Business Handover Means Potential Windfall for IT Companies

The handover of family owned businesses to the next generation is likely to mean a big windfall for I.T. companies. I originally wrote this article while serving as the CTO at MIT Consulting.

By Jeremy Lichtman

A sales rep from my former company recently visited a family-run firm that has been in operating in Toronto for a number of decades. The company has annual revenues in the low tens of millions of dollars.

The current owners are from the baby-boom generation, and are in the process of handing over the business ownership to their adult children.

The result: one of the largest potential sales that they have had to date.

The existing owners had viewed information technology as a necessary evil, and had not invested in the company’s information technology infrastructure in more than ten years.

The most recent computer in the building dates from an era when networks required special software to operate (picture 14 inch monochrome monitors), the accounting package still runs on MS Dos, and they currently have no website or email. The network still operates on coaxial cable, and their phone system is a decades-old antique.

All this in an industry where many of their competitors use EDI and web-based technology to integrate with both suppliers and vendors.

The scenario above is actually an amalgam of a large, and increasing, number of clients that IT consultants are seeing these days.

There are approximately one million family owned businesses in Canada alone that are likely to change ownership in the next decade

I’ve heard the statistic kicked around that there are approximately one million family owned businesses in Canada alone that are likely to change ownership in the next decade.

Many of the current owners have been operating the business for many years, and are intimately familiar with their operations, meaning that they do not have many formal systems in place.

The business, as a result, may not require computers, network, or even accounting software. Who needs a computer when the accounting system is a paper ledger book? And who needs a website when you are on a first-name basis with all of your customers?

As these businesses change ownership, and a new, younger generation takes over, much of the knowledge base that was required to run the business – things like the first names and birthdays of all of the customers – will be lost.

The only way these businesses will be able to continue their operations will be to invest in the creation and maintenance of systems to capture critical business information.

Upgrades to computers, servers and accounting software are just the tip of the iceberg; CRM (Customer Relationship Management) software, often considered to be a static, tapped-out market, may see growth, particularly at the low end of the range. And the lowly web developer may be busier than they are accustomed to being in recent years.