High Percentage of Failure in Family Business Transfers

HAMILTON - "Handing down" a family business fails at least 50 per cent of the time because the next generation lacks essential business skills or haven't been well prepared for the job, says an industrial psychologist with a leading business intermediary firm.

"Business owners who dream of having their son or daughter follow in their footsteps need to put away rose-tinted glasses and clearly assess whether Junior has the right stuff," says Dr. Richard Wolfe, an industrial psychologist with Robbinex Inc. "All too often, they don't."

Dr. Wolfe carries out psychological testing on family members who are assumed to take over a business run by an older relative - most often a parent. "The person who started and built up the business is usually passionately committed - it's their baby," he says. "They can be very hands-on and often haven't really trained or mentored the next generation to assume the lead role.

"In our experience, business owners often ignore the fact that their son or daughter isn't well suited or trained for the job," Dr. Wolfe says. "It's a case of both making assumptions and wishful thinking."

Doug Robbins, president of Robbinex, says the firm usually advises that psychological testing be carried out when a business is transferred within a family.

"The secret to a successful intergenerational transfer is a structured plan for the take-over, which may include special training for the incoming owner, a management transition period, and the definition of appropriate roles for the family members involved," Robbins says.

Robbinex Inc. is a mergers and acquisitions consulting firm specializing in selling medium-to-large private businesses. Since its inception in 1974, Robbinex Inc. has participated in the sale of more than 650 businesses. The head office is located in Hamilton, Ontario, with affiliate Canadian offices in Windsor, Victoria and Vancouver, and U.S. offices in Buffalo, New York and Detroit, Michigan.

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