Canada’s family-owned businesses are the real “backbone of the economy,” but more information about those firms is required to help keep that foundation from cracking, says a new report from the Conference Board of Canada and the Family Enterprise Xchange Foundation.
Family businesses were directly responsible for about $574.6 billion in goods and services produced in 2017, or more than 35 per cent of Canada’s real gross domestic product and 48.9 per cent of its private-sector output, says the report, to be released on Tuesday.
About $191.9 billion of that family-owned GDP came from big businesses, the report says, firms such as Bombardier Inc. and Loblaw Cos. Ltd.
“I think one of the significant things that comes out of this is how much an impact that family enterprises have, from … startup operations, through to farming and fishing communities, through to, obviously, these mega-corps, on the economic footprint in Canada,” said Jim Burton, chair of Family Enterprise Xchange Foundation.
Family businesses directly employed 6.9 million people in 2017, or 46.9 per cent of all private-sector positions and 37.4 per cent of all jobs, according to the study. Some sectors were more family-friendly than others, such as agriculture, where family companies accounted for more than 80 per cent of employment.
Revenue of family firms expanded 14.6 per cent between 2007 and 2013, the report found, while non-family firms studied reported 13.9-per-cent growth. Meantime, just over 70 per cent of family firms that were operating in 2007 were still doing so in 2013, while the rate of the other companies (which employed, on average, more than twice as many people) was 65.2 per cent.
“The analysis shows that, although conventional wisdom suggests small and medium-sized enterprises (SMEs) are the backbone of the economy, it is more accurate to assign this function to family enterprises,” the report says.
The Family Enterprise Xchange Foundation, which funded the research, is an Oakville, Ont.-based charitable organization connected to a similarly named non-profit that represents businesses and their advisors. The Family Enterprise Xchange founding members include accounting and advisory firms Deloitte and Grant Thornton LLP, and has more than 1,100 members overall. The group launched in 2017, and was among those pushing back that year against controversial tax proposals from the federal Liberal government.
“Demographics, tax policy, and inadequate professional advice are the key threats to family enterprise,” the latest report notes.
But the report also says data related to family businesses — such as around access to financing — are lacking when compared to details available about other public and privately owned companies. Examples of where more information could be helpful would be in ownership, governance and succession planning.
“There was very limited empirical evidence, particularly in Canada, and so we pioneered this research project with the Conference Board,” Burton said.
Some progress has been made. Statistics Canada, the report says, recently added a question about family ownership to its survey on the financing and growth of small and medium-sized businesses.
“Family enterprises, their advisors, and our public policymakers need more accurate information to enhance the future health of the family enterprise landscape,” the report says. “Informed appreciation of the depth and breadth of family enterprises will illuminate economic discussions and ensure that this important driver of the Canadian economy is fully considered in regional and national economic and fiscal policy.”
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