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Generational Transition For The Small Business

Charles works for his parents, and they're in their 60s. Charles needs to have a conversation with them about beginning to transition the business. How does he start the conversation?

QUESTION: Charles in Nebraska works for his parents, and they’ve been in business 30 years. Charles has been in business with them for 16 years. Now, they’re in their 60s, and Charles feels he needs to have a conversation with them about beginning to transition the business. How does he start that conversation?

ANSWER: I’ve been studying small business generational transition for a couple of years now, and I’ve found several very successful transitions. The most difficult transition emotionally, relationally, and communication-wise is the first one. The founders of a business—including me—are typically hardheads. That’s what has allowed us to start something from nothing and to survive. The very thing that caused us to do that makes us hardheads and control freaks. Prying their hands loose from the thing even after they’re dead is tough. You can just talk about that upfront and say that’s the way it is. You can also start talking about the idea that transition after death is what’s known as stupid. It doesn’t work. If he dies today, the chance of this business surviving if he—over the next three to five years—systematically moves you into ownership and leadership and systematically moves himself out, that business is 20 times more likely to survive than if he drops dead today. Transition after death is almost certain doom for the business, because you’re not prepared and your team isn’t prepared for you to take over. It’s kind of like standing on one side of the football field and throwing a baseball bat across the field hoping somebody will catch it versus running in a well-synchronized relay race where the baton is handed off seamlessly.

The transition ought to be so gradual and steady that your team—the day you are named president and owner—doesn’t have an emotional ripple. You have to talk to him about that. There’s tons of stuff online about family business. Kennesaw State University in Georgia has a degree in family business. There are some books out on it. Family Business Magazine can be subscribed to online. Talk about it as a way of making sure that his hard work survives him. Then you’ve got to be very careful so long as he lives to honor him through the business.

The son or daughter taking over has to learn to survive the quirky brilliance of the business founder. Most of us founders have a quirky brilliance. It’s not systematized, and it’s not a process. We fly by the seat of our pants. We make great decisions. That can only take a business so far, and it will not transition it. The business will die if you don’t begin the transition prior to death. If he can’t do that, then threaten him with you not sticking around to watch it die. You can be diplomatic about it.

I’m 50, my kids are in their 20s, and I’ve already started. I’ve already started training them, talking about it, thinking about it, and I figure it’s 20 years before one of them is completely in the saddle—maybe 15. I’ll be here until I die, spreading hate and dissension, but one of them will be running it.