(NC) -- Roughly 98 per cent of Canadian businesses are small to medium sized, owner managed businesses of which more than a third plan to sell or pass their businesses on to the next generation within five years. While, on the surface, that may seem harmless, the reality is that more than 60 per cent of owner managed businesses fail to successfully transfer from the first generation to the second generation and 80 per cent to 90 per cent of these fail to succeed to the third generation.

Richard Niedermayer, partner at one of Atlantic Canada's leading law firms, Stewart McKelvey, and a specialist in succession planning, says Canada is losing an enormous opportunity not only to maintain, but to increase its prosperity and global economic position if it doesn't address this issue.

“If these businesses fail generationally, our country is continuously losing knowledge-base, company equity and spin-off economic and social benefits,” says Niedermayer. “If increasing innovation and closing the prosperity gap are indeed integral to the success of our region and country, then the role of succession planning is more important than previously recognized.”

The more than 130,000 small businesses in Atlantic Canada should create succession strategies that address the management of the business, the financial situation of the owner and the family concerns that may arise during transition.

Guide to succession

• Work with a succession planning consultant who focuses on fact-finding and family issues rather than on estate and tax planning issues alone.

• Review the structure of the business, the concerns and goals of family members, and advisors' perspectives on finance, estate and tax planning with that consultant.

• Create a contingency plan that will take effect in the event of an unanticipated death or disability of a key stakeholder.

• Summarize familial issues and create a family participation plan which provides guidelines and manages expectations for family employment in the business.

It is critical for business owners to start planning early. Owners are advised to encourage intergenerational teamwork, involve family and colleagues in the process and take advantage of outside advisors. The sooner this process starts, the better the outcome will be.

For more information visit www.stewartmckelvey.com