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Predictable Futures Presents:. Family Business Succession: It’s all about planning Preserving the Endangered Species. Presented by: Gordon Wusyk President and CEO of Predictable Futures Inc. the Business Family Centre. Canadian Construction Association Conference. Hawaii 2006.

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Predictable Futures Presents:

Family Business Succession:

It’s all about planning

Preserving the Endangered Species

Presented by: Gordon Wusyk

President and CEO of Predictable Futures Inc. the Business Family Centre

Canadian Construction Association Conference

Hawaii 2006


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If you think…

RETIREMENT

&

DEATH

Are “OPTIONAL” EVENTS

You’re in the WRONG room!!


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Family Enterprise in Canada

  • Canada’s family businesses employ 4.7 million full-time and 1.3 million part-time workers

  • Total annual sales of Canada family-owned businesses: $1.3 trillion

  • Most family enterprises are highly dependent on their current leader

  • Major leadership change in Canadian family businesses

    • 27% of family business leaders will retire in next 5 years

    • 29% will retire in 6-10 years

    • 22% will retire in 11-15 years

  • Most have no contingency plan covering the death or the disability of their leader

  • Only 29% have a succession plan

  • Unlike US counter part, Canadian family business owners see the generation of wealth as the primary role for the business. Keeping business in the family is a lower priority

  • Source: BDO Dunwoody/ Compass Report on Canadian Family Business (2003 & Survey of Canadian Family-owned Business by Deloitte& Touche for Tax Education and Research at the University of Waterloo (1999)


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From ‘FAD’ to ‘FIELD’ of study

  • Research over the last 25 years provides new understanding of family business & their issues

  • Growing number of family business advisors coming from a variety of disciplines

    • Family Firm Institute: Founder in 1983 by 22 professionals, now has 1200 members

    • Certification program now available for professionals

  • Clients are more knowledgeable and sophisticated than 10 years ago:

    • Families have access to many different educational opportunities

    • Families have access to many networks:

      • PFI

      • Family Business Network (FBN)

      • CAFÉ

      • BFF

      • ABFI

      • CEFE

      • FFI

  • Clients now expect advisors to be well informed

    Source: CALU May 2005 – Evolution of the Family Business Field


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The Enigma of the Business Owner

The Four Part Personality*

1) The Owner

  • ROI

  • Growth

  • Income

  • Exit strategy

    2) The Aging Male/Female

  • Physiologically

  • Psychologically

3) The Best Employee

  • First in, last out

    4) The Manager

  • Hires

  • Fires

  • Organizes


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The 7 F’s of Balance

Family

Fitness

Fun

Friends

Faith

Finances

Firm


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All about PERSPECTIVE


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Family/Personal

Relationships

Tax Planning/

Minimization

“Death Tax”

Liabilities

Estate

Equalization

Wealth Management

“Game Plan”

Legal

Documentation

Retirement

Strategies

Creditor

Protection

Protection From

Family Law

FAMILY BUSINESS SUCCESSION PLANNING A “Multi-Dimensional” Process

Your Family Your Business


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Roots/ Principles

  • MMake Things Happen

  • AAchieve Significance (vs. Success)

  • XX out the Negatives

  • IInternalize Right Principles

  • MMarch to a Mission

  • IIntegrate all of Life

  • ZZero in on Caring for People

  • EEnergize the INNER Life

  • RRe-align Rigorously

  • SStay the Course


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Family Business Valuation –Same notes different melodies

  • The Government – “Silent” Partner

    • Deemed dispositions (fictions) & liquidity

  • Wives, sons and daughters

    • Section 69 (the Family Trap)

    • The Estate Freeze & Price adjustments

    • The small business exemption

  • Employees: employment, leadership & retirement

  • The Executor – Fair Market Value – “Legal Fictions”


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Family Business Valuation

  • The Liquidator: Wind up or going concern?

  • The Business Founder: Value with/without him

    • Special Buyer

  • The CBV

    • Going concern?

    • Sale of assets?

    • Sale of shares?

    • Multiples?

    • Tax issues?

    • Normalization?

    • Maintainable earnings?


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The Interdependence of our Family,our Ownership and our Business Entities

Family

Business

Ownership


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Perspective of Each Entity

  • Needs / Priorities:

  • Strategic Planning

  • Market Value Compensation

  • Results (targets)

  • Profits (retained earnings)

  • Competent, Competitive Staff

  • Systems for Management

  • & Control

  • Marketing

  • Quality Product/Service

  • Accountability

  • Regular Reviews

  • Solvency

  • Cash Flows

  • Entrepreneurial Perspectives

  • Fast, Efficient Decisions

Business


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Family Perspective

Needs / Priorities:

  • Nurturing

  • Communications

  • Affection and Love

  • Equality of Affection

  • Individual Needs

  • Personal Development

Family


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Ownership Perspective

  • Needs / Priorities:

  • Return on Investment

  • Return of Investment

  • Equity Growth

  • Stewardship of Assets

  • Reputation of Owners

  • Diligent Management

  • Timely Reporting

  • Responsible Board

  • Selection

Ownership


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Neglect one…

Family

Business

and riskdestroyingthe whole system

Ownership


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The Family

Goals:

Support Family members

Rules: Informal expectations

Evaluation: Rewards for who you are – unconditional

Succession: Caused by death, divorce or illness

Relations: Deeply personal, of primary importance

Authority: Based on family position of seniority

The Business

Goals: Profits, revenues, efficiency & Growth

Rules: Written & Formal w/rewards & punishment

Evaluation: Support conditional on performance

Succession: Retirement, promotion or departure

Relations: Semi Personal or impersonal, of secondary importance

Authority: Based on formal position in the organization’s hierarchy

The Natural Conflict…


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If you don’t have PROCESS

you have a PROBLEM


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The Process

1. Clarification of founder’s dreams of the future

7. Building the Legacy – review of estate plan

  • Clarify family member’s personal vision – for business & at a personal level

6. Choosing and Training the New Owners

3. Aligning the business strategically to support family & founder’s dreams and goals

5. Choosing The New Leader

4. Prepare the successors


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A Game Plan..

Or it’s GAME OVER


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WISH BONE

JAW BONE

BACK BONE


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How to Contact PFI

Predictable Futures Inc

The Business Centre

Suite 1211 10104 103 Ave

Edmonton, AB

T5J 0H8

www.predictablefutures.com

solutions@predictablefutures.com


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