Seventy per cent of private company owners in Canada plan to either transfer or sell their businesses when they retire—but many don’t have a plan in place, according to a new report from PricewaterhouseCoopers (PwC).
A survey by PwC found that 48% of family business owners plan to pass ownership and/or management of their businesses to the next generation, but 47% of them don’t have a succession plan, and 27% haven’t involved the next generation in preparing for the changes.
The report noted that 70% of family business transfers fail between generations. Sixty per cent of those failures are due to breakdowns in communication and trust, and 25% result from inadequate training. Only 5% of business transfers survive four generations.
“It’s important for owners to start thinking about what business continuity looks like and how they are going to proactively plan for this going forward,” PwC partner Bill McLean said in a release.
The report also found that 22% of Canadian private and family business owners plan to sell or float their businesses, and that the valuations of Canadian private businesses have been increasing, leading to more M&A demand from domestic and foreign buyers. This, PwC said, has made the proper valuation of family businesses critical.
Read the full report here.