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O Canada! Family businesses flourishing in the True North (infographic)

Family businesses are key drivers of Canada’s economy, accounting for at least 45% of GDP, and numbering among them many of the country’s top firms, including global powerhouses such as Thomson Reuters and Bombardier.

A 2014 report by Toronto-based Creaghan McConnell Group highlighted the importance to Canada of large family-controlled companies: the country’s top 500 business families generate 23% of the total revenue of medium and large enterprises. Among Canada’s 100 largest companies, more than 30% of the turnover, or CAD$280 billion (US$224 billion), comes from family-run enterprises.

Their role in providing jobs can hardly be overstated: 10 of Canada’s 25 largest employers are family-run.

Appropriately enough, Canada’s largest private-sector employer, the food giant George Weston Ltd, is family controlled. Founded by George Weston in 1882 and now chaired by his great-grandson Galen, the company has 200,000 staff and posted sales last year of CAD$43.9 billion, making it one of the world’s top 40 family firms by revenue.

The multinational rail and aerospace giant Bombardier is the country’s top manufacturer and a company with truly global reach, achieving revenues last year of US$20.1 billion thanks to operations in 60 countries. It has come a long way since it was founded by Joseph-Armand Bombardier in 1942 in Québec.

Among Canada’s other globally important family-run firms is Thomson Reuters, one of the world’s top news and information providers, controlled by the Thomson family.

Power Corp of Canada, Empire Co, and Canadian Tire Corp are perhaps less well known globally, but each of these family-controlled companies generate annual revenues in the US$10 billion to US$30 billion bracket.

For all that, however, recent surveys raise questions over whether the country’s family-owned businesses are ready to grow to become globally competitive. According to a 2014 PwC report, just 12% of sales by Canadian family firms are generated by exports, compared to 25% for family businesses worldwide. Also, only 40% of Canadian family firms understand the benefits of transitioning to digital operations, compared to 57% globally.

Striking a cautionary note for family firms is the uncertain position of the Canadian economy. The first quarter of this year saw an annualised rate of contraction of 0.6%, its worst showing since 2009, with lower oil prices more than cancelling out the positive effect of improved growth in the US, the country’s main export market.
 

Goverment policy
Cutting red tape has been a key focus of the Canadian authorities in recent years, something they say will impact positively on businesses, including the country’s wealth of family-run firms.

Most notable is the “One-for-One Rule”, brought in during 2012, which states that for every new regulation that “imposes an administrative burden on business”, another one must be removed. The government says Canada is the first country in the world to bring in such a directive.

Demand for simpler regulation will be well received – a 2012 KPMG study found regulation was a “major concern” for 27% of Canadian family firms, a “minor concern” for 49%, and “no concern” for only 24%.

Savings to businesses since the rule change are said to total tens of millions of Canadian dollars. Almost 300,000 fewer person hours a year were spent dealing with red tape, while the number of regulations that firms must adhere to has been cut by 19. Measures were strengthened this year by the Red Tape Reduction Act, which officials say will permanently cut the federal regulatory burden.

Such attention to the issue could help to explain why Canadian family businesses tend to view the authorities relatively positively: a 2013 PwC study reported that 39% thought the government recognised the importance of family businesses, more than the worldwide figure of 27%.

Also aimed at promoting growth is the country’s high immigration rate. For the past quarter of a century, Canada has welcomed between 200,000 and 300,000 new residents most years, with this year’s target being between 260,000 to 285,000.

CampdenFB would like to acknowledge the help of PwC, Deloitte, and KPMG

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