influence on the economy indisputable. As these businesses continue to
thrive, so do the employment opportunities for a vast number of Canadian
Ian Smith, a Vancouver-based Practice Leader for Grant Thornton's M&A
Advisory Services asserts that there are many advantages to this business
model. "Not only is family enterprise the dominant form of business in Canada,
it may, contrary to assumption, be the most functional, effective and
beneficial to the economy. It can be argued that the family enterprise
demonstrates higher levels of trust, greater loyalty (both within the business
and to customers), increased community involvement, a more long-term
perspective, and the motivation that comes from having ones' wealth and
reputation tied up in the business."
"Mid-sized family enterprises in Canada are optimistic about their
prospects for the coming fiscal year," said Jim Mills, a Vancouver-based
partner with Grant Thornton and the firm's national leader of family
enterprise. "Sixty-seven percent of those we surveyed feel positive about the
overall national economic climate, and 64% expect revenues to climb or remain
constant. Eighty-seven percent expect profitability to remain constant or
increase, and 92% say they will add to or maintain their current workforce."
Despite the signs of strength, optimism and health, the report suggests
that mid-sized family enterprises in Canada lag behind other sectors in
diversification of their client bases and in investing in new technology, and
in innovations in operations and management.
Half of the surveyed companies intend to increase their investment in
innovation next year. Among the family enterprises that own their buildings,
six-in-ten do not plan on changing their level of investment in new buildings,
and half of those owning plants and/or machinery have no plans to increase
investment in either.
Mid-sized family enterprises excel at building strong locally based
clients that can result in the risk of over reliance on a few key
relationships. An insight from the Grant Thornton report is that mid-sized
family enterprises need to embrace the strategy of client diversification
complementing locally based clients with expansion into new market areas for
continued success and reduced risk.
The Grant Thornton Family Enterprise Insights 2007 report also found that
long-term planning is required to deal with the potential sudden loss of
customers, key suppliers and personnel. According to Shelagh Rinald, a
Vancouver-based Partner and National Leader for Grant Thornton's Succession
and Estate Planning services, "To understand the existence of a document as
evidence of succession preparedness is to misapprehend the nature of family
enterprise transition. It is not a piece of paper or a singular event, but a
process that must be realized across and throughout the family structure,
taking both business and individual needs into account. Communication - early
and throughout - is absolutely key. Whether facilitated though family
committees, trusted advisory boards or outside counsel, transition will only
succeed when the family moves forward with mutual trust and knowledge."
Family enterprises are not immune to the staff pressures faced by
Canadian businesses at large. Half of the respondents selected "lack of
skilled workforce" as a constraint to their business growth, more than for any
"We are pleased to report that our survey also determined that mid-sized
family enterprises have taken some necessary steps in succession planning,
which is a key concern among Canadian businesses at large," Mr. Mills said.
"Two-thirds of the respondents in our survey have a formalized, documented
succession plan in the legal and financial sense as compared to about half of
mid-sized non-family held enterprises as a whole."
Note to editors:
2007 Grant Thornton Family Enterprise Survey
The proprietary research contained in the 2007 Grant Thornton Family
Enterprise Survey is the result of 472 telephone interviews that were
conducted with business owners and senior executives of mid-sized businesses
across Canada, including 201 private family enterprises. Respondents were
classified as family enterprises if any ONE of the following conditions were
Other members of the respondent's family or the owner's family are
involved in the business ...
- As employees (88%)
- As part of the management team (71%)
- As directors (64%)
- As shareholders (64%)
For the purposes of this survey, mid-sized was defined as businesses with
annual revenues in the range of $15M to $500M. Data was weighted to reflect
the regional and industrial distribution of mid-sized business establishments
based on information provided by Statistics Canada.
Grant Thornton LLP is a leading Canadian accounting and business advisory
firm providing tax, specialist advisory, audit and assurance services to
private and public mid-sized organizations. Together with the Quebec firm
Raymond Chabot Grant Thornton, Grant Thornton has more than 3,100 people in
offices across Canada. Grant Thornton LLP is a Canadian member of Grant
Thornton International Limited, which has over 585 offices worldwide and is
represented in over 100 countries.
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