Chloe Quigley, CEPA
Business Exit Planning Advisor
Dear Second Generation Business Owner,
You, like me, have joined something that your mother or father (or both) spent a great deal of time developing. Like any other major part of their life, this venture caused them stress, distraction, possible turmoil as well as their potential fortune. As a second-generation family member in a family business, here are some lessons that I’ve learned.
Your ideas may be new, but they are not always better.
Dad’s way of tracking business seems outdated? It’s worked so far! New technology to utilize? Give them a try. Like me, you’ll quickly see that change and success come gradually. Each idea requires hard working hands to see it come to fruition.
Your ideas may be better. But there’s also a reason Grandma’s recipes are saved, cherished, and passed throughout the generations. It takes time to incorporate a new secret ingredient. Be patient, be curious, be respectful.
You can work differently but you must produce the same or better outcomes.
The generational differences will make themselves obvious. So will the differences in personality, leadership, and work style. You can do things differently. But you must produce equal or greater outcomes. You can’t skip on details.
Iterate, reiterate. Many steps can lead to the same point. The benefit of combining different approaches is that you have options and a diversified toolbox.
You and the first generation need to be willing to ask and answer the hard questions.
To the first generation:
• Are you open to selling to a 3rd party?
• Are you financially prepared to gift the business? Or do you have outstanding cash needs for retirement?
• Will this push a sale?
• Do you see each member of the second generation’s value in the business the same way they and their co-heirs do?
To the second generation:
• Do you understand your role?
• How about your role five years from now?
• What are your short-term and long-term goals?
• Do you see your value in the business the same way as the first generation or your co-heirs?
There are a handful of tools that help facilitate these conversations, as well as advisors that specialize in leading them. Bringing in a third party that can see and assess the situation more objectively and set expectations and steps to move forward can help keep the professional considerations in the business lane and the personal ones aside. These are often unchartered conversations for families so bringing in an expert to moderate often helps.
You don’t have to do it alone.
To the first generation, you have spent years laying the foundation for your family. You have built a successful business and defeated so many odds. Transitioning your business and making sure the next generation is equipped is likely new territory. This next chapter adds a new layer to the complexity of running your business. On this new ground, we encourage you to bring in outsiders, people that have done it before and that have you and your family’s best interest at the forefront.
Transitioning a business requires the consideration of several factors. In any transition, an owner’s personal financial situation must be accounted for. In family transitions, their personal financial situation can’t help but overlap with that of the second generation, even if full independence from the second generation is established.
Family business is personal. Finances are personal. Like I mentioned, there are plenty of tools and specialized advisors that work specifically with family businesses (in or before transition). Their goal is to objectively see the value in the business matched by the values and goals of everyone involved. After all, a valuable business is a readily transferable one. Are you ready to get there?
Reach out to our Business Exit Planning Team today.