Family Business in Canada and the Dalhousie Centre for Family Business and Regional Prosperity Halifax Estate Planning Council October 19, 2009 Dr. Robert Blunden, Dalhousie University

Importance of Family Business 80% of Businesses in Canada and US are Family Owned and Operated Family Businesses employ 48% of Workforce and Create almost 50% of GDP Many successful Entrepreneurial Ventures become Family Businesses

But Successful Intergenerational Transfer is Difficult Only about 30% survive the transition to the second generation Only 13% survive the transition to the third generation

Because of the Complexity Conflicting Desires about Passing On and Running the Business Conflict Within the Family Conflict Between the Family and Business Systems

Opportunities $10 trillion to change generational hands by 2020 Succession 34% > 61 years old 40% NO identified successor 28% NO estate plan 48% NO buy-sell Continuity 49% NO Strategic Plan 67% NO Redemption Plan 60% NO Valuation 66% NO Family Meetings 74% NO Participation Policy 85% NO Outside Board 98% NO Family Business Consultant

Family Business Challenges 22% Divorce within five years 33% Fire family within five years 30% Buy out last ten years 28% New CEO within five years

Family Business Dynamics Secretive atmosphere NO Board of Directors/Advisors Liquidity Closely held Tight span of control Family businesses think long term Founder’s Disease Different pockets, same pants Limited fund raising potential Proud Tight fisted with money (will pay for expert value) Do business with family values: mafia/gangs Children: marriage contracts, wills, blended families

Three Circle Model FAMILY BUSINESS OWNERSHIP

Interrelationships in Family Business 7 6 2 3 5 1 4 Ownership Business 1. Family owner-managers 2. Family members who work in the company but have no ownership 3. Non-family employees 4. Non-family employees who own stock in the firm 5. External Investors 6. Family members who own stock in the company but do not work in it 7. Family members not involved with the firm

Ownership Structures And plans Where do the In the Three Circle Model Where do the consultants fit? How do they co-ordinate their efforts? Structures Shareholder Meetings Board of Directors Plan Estate Plan Plan Strategic Plan Plans Contingency Plan Continuity Plan Structure Family Council Plan Family Plan Structure Management Development Team Plan Family Business

Dalhousie Centre for Family Business and Regional Prosperity Official launch in January 2009 to provide: Outreach and training to Family Businesses, Families in Business and Professionals serving Family Businesses A Resource Centre for Family Businesses Teaching programs in member universities Research support for faculty and students in the region

The Centre’s Partners Universities: Saint Mary’s University, Acadia University and University of New Brunswick Organizations: CAFE and BFF Financial: BFF and the Bragg Family

The Centre’s Accomplishments Elaine Sibson appointed Director Advisory Board established 1st Annual Family Business Dinner with the Bragg Family – September 2008 A number of joint educational outreach events with CAFE 2nd Annual Family Business Dinner with the Ganong Family – October 2009

Ongoing Activities Fund Raising: Dalhousie Capital Campaign $7 million Outreach: Joint program with CAFE and ICD (Institute of Corporate Directors) on Family Business Dynamics and Boards of Directors – October 29, 2009. Research: Life Stage Fit and Succession Success and Family Business in Difficult Economic Times

Canadian Association of Family Enterprise (CAFE) National, Grass-roots Association Founded in 1983 to Promote the Well-being and Understanding of the Family in Business 15 Chapters in Canada, 1 in Halifax

CAFE Programs Educational Programs Networking and Social Opportunities Personal Advisory Groups Advocacy for Family Business

CAFE Benefits for Professionals Serving Families in Business Improved understanding of the soft family business issues that influence family business decisions Improved ability to best serve your family business clients and become their most trusted advisor BUT, not a place for client development

Questions? Comments? Thoughts?