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By Scott McCulloch


Scott McCulloch is a North American media consultant and former editor of CampdenFB


business can improve, but very large corporations often have access to the best consultants, advisers, managers and relationships.” That’s changing, especially for


family-held firms getting next gens up to speed in terms of leadership skills or those seeking talented executives beyond founding families. The outlook is as urgent in Canada


where Olivier de Richoufftz, president of Business Families Foundation, notes that within five years 3.5 million jobs and some 27% of Canada’s GDP will be affected by intergenerational wealth transfers. Stability is vital. Aggressive


taxation in either jurisdiction could undermine the very economies middle market businesses drive. “Governments can’t tax wealth


transitions to death otherwise businesses might go,” de Richoufftz warns. It’s one reason why Business


Families Foundation is pushing its “intrapreneurship programme” to spark opportunities through all-new business ventures and with access to prolific experts associated with major corporate entities. “We specifically ask our partner


Deloitte to give us strategic experts to work on the business model canvas before they engage the rising generation,” de Richoufftz says. Few dispute America’s middle


market firms are vital. “There are 32,000 private businesses with between $50 million and $1 billion in annual revenue—16 times more than the number of equivalent public companies,” Weinberg points out. But some commentators are uneasy


with the notion that, as next-gen management transitions play out, family-owned businesses will need greater access to capital to fend off competition from larger entities. “Most middle market companies


are smart enough to know they can’t compete with Walmart or Marriott,” says Wayne Rivers, president of The


ISSUE 74 | 2018


THE PROFESSIONAL OPERATING COMMUNITY DOES A MISERABLE JOB OF COUNSELLING NEXT-GEN SUCCESSORS. THEY SEEM OBSESSED WITH SERVING THE SENIOR GENERATION


Family Business Institute. Instead, he says, they find and stick to niche markets. “It would be easy for a lot of our clients to go into the


marketplace and say: ‘I’ve got a great profitable company, let me find capital and we’ll grow a thousand-fold’, but that’s not their aspiration.” Rivers says 95% of family businesses are so debt averse


that it “borders on illness”. “They want to grow organically.” That, adds Eugene Wallace, president of Oregon-based


Family Business Advisers, partly explains why family firms are not rapidly queuing for external sources of cash. “Family office money is giving private equity a run for


it,” says Wallace referring to Seattle’s Cascadia Capital, which manages a fund financed by family businesses for family businesses. “Family office money is seeking out family-owned


businesses that want a leg up.” Notwithstanding millennials’ investment styles, advisers


mostly agree coming wealth transfers pose an historic challenge in terms of magnitude. Few dispute the risk of talent shortages. Knowledge gaps could emerge—among both out-of-touch


advisers and next gens—as Boomers retire. Rivers’s consternation extends beyond readying young


executives for wealth management to more practical, operational aspects of running businesses. “The professional operating community does a miserable


job of counselling next-gen successors,” he says. “They seem obsessed with serving the senior generation.” Harsh. Could it be a case of patriarchs and matriarchs not


wanting to misstep in the best interests of their progeny? Isdale says there are plenty of pools of capital for families


keen to do private equity or other deals, which can be complex. With so much at stake, few advisers can allay all fears by pointing out each and every pitfall. “You have a lot of families who sold the business and


are more than happy to go back in and be a partner,” she says. “In other family businesses, you’ve got a lot of willing investors out there. The problem is on the receiving side: a lot of these families don’t know what they don’t know.” Who said ignorance is bliss?


CAMPDENFB.COM 9


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