Safeguarding your business for future generations
Over 60 per cent of family enterprises are expected to change ownership between 2022 and 2032, according to Family Enterprise Canada. Of those, 47 per cent of families indicated they intend to transfer ownership to family members, while another five per cent plan to transfer ownership within the family to eventually transition to non-family leadership.
The commercial real estate and construction sectors are certainly no exception. Family ownership is a defining characteristic of both industries, with many firms having been passed down through multiple generations. In line with national trends, family-owned businesses account for approximately 63 per cent of all private companies.
Despite owners’ best efforts, the Family Business Institute reports that only 30 per cent of family-owned businesses survive into the second generation, 12 per cent into the third, and only three per cent into the fourth and beyond.
While some factors may be unavoidable (e.g., no heirs to take over the business), much of this decline is directly linked to a failure to identify, prepare, and mentor a successor, as well as the lack of a clear governance structure. Both will leave your business vulnerable to uncertainty and disruption, impacting the financial stability of your family and other stakeholders. In fact, Family Enterprise Canada reports that only 50 per cent of North American family offices have a succession plan in place, 48 per cent of which are formally written.
Succession planning is both time-consuming and complex, leaving many business owners unsure of where to begin. Add the discomfort of broaching difficult subjects with your family, like death or disability, and it inevitably takes a back seat to more immediate concerns.
The consequences of not having a well-documented, well-communicated succession plan, however, could mean the difference between your company thriving or failing when you retire. Starting early and working with your family to build a shared vision for the business that clearly defines leadership roles, goals, and growth plans significantly increases the likelihood that your business will survive into future generations.
Here we have outlined the key things to consider as you start building your succession plan.
Leadership (who will your people follow?)
Perhaps the most critical decision you need to make is choosing your successor. Waiting until the eve of your retirement is unlikely to result in a smooth transition. The entire family should be in agreement with the decision. Therefore, the sooner this conversation takes place, the better for all involved. Identifying your successor well ahead of your retirement also means you can evaluate their current skills and determine if additional training and/or outside work experience is needed before they take over. It allows for mentorship, providing the opportunity for your successor to learn about the business from the person who knows it best – you.
In some instances, the choice is obvious. You have a child who has been working at your side for many years and who knows the business inside out. But are they ready and willing to take on a leadership role and make the difficult decisions that come with it?
If you have more than one child, and particularly more than one working in the business, choosing the right successor(s) can be a very difficult decision. Enlisting the help of an external advisor to participate in the identification process can help remove the likelihood that family biases impact the decision.
Additionally, it is important to remember that not all family members are suited to work in the family business. As such, there will need to be a discussion with your family to lay out who will have active and non-active roles. These conversations can be challenging, but they’re essential to ensuring the business has the right leadership in place.
Governance (decision making)
Control of the business must ultimately rest with your successor. The entire family cannot weigh in on every decision because the chances of reaching a consensus are marginal, and the decision-making process will grind to a halt.
At times, there will be decisions that require everyone’s input, so having a conflict resolution mechanism in place is crucial. This will minimize family disagreements and disruption to business operations. You will also need to clearly define what roles and responsibilities other family members and senior staff will take on, and draft a contingency plan to ensure the business survives in the case of illness, accidents, or death.
Proper governance demands a formalized structure. This is especially crucial in an industry such as commercial real estate, where the asset values can be high, and valuation is an exceptionally complex exercise. According to Mordor Intelligence, Canada’s commercial real estate market size is valued at USD 83.22 billion in 2025 and is forecast to reach USD 102.87 billion by 2030, expanding at a 4.33 per cent CAGR over the period.
Family Enterprise Canada reports a gap between the continuity intentions of the senior generation and the next generation of family business owners, noting that 24 per cent of family businesses in North America do not have any of the following structures in place: a board of directors, a shareholders’ agreement, or family meetings.
As you depart the business, and more family members get involved in the day-to-day operations, think about whether the company would benefit from having a board and if it should consist solely of family or not. It’s prudent to consider the appointment of outsiders because they can bring fresh ideas and new perspectives as well as balance out family dynamics. Having outsiders on the board is also beneficial when discussing matters such as remuneration or dividend policy. Often, there are contrary opinions on whether money should be reinvested into the business for growth or distributed to shareholders. It could be the case that one sibling may believe they should be paid more because they work the hardest. Non-family board members can temper these discussions by offering impartial advice and candid opinions, leading to more productive conversations.
Transparency (communication is key)
As much as possible, have open and honest discussions with family members as you move through this process. It is important that everyone is aware of your succession plan and that the family agrees with it as a whole.
As your retirement approaches, reach out to your customers and suppliers. A well-communicated succession plan will give them peace of mind that there will be minimal disruption to the business as you transition out.
Additionally, it is vital that you talk to employees. They need to trust that a strategy is in place to foster the health and longevity of the business while minimizing risk to their livelihoods.
Retirement (where do you go from here?)
What will your role be going forward? Giving up control is not easy and may require a transition strategy for your benefit as well as the new management’s. A comprehensive transition strategy will also include how you intend to fund your retirement.
Careful succession planning will allow you to constructively deal with the unexpected while preparing your business for the future. In industries as complex and competitive as construction and commercial real estate, the process should begin years, or at the very least months, before the targeted transition date, given the inherent complexity of the valuation processes, financing, tax strategies, and ownership structures. Getting started early increases the probability that your business will remain prosperous following your departure and will continue to provide a lasting legacy for you and your family.
At Fuller Landau, we have deep expertise in the real estate and construction industry, and considerable hands-on experience in advising general and niche contractors, property management companies, private developers, and landlords owning residential, industrial, and commercial properties. If you have any questions or need further information, please reach out to the Real Estate and Construction group at Fuller Landau.