Only 40% of Canadian privately-owned companies have a clear succession plan in place and would be prepared in unforeseen circumstances, but the situation is better among family business owners, as 60% of them have identified their successor.
These are the main findings of a new study by research institute Canadian Financial Executives Research Foundation, which carried out a survey of more than 100 financial executives working in Canadian companies.
According to the report, the lack of succession strategies is partly due to the absence of business planning, as one in three respondents said the business owners they work for did not have a five-year strategy for their business, and 20% said they didn't even have a clear overall vision.
The study also highlighted the challenges faced by family businesses, which employed half of the survey respondents.
Among them, over half said the current owners plan on leaving the business to the next generation. However, only 60% of respondents said the owners had identified a specific family member.
While 55% of those surveyed said there were clear plans as to how family members outside the business would share in the profits, under half said there were mechanisms in place to solve family conflicts.
Many family business owners hope their children will take over their companies and yet they don’t plan the succession carefully, said John Harris, a partner of advisory firm Grant Thornton, which sponsored the research.
"While the majority of family businesses had appointed designated successors, some of those had not gone through any training or education programmes to prepare them for their future responsibilities," he said in a statement.