Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Horst Fabian and Gnanabaskaran Narayanapillai. (Charla Jones/The Globe and Mail)
Horst Fabian and Gnanabaskaran Narayanapillai. (Charla Jones/The Globe and Mail)

Succession

Handing off the business Add to ...

This could be somewhere in Europe. Thin lace curtains - no modern minimalism here - cover the front window of Fabian's Café.

Inside, in preparation for Christmas, the bakery's shelves are stocked with goodies such as fanciful gingerbread houses and sugar-

covered loaves of stollen, along with Black Forest cakes topped with whipped cream.

Horst Fabian, a pastry chef who immigrated to Canada in 1956, created this slice of Germany in a Toronto suburb in 1974. He spent the next three decades crafting mice from chocolate and mushrooms from meringue until his wife told him it was time to take off his baker's hat.

There was no succession plan. He has a daughter, who loved the bakery and worked there for years. Alas, she was busy with her own family.

"You can't say you've got to [work]here," Mr. Fabian says. "You've got to let them go."

So Mr. Fabian put his beloved café up for sale four years ago. Luckily, a suitable new owner came calling. Gnanabaskaran Narayanapillai's roots are in Sri Lanka, not Europe. As a trained pastry chef, however, he had the professional credentials that Mr. Fabian felt his successor needed to keep the beloved bakery alive.

Today, the café's name and old-fashioned atmosphere is unchanged, and the desserts remain as delicious as ever. The founder and new owner obviously get on well, with Mr. Fabian dropping in to help out each week.

"It's like a tradition," says Mr. Narayanapillai, who arrived in Canada in 1991. "I just carry it on."

Unfortunately this isn't the case for other small businesses started by newcomers to Canada. Whether it's the neighbourhood bakery, corner store, mechanic or flower shop, owners who dedicate their working lives to their business may see it disappear when they retire. If they can't find a successor, be it a family member or new owner, they must shut the door and sell the real estate.

This experience could become more pronounced in coming years as the baby boomer set stops working. Right now, 45- to 65-year-olds make up the largest group of business owners in Canada, according to Ted Mallett, chief economist at the Canadian Federation of Independent Business.

Finding a new owner to run the business may prove a challenge considering that families are smaller and fewer people are expected to establish their own firm in the coming years, Mr. Mallett says.

While there is no specific data on immigrant-owned stores, the succession statistics for family-owned businesses are sobering. Only 30 per cent make it to the second generation, and 12 per cent to the third, according to accounting firm Deloitte & Touche.

It's a problem. The country's economic health depends on entrepreneurs who are able to not only start, but also build a business, according to Mr. Mallett. That's where succession planning comes in because "you may need more than a lifetime to do it."

Many newcomers to Canada opt for this entrepreneurial career path. One reason is that their foreign credentials in areas such as engineering and medicine are often not recognized in their new country. They must make a living, and so they open a shop or a restaurant.

"It seems to be a little more natural to new Canadians than people born here," Mr. Mallett says. "The whole notion of uprooting yourself and coming to a new country is an entrepreneurial action in its own right."

These mom and pop stores often generate enough cash for the children to go to university and graduate as architects and lawyers. It's no surprise they then shun the family business. They remember how hard their parents worked and have other lofty career ambitions.

"They build these businesses not necessarily for the kids to take over, but for the kids to do something different," says Harley Mintz, vice-chairman of Deloitte in Canada. "You have a kid with a masters degree. They don't want to sell cigarettes."

That was the case for Joanne Lee, a senior consultant for Deloitte. When her parents arrived from South Korea, her father's engineering experience was not recognized in his new home country. He ended up starting a range of businesses from a liquor store to a cafeteria.

Some were successful, others weren't. But through tremendous hard work (14-hour shifts, seven days a week), Ms. Lee's parents put all four children through university. When his children were in their 20s, her father was ready to retire but didn't have a successor. He ended up selling his combined

gas bar/corner store and liquor shop to another immigrant.

"Christmas was not considered a break," Ms. Lee reminisces. "Having seen what happened, we weren't really interested in taking over."

TRANSITION TIPS

When kids bow out of running the small family business, it creates a succession stumbling block for the parents. Experts, however, say there are steps that can be taken to increase a business's chance of survival in the future, even if it isn't within the family. Deloitte's Joanne Lee and Harley Mintz explain how.

Build up the business

The key is to create more value than just the basic assets. That means getting more dollars flowing in the store, and hiring staff, according to Mr. Mintz. The owner of a basic corner store who works long days alone may struggle to find a buyer.

Prepare for departure

An adviser can help owners consider their options and address possible areas of risk, says Ms. Lee. She adds that owners can continue to play a role in the business even after they leave, which helps smooth the transition. And they need to give themselves time to prepare: two months, for instance, isn't going to cut it, according to Mr. Mintz.

Follow us on Twitter: @GlobeSmallBiz

 

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories