Do you know who your successor will be?

• Author: Bobak, Laura
• Position: PRIVATE COMPANIES

If only every private company succession could run as smoothly as that of Toronto-based Conros Corp., a family-run business. Founder Navin Chandaria built his businesses by developing opportunities and spinning them off profitably, all the while raising a family.

Conros, which manufactures and distributes stationery products and shipping supplies, has a history of developing a market for a product and then divesting the subsidiary. For instance, the company popularized the glue stick in North America in the 1980s, and then sold its interest.

Unlike some other entrepreneurs, Chandaria understood he'd eventually have to hand over the reins. He planned for a smooth transfer to his children five years ago. Another potential pitfall was averted when Chan-daria's son volunteered to lead the company, with support from his two sisters.

Not every company will have a similar success story. Only 40 percent of Canadian private companies have a clear business ownership succession plan, a practice that could leave them unprepared and at risk.

Private Company Succession Concerns

These and other findings were published in a recent study by the Canadian Financial Executives Research Foundation (CFERF), entitled Private Company Succession Planning; Where Do You Stand? CFERF is the research arm of Financial Executives International Canada (FEI Canada).

The research, which was sponsored by Grant Thornton LLP, is based on a survey of more than 100 financial executives in July 2011 and enhanced with insights from executive forums in Toronto and Vancouver.

The results are a concern, as boomers retire and a new generation takes ownership of small and medium-sized businesses--a vital area of (he economy for both growth and job creation.

"The risks of companies not having succession plans in place are enormous, both for the economy and for the owners themselves," says Michael Conway, chief executive and national president of FEIC. "In addition to putting the businesses at risk by alienating potential successors and buyers, owners may fail to realize the full value of their life's work."

As owners age, many find they are ill-prepared for the inevitable transition. Reasons include lack of foresight, owners who refuse to let go, limited resources and struggles to manage growth or simply survive.

"The study also points to specific challenges for familyrun businesses, which employ half of the survey respondents," adds John Harris, a partner in the Vancouver office of...