Keeping it in the Family: Succession Planning for Family Businesses

The time has come for you to retire. You have worked hard over the years to build your business to its current success. The kids have all been involved, so it makes perfect sense that they should take over. You simply sign on the dotted line, hand over the keys and walk away. Right? Think again.

Dave Pettinger’s family has owned the Pacific Sands Beach Resort for 33 years, and the Pettingers are one of the few families who have made the successful transition from a parent-run to a children-run operation. The statistics are grim: some 70 per cent of family-run operations do not survive the second generation. “It sure helps if you have the support and trust of a family who will allow you to take your vision forward, offering their full support but with minimal interference,” says Dave.

If survival of your business is crucial to your survival during retirement, then a successful transition must occur and can only do so with family cooperation and a comprehensive business succession plan.

Update the business plan to demonstrate the value of the business. Your business cannot legally be transferred without knowing the value. Your business has grown over the years, so you may need to redefine what the business is, how it is owned and what the assets are, before you can determine its worth.


Who you will leave the business to is the emotional side of succession planning. “The problem with a family-owned business is that there are so many sensitive issues.” says Brent Stetar, a consultant with Investors Group. “Often, complex family dynamics come into play, making this topic difficult to discuss. The result can be a delayed decision in who takes over. That can be devastating to the business—especially in the event of death, where the business can end up in limbo due to probate.” Stetar recommends you not assume that the family members are capable of taking over, or even want to. He suggests meeting with them, perhaps with the assistance of a professional third party, to determine who has the desire, skill and vision warranted to take over your business.

“Examine ways to make it equitable to all siblings and be sure to consider the ramifications of extended family such as spouses, grandchildren, and even ex-spouses. Now is the time to ask the tough questions,” says Stetar


Take the time to train new management and ease the transition for your business contacts and customers. Determine what your new role will be during the transition and after the reins are completely turned over. “In the interest of the business, the person who owned it, stays involved,” he says.


Lawyers need to draw up the legal documents. Accountants need to prepare the financial statements. Investment advisors and accountants can advise you on issues surrounding taxes. Dave Pettinger credits his family’s successful transition to the solid consultants and accountants his parents had on board. “I suggest seeking proper and professional guidance from people who are involved in estate planning and understand the challenges faced by family business,” says Dave. He points out the importance of having foresight in planning with regards to capital gains. Stetar says that a lack of foresight can be expensive. “In the case of transfer [after a death], the taxable gains alone can cause the new owner to sell the business to pay what’s owing.” He suggests that life insurance can make the transfer a lot easier by providing the necessary funds.


The key steps to ensuring a successful transfer are:

  • A commitment to pre-planning
  • An awareness of potential issues
  • Knowledge from informed professionals
  • Communication to all interested parties

Can the family business really stay in the family? The better question may be, can the family survive the family business? There are not many topics that have the potential to become as complicated as this one but there is hope, so long as you combine communication, trust and respect of family members, seek lots of professional advice, and commit to dedicated pre-planning.

For more information on family business transitions, please go to the Sauder School of Business – Business Families Centre.