Are First Nations Organizations Viable Partners for Business Succession and Transition in Saskatchewan?

By Peter Moroz

Many successful entrepreneurs and business people in Saskatchewan are looking to transition their companies via sale, succession or partnerships. A recent Canadian survey suggests that this applies to upwards of 70% of small and medium sized businesses. The succession of these companies is important to the economy for reasons beyond their contribution to the local tax base.

Obviously, most business people are seeking to exit from their businesses to cash out the value built up in their companies for their own retirement. But for many owners, keeping the company growing beyond their own exit signals more than just self-interest. These owners are thinking about how the process of transition will affect others, not just within their own family or company, but also within the local economy. This means jobs that stay in Saskatchewan.

The process of transition is not easy, and the number of owners looking to sell often is higher than the number of potential buyers available. This combined with the difficulty of finding the right partner while continuing the business as a stable going concern through the uncertainty that surrounds ‘sale or change’ presents many problems for owners. Putting up a ‘for sale’ sign on a company may present a red flag to partners and customers.

One could argue that First Nations organizations are on the radar as a potential solution to this problem. But they are still flying quite low on that radar, even after several recent high profile transitions being in the news over the last few years. For example, English River and Peter Ballantyne First Nations recently made an agreement with JNE Welding, a company with over 1000 employees, while Des Nedhe Developments, the development arm of English River, purchased a majority position in Creative Fire, a local, but nationally recognized full-service communications company.

While these examples highlight the potential of transitional partnerships in terms of exploring new opportunities, more of them will be necessary to ensure growth and prosperity for all people in Saskatchewan. Yet very little is known as to what can be done to ensure that opportunities for transition may be effectively acted upon and what factors are necessary for success. Most of the existing transitional partnerships featuring First Nations organizations are charting new waters.

A team of researchers at the University of Regina’s Hill/Levene Schools of Business are studying entrepreneurial business transition. Their recent survey found that the top business chambers, institutions, First Nations organizations and government agencies in Saskatchewan close to the issue believe there are indeed opportunities; but also barriers to overcome.

Some of their initial research suggests that partnerships with First Nations are becoming more viable due to the growing investment and managerial capacity of their development corporations. Some of these ‘devcorps’ have learned hard lessons in resource partnerships and joint ventures with multi-national corporations over the last 30 years. Several First Nations development companies have joined the ranks of some of the best managed companies in Saskatchewan. There are also certain advantages that are tax based, supply chain oriented and provide access to much needed human resources and relationships. For some partnerships, advantages may also include access to new opportunities and markets. Most important of all, First Nations organizations are local while becoming more globally focused: that means the potential for jobs and economic growth for Saskatchewan.

Dr. Peter Moroz, an Associate Professor, is the lead researcher in this project to study transitional companies in Saskatchewan as an alternative to ‘starting up’ brand new organizations. Individuals who start up businesses often have much higher failure rates that those that buy existing businesses.  These existing businesses may also offer the potential for new opportunities that older generational owners won’t or can’t pursue.

Moroz states that experts in the local economy believe that synergies may exist in the form of leveraging existing trust formed with First Nations communities and existing businesses that already have good working relationships, capacity and experience. “Many First Nations communities are beginning to look at the feasibility of taking ownership positions or transitional ownership in existing companies for an assortment of reasons.  However, there are still many barriers to this process that come from not understanding what a shift in ownership means for employees, the new owners and the communities where services are provided.”

In most cases, not much does change, as First Nations development corporations with good management understand the value of existing relationships and organizational practices while still looking to improve the welfare and opportunities of their own people. If anything, there may be opportunities for new jobs and new markets previously untapped for everyone. Thus, doing business with First Nations communities may be part of a targeted strategy for succession planning for some owners. But opportunities for partnerships between First Nations and business owners in Saskatchewan may be limited by current capacities and industry type.

Along with the opportunities for partnered transition or sale of existing Saskatchewan owned businesses to First Nations organizations, we also need to better understand the role of newcomers, female entrepreneurs and young people in business succession. Alison Anderson, a Saskatchewan entrepreneur, owns SuccessionMatching.com. She is working with agencies and institutions across Canada to get out the message that young adults must be educated in being alert to and how to capitalize on many opportunities for transition in the near term.

Steve McLellan of the Saskatchewan Chamber of Commerce also believes that there are good opportunities for well trained youth to take over million dollar companies as an ‘employment to ownership’ strategy. Opportunities for young people also extend to a growing First Nations population and will require more students to take business education in the next few years. Furthermore, with the growing importance of mentorship in starting up new businesses, a greater role may be needed for mentorship in transition opportunities as evidenced by the interest and support of the Raj Manek Mentorship Program.

If you have any interest in this work or may have insight into any cases of businesses going through succession and transition that align with this research project, we want to hear from you! Please contact Peter Moroz or Aldene Meis Mason at the University of Regina.