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Thousands of businesses are owned by the Baby Boomer generation, and they are finding themselves asking one of the largest questions of their careers: “Who is going to take over the family business?”
If you are or have been the parent of a teenage child you may have read the book by Anthony E. Wolfe, I Hate You, But Will You Please Drive Me and Cheryl to the Mall? You probably got a chuckle out of the title, but after reading it, found it totally relatable. Raising children is always a push-pull relationship; however, in the final analysis, we love our children and will do almost anything for them…including turning over the family business.
Thousands of businesses are owned by the Baby Boomer generation, and they are finding themselves asking one of the largest questions of their careers: “Who is going to take over the family business?” This is especially the case now, against both the backdrop and challenges of the pandemic, plus a general trend toward a Baby Boomer retirement exodus from the workplace.
Your business is like your child. In many cases, you have given birth to it, you have fed it, nurtured it, been angry at it, loved it and despised it. In the end, it is like a piece of you, and you cannot imagine leaving it permanently. Perhaps you would like to take a long vacation from it, keep your hand in it, but NEVER leave it completely. After all, it is part of the family.
Whether you have inherited or started your own business, you have likely heard the question, “What is your exit plan?” It is one we ask our clients on a regular basis. It is not an easy question to answer and can be especially vexing for owners of family-held businesses, where few seem to have a solid exit strategy in place. Typically, business owners fall into one of these categories:
I feel my plan is solid and I can walk away today with a strategy in place.
My son or daughter will take over after s/he graduates from college.
Once I hire the right people, I will be able to take more time off and it will run itself.
I need to bring in someone to run the business until my son/daughter is ready to run it.
Warren Buffet is famous for the expression, “the lucky sperm club,” when it comes to the inheritance of a family business. But are inheriting children really that lucky? A successful parent-owner can be a hard act to follow. The pressure on the next generation to do things as their parents have done or to take the business to the next level is immense.
Given this, it’s worth making a careful assessment to determine whether your child wants to or – equally important – whether your child is the best person to take over your business. As you consider this, to potentially give your business’s future a leg up under the leadership of the next generation, have your son or daughter precede their entry or return to your business by spending some substantive years in another well-run business. The education and perspective they can achieve will be reinvested in your business and will further their own exposure to different career opportunities not bestowed on them simply because of their lineage. Ultimately a smart, interested and talented offspring won’t be good at everything; running your business may be one of those things.
Alternatively, they may self-select out of consideration. In these cases, as a business owner, you may have a very painful decision to make – to engage a non-family member to take the helm. If you give this decision the time and energy it deserves, you may conclude that by turning to a more skilled leader you’ll be favoring your business, your employees and your community, not to mention your children’s inheritance and your own legacy.
On occasions when it becomes obvious that the leadership reins of a company should not – for whatever reason – be handed down to the next generation, we’ve worked with owners who have determined that their best (or only) option to sustain their enterprise was to recruit the right successor. We’ve also worked with a number of families who opted for a strategy to simultaneously elevate performance, position the business for eventual sale, and provide a leadership asset for the acquirer.
The natural life cycle of Baby Boomer-owned family businesses has them all now facing the wave of leadership and ownership succession. The difference for this generation is the resources that have emerged to help sustain their business legacy, plan for their personal wealth and consider their own next adventure. A keystone asset will be the right leadership for the business and the times. That leadership will optimize business performance, maximize the attractiveness for an acquirer and be an asset toward the longevity of the enterprise.
The right leader to sustain and position each business will underpin the best outcomes within the flood of Baby Boomer successions. Selecting that leader may be one of the biggest and most important decisions you, as the business owner, have left to make.
Kelley Small is an Advisor to Standish Executive Search, a New England-based firm that advises business owners, executives and boards who are positioning their companies for accelerated growth, change or succession.