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Canada
Small business

Family enterprises: a major (yet little known) sector of the economy

As a new study shows, family firms play a key role in many aspects of Canadian life. But to fully understand the sector, we need more research. 

Father and son farmers using laptop at pickup truck on a sunny day at farmFamily businesses generate employment in all provinces and sectors, including transportation and warehousing, agriculture, accommodation and food services and construction (Getty Images/Hero Images)

Family businesses are a major driver in the Canadian economy. As a whole, they account for 50 per cent of our private sector GDP and support nearly seven million jobs. In fact, approximately 63 per cent of private enterprises in the country are family firms. 

But despite the key role family enterprises play in many aspects of Canadian life, there has been very little dedicated research on the sector to date. And this is a gap that urgently needs to be filled, says James Burton, chair of the Family Enterprise Xchange Foundation, an organization that supports family-owned businesses in Canada (see sidebar regarding FEX and the FEA designation).

“We need to know more about how family enterprise is structured, and about their governance models and social impact in their communities. More in-depth research would provide us with a greater understanding of the sector and its influence on the Canadian economy.”

PAYING ATTENTION

As a first step toward building a better knowledge base around family firms, the FEX Foundation commissioned the Conference Board of Canada, with support from CPA Canada, to conduct a study on the sector. For CPA Canada, this was a natural fit: as Gord Beal, vice-president of research, guidance and support, explains, “CPAs play an important role in working with family-owned businesses of all sizes. They can help them with their growth strategy, their risk strategy, and their underlying business and performance strategy. So we wanted to learn more about the challenges they face because it could feed into some of the work we might do to support CPAs in this space.”

The report, which was recently released, provides some facts and figures that can serve as a starting point for more research. It shows, for example, that:

  • Family enterprises directly generated approximately $574.6 billion in 2017—more than 35 per cent of Canada’s real (inflation-adjusted) gross domestic product and 48.9 per cent of GDP originating from the private sector.
  • Approximately $191.9 billion of the total was produced by large family enterprises, which represents 34 per cent of all GDP generated by large companies.
  • Family-owned businesses directly accounted for 46.9 per cent of private-sector employment and 37.4 per cent of the entire workforce in 2017. 
  • More than 90 per cent of the jobs supported by family owned businesses (6.4 million) are in small and medium-sized enterprises.
  • Family businesses generate employment in all provinces and sectors, including transportation and warehousing (85.4 per cent of employment in 2017), agriculture (just over 80 per cent), accommodation and food services (71.3 per cent) and construction (68.5 per cent).

TAKING ACTION

As Burton points out, the study confirms the importance of the sector to Canada. “We already knew from previous research that a significant portion of Canada’s overall GDP—not just from private firms—could be ascribed to family enterprise,” says Burton. “And our work with families had already given us a sense of the key role family firms play. But this is the first study that has quantified and affirmed this information.”

“The research clearly shows, for example, that these firms, whether they are startups or large multigenerational family businesses, are in each community. And they provide not only direct employment opportunities but also are directly involved in those communities. We will deepen our analysis in future—we are already planning another research study. But already, that seven-million figure gives us a very good sense of how important the sector is to Canada.”

Beal agrees. “As the research clearly shows, family firms comprise a substantial proportion of the businesses in this country and they employ many Canadians. And many of our members either work in them or act as advisers. By continuing to gain a greater understanding of these firms and their needs, we can better support the work our members do in this area.”

FEX AND THE FEA DESIGNATION

The Family Enterprise Xchange (FEX) is an independent organization that, as chair James A. Burton explains, “is dedicated to building a dynamic peer community for family enterprise members across Canada—one that connects family enterprises and advisers to global best knowledge, resources, and learning opportunities.”

As a major part of its mandate, FEX offers a Family Enterprise Advisor (FEA) designation for professionals who want to offer family-centric advice—or, as the organization’s website puts it, to “become fluent in family enterprise.”

This one-year professional designation program includes seven modules and is offered in Vancouver, Calgary and Toronto. Candidates who pass the final exam become designated Family Enterprise Advisors.

To date, many CPAs have already earned the designation.

“CPAs have a critical role to play in family business,” says Burton. “We can find all the advice we want on Google if it’s just knowledge we are seeking. But what we cannot get is a relationship with an experienced specialist who is practising in the area.”

Burton adds that over the next few years, we’ll be seeing a trillion-dollar transfer of wealth between the baby boomers and the next generation—and much of it will be taking place within family enterprises. “This offers a major opportunity for CPAs and all the professionals working in that area,” he says. “The faster they become recognized as family enterprise specialists, and the more committed they become to building a relationship with those families, the better able they will be to make a difference.”

Gord Beal, vice-president of research, guidance and support at CPA Canada, agrees. “Family businesses are just like other businesses: they need to ensure they have the capacity, leadership and expertise to support their growth most effectively. But often, as family businesses, they’re trying to find a way to ensure some continuity—and that can sometimes be a challenge. CPAs are perfectly positioned to be the specialists who help them ensure their long-term sustainability.”