FAMILY BUSINESS NEWS

Building A Legacy For The NextGen

October 2020 | Volume VIII

A family business founder once asked me: “what was I thinking, wanting to build a family business?”

Here is what immediately flooded my mind, almost too quickly to get it out rationally:

  • When you started the business, did you know it was going to be a family business?
  • What makes it a family business to YOU?
  • What frustrates you the most:
    • the blurred lines between business and family?
    • that succession and legacy – grooming a family member – is a lot more effort and stress than “cashing out” to a third party?
    • Which family member involved in the business should be anointed the leader over all the other family members in the company?
    • Should ownership be based on performance, a birthright (“blood” relative) or a combination thereof?
  • And finally, after 30 years in business, would you even think of having it any other way?

WHAT DRIVES THE FOUNDER OF A FAMILY BUSINESS?

Family business owners, especially that generation that founded the business, run the gamut of emotions. At one moment:

  • they are cursing out family members because they are not living up to (unrealistic) expectations (that they unilaterally established);
  • they show a lack of passion and commitment to the business, unlike what they did when they founded the business;
  • they are shaking their heads, wondering why (“please, remind me why”) I chose legacy over a massive cash payout….

… all the while, exhibiting what can seem like bipolar moments between control-freak tendencies and depressed Eeyore-like mood-swings.

The sooner a founder understands that they cannot be replaced by themselves, the faster the successful transition can begin.

Related: Six Steps To A Family Business Succession Plan

Those qualities that drove the business to get off the ground and flourish are likely not the same needed 30 years later in a different stage of the business life cycle.  That is neither good nor bad – merely realistic. The likelihood that the raw, uncalculated risk that was mixed with tireless energy, and often a gut feel over logic that led to the creation of the business are not needed today. And never present thirty years ago was a twinkle in the founder’s eye to create a “family business” while sweating through making payroll or mortgaging the house to capitalize the fledgling business!

THE NEXT GENERATION, AKA NEXTGEN, OF LEADERS

Founders create a new generation of entrepreneurs who are highly educated, risk-conscious, and slightly less hungry than themselves. Since the founder likely had a huge “hand” in creating this next-generation business owners, why should they be surprised when that is who shows up to work the family business after university? That same “hand in creating” a gap year, travelling the world and eating in good restaurants. And why not – the founders did what they do to make the NextGen more comfortable: remove the fear and risks of mortgaging the house and ensuring that working 14 hours a day 6 or 7 days a week was not required. After all, don’t we all want our kids to have it better than we did? Enjoy what we have built? Reap what we have sown? Why else would we do it?

Related: The challenges of succession planning

To eventually build a legacy – a family business that supports many branches of the family tree and satiates their desire to succeed financially and in the eyes of their peers – is borne from nothing that resembles legacy in its infancy stage.

However, the decisions to create legacy and wealth do not have to be mutually exclusive. Still, the commitment to planning, direction, discipline and understanding has to be as meticulous as the drive and energy and (sometimes) reckless abandon that started this thirty years ago. All in all, I would say it is an envious place to be even if Eeyore rears his ugly head from time to time!

If you want to know more about family businesses, how to manage tangible such as tax and estate planning
and the not so tangible family dynamics, please contact us or subscribe to our Newsletter.

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