Study challenges assumptions that young family members don't want to take over the family business
The next generation of family business owners is more interested in sustaining the family legacy for future generations than the founding generation realizes, says a new report that the Family Enterprise Foundation (FEF) released today.
“It was very encouraging to see this result coming from the next generation,” Bill Brushett, President and CEO of both FEF and Family Enterprise Canada, told Wealth Professional.
“There has always been concern and the problem has been that all of the information that’s out there is really anecdotal. You have conversations and hear people’s concerns about the younger family members in the business families having another interest or pursuing other career options. So, I think the more senior, or current, ownership generation has always, anecdotally, expressed concerns about their motivation, interests, or willingness.
“What’s so encouraging in this result is that it’s almost overwhelming that the next generation is very interested and very motivated in maintaining that family legacy and it’s ready to step up and really get involved. So, we have something really positive to look forward to considering all the major transitions that are going to occur in the next decade.”
Brushett noted that the report is valuable since his organization’s previous research showed that much of the Canadian, and global, economy is built on family businesses.
“This is not just a succession discussion,” he said. “It’s about the strength of the Canadian economy.”
This report, Who are the Guardians of Family Legacy?, is the second part of FEF’s national study and builds on its Ready, Willing and Interested – or Not? report. Abacus Data conducted this research, supported by KPMG in Canada’s Family Office, last June. It surveyed the owners of 300 family-owned Canadian businesses with 20+ employees. FEF is considering follow-up research to learn what the younger generation needs to enter, or take over, the family business.
The survey results released today showed:
- 100% of those aged 18 to 35, versus 77% of the 60+, considered working together as a family is important;
- 96% of those aged 18 to 35, versus 67% of the 60+, think of the family business as a legacy to leave future generations;
- 95% of those aged 18 to 35, versus 74% of the 60+, would be willing to invest in their next generation’s business;
- 95% of those aged 18 to 44, versus 65% of the 45+, feel it’s important for the family to take over the business;
- 87% of those aged 18 to 44, versus 70% of the 45+, expect future generations to retain company ownership.
The survey also showed 91% of respondents thought it important to build a sustainable business.
“The next generation is really well positioned to step in and take over the leadership,” said Brushett, noting the younger generation now sees an opportunity to put its own mark on the business and can bring its technological savvy to it.
Richa Arora, a Senior Family Advisor with the KPMG Family Office for KPMG in Canada, added: “Working with families through the last few years of the pandemic, we’ve seen a positive shift in terms of families coming to the table. There is more willingness, and more interest, from a next gen standpoint, to better understand the business and try to see if they can continue the same entrepreneurial spirit that their parents had. They want to take over. They want to leave their mark and shape the business in a positive way.”
Brushett added that the pandemic has probably heightened that by creating more family cohesiveness.
“The kids are being raised as digital natives, so there’s a lot of technology influence. There’s a desire to bring more innovation into the business, new ideas,” he added. “So, I think there’s a greater willingness to hear what ideas they have to bring and bridge the gap between how they go about it between the senior and younger generation. That’s where we’ll start to see a little bit more of a shift.”
While Brushett noted that can take three to five years to successfully transition a business, Arora urged advisors to sue this new data to “challenge the status quo” with their clients.
“I think for wealth advisors working with a business family, this research says that it’s very important to step back and understand the dynamics within the whole family and not just focus on transitioning the investment assets of the family,” said Arora. “They need to think of the family as a whole in terms of being able to transition from generation to generation. If they don’t focus, there’s a risk that the leadership within the family is not successfully transitioned.
“We have this research report now that shows the next generation has a strong desire to get involved, which challenges the sort of the assumptions and biases that the senior generation may have had. So, perhaps the advisors can say, ‘you should give the next generation more of an opportunity’ or start having an open dialogue about their intentions and ideas. Just bring them to the table.”