Successful Succession Danatec shows the right way for small family businesses to transfer ownership By Bobbi Menard
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t’s rare for a small business to not be family owned. The highs and lows of entrepreneurship and ownership of a small enterprise are inevitably shared with family, along with employees. One of the most challenging issues for a small, family-owned business is the succession plan. Mix in the emotional ties of the family with significant money decisions and the process can be emotionally fraught and carries financial risk. The majority of Edmonton Chamber members are small businesses and there is much that the owners can learn from each other. Alina Martin is the President and CEO of Danatec Educational Services, an Alberta small business founded by family in 1985, and an Edmonton Chamber member since 2015. Martin’s story of succession planning and transitioning ownership of a small business highlights several of the main components of a successful transfer of ownership within a family business. Martin first joined the family firm in 2004 after a stint as an entrepreneur suddenly ended. Her first try at working for her father was not successful. “It was disastrous,” admits Martin as she recalls the early days of working with her dad. “I left after six months when my dad and I had a really big fight.” There were several secrets to Martin rejoining Danatec. She can list them with ease, “I changed my attitude, got really focused and learned every single aspect of the business.” This approach laid the groundwork for her father to feel comfortable handing over the leadership of Danatec, which was the first step in Martin moving towards ownership. “My dad sat down at my desk and told me that I was ready. He wanted to retire. He also told me to not screw up his retirement.” This was the start of succession and transition inside Danatec. Leading the company enabled Martin to make strategic decisions about professional help when it came to transferring ownership. It also allowed enough time for the important conversations between
Alina Martin, President and CEO of Danatec Educational Services
Martin and her father to take place. “We talked back and forth, and in 2011 we decided to hire a team. When my dad passed away we had already agreed on everything months before. It would have been much more difficult to change over the ownership without those conversations.” Martin and Danatec hired a team of accountants, lawyers and mediators. Martin terms the decision as a “huge expense” that paid off in return on investment. The accountants did the valuations, the tax specialists went through every tax implication and option, and the lawyers handled documentation, including the re-issuing of shares. “You have two things to preserve in the process: family first and the wealth of the business for family and for employees,” says Martin. “You need to get it right.” The perils of getting it wrong are multiple. Unplanned successions often follow one of two paths. The first is that the surviving spouse, who may not be qualified, can have the business thrust upon them to run. The second is that the business will lose value and competitive edge – especially if the value is caught up in the founder/owner of the business. Danatec got the process right. The family succession plan for the business began in 2008 and, in 2013, Martin’s purchase of the firm was complete in every way, including on paper. The company continues to grow with offices in Calgary and Edmonton and business across Canada. Martin is proud to have built a culture of community engagement and building community – it is part of why the company is a member of the Edmonton Chamber. As a business owner under the age of 40 who has successfully completed purchasing the family business, Martin has one last piece of advice for the next generation of family business owners. “It took me a few years to fundamentally believe that I was capable of this, but you start to trust who you are. My father believed in me, but this process was a journey.” www.businessinedmonton.com | Business In Edmonton Magazine | May 2015
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