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Pervin Family Business Advisors

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Transfer of Family Business is Tricky

CALGARY HERALD – Friday, October 4, 1991 – E3

The successful transfer of a family business to the next generation is seldom an easy task, according to a family business consultant.

The successful transfer of a family business to the next generation is seldom an easy task, according to a family business consultant.

The biggest reason is that family businesses are not simply financial entities designed solely for generating profits, Aron Pervin told the Calgary chapter of the Canadian Association of Family Enterprise on Thursday.

"Capital investment in a family business is minor compared with the emotional, physical and intellectual commitment demanded of the founder and his or her family," the Toronto-based adviser said.

Family-owned enterprises are a significant part of the economy, representing approximately 80 per cent of all Canadian businesses. They employ more than 60 per cent of the labor force, generate more than 50 per cent of all wages and account for 40 to 50 per cent of the gross national product.

But despite the importance of this small-business sector, Pervin said, family-owned businesses have "a very real tendency to self-destruct."

"Less than one-third survive to the second generation – 70 per cent are either liquidated or sold after the founder's retirement or death and less than – 13 per cent last through to the third generation."

"To achieve continuity of family ownership and management through a successful transition, the founder must let go, relinquishing control and guidance of his or her baby to a new custodian – and do it voluntarily," Pervin said.

The earlier the founder begins planning the transition, the better, he added.

"After all, it takes constant attention for 18 years to raise a child to legal adult status. So why would a business operator wait until a year or two before planned retirement to begin to plan their own succession and the transition to new management?"

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