Children in the Business, It's Complicated

By: Jeff Bannon | 5,630 Reads | 13 Shares

%3Cp%3EDefining+the+members+of+your+business+family+can+be+difficult.+Especially%2C+when+considering+the+idea+that+your+family+business+members+include+%3Cem%3Eanyone+you+do+business+with+for+reasons+other+than+just+money.%3C%2Fem%3E+As+a+result%2C+family+dynamics+can+become+quite+complex+among+minority+partners+you+may+have%2C+whether+they+are+blood+related+or+not.%3C%2Fp%3E%0D%0A%3Cp%3EWhether+your+minority+partner+joined+you+via+a+stock+recognition+plan%2C+equity+buy-in+along+the+way%2C+or+at+the+inception+of+building+your+multi-unit+franchisee+business%2C+there+are+very+simple%2C+common+expectations+that+surprisingly+can+get+misconstrued.+First+and+foremost%2C+is+simply+that+%3Cem%3E%3Cstrong%3Ewe+are+in+this+to+make+money.+Period.%3C%2Fstrong%3E%3C%2Fem%3E+The+second+is+that+%3Cem%3E%3Cstrong%3Eyour+partner+provides+something+that+you+consider+important+to+the+overall+success+of+the+organization.%3C%2Fstrong%3E%3C%2Fem%3E%3C%2Fp%3E%0D%0A%3Cp%3ESimple%2C+right%3F+Well%2C+unfortunately+there+is+at+least+one+season+of+life+that+complicates+these+simple+assumptions%3A+%3Cstrong%3EThe+coming+of+age+of+children%2C+whether+yours+or+your+partner%27s%3C%2Fstrong%3E.%3C%2Fp%3E%0D%0A%3Cp%3ELet%27s+assume+for+a+moment+that+neither+yours+nor+your+partner%27s+children+have+shown+any+interest+in+your+business.+Then+you+can+continue+doing+what+you%27re+doing+without+interruption+and+everything+will+work+out%2C+right%3F+Well%2C+in+today%27s+world%2C+it+is+not+out+of+the+realm+of+probability+that+a+child+will+live+with+mom+and+dad+into+their+30%27s.+There+are+many+households+with+highly+educated+tenants+unable+to+pay+rent.+Having+worked+with+several+mom+and+dads+in+this+position%2C+I+can+attest+that+there+is+a+natural+inclination+to+view+the+business+as+an+opportunity+to+help+launch+Junior+into+the+world+and+get+them+on+their+way.+As+a+result%2C+it+can+be+extremely+difficult+to+deny+a+request+to+give+Junior+a+job+until+they+figure+out+what+they+want%2C+particularly+if+you+have+not+addressed+it+ahead+of+time.+Furthermore%2C+it+is+in+this+moment+that+at+least+one+partner+has+shifted+away+from+the+first+simple+expectation+-+you+are+no+longer+in+business+just+to+make+money%21+The+business+has+become+a+support+system%2C+fallback+plan%2C+and+potential+enablement+vehicle+that+transcends+day+to+day+business+performance.%3C%2Fp%3E%0D%0A%3Cp%3EAlso+in+this+scenario%2C+many+young+adults+have+no+idea+what+they+want+to+do%2C+and+there+is+a+natural+tendency+by+parents+to+keep+the+opportunity+open+should+the+children+make+up+their+minds+to+commit+someday.+This+has+been+known+to+impact+hiring+decisions%2C+delaying+the+fulfillment+of+vital+management+roles+within+the+organization+in+the+hopes+that+one+day+Junior+will+want+to+join+the+business.+Sounds+crazy+but+it%27s+true%21+Again%2C+this+is+a+shift+away+from+the+%22profitability+first%22+approach+that+puts+the+minority+partner+in+a+precarious+position+to+either+engage+in+the+family+dynamics+or+begrudgingly+bite+their+tongue.+This+is+when+the+value+of+the+partnership+can+begin+to+decay%2C+causing+a+minority+partner+to+withdraw+and+subsequently+be+less+inclined+to+contribute+at+the+level+you+had+grown+to+expect.+Therein+lies+the+shift+away+from+the+second+simple+expectation%2C+you+are+no+longer+as+concerned+with+your+partner%27s+input%2C+even+though+they+will+share+in+the+result.%3C%2Fp%3E%0D%0A%3Cp%3EFurther+complicating+the+%22no+children+in+the+business%22+dynamic+is+the+question+as+to+whether+the+business+can+be+kept+in+the+family+and+operated+by+a+Board+of+Directors%2C+or+whether+a+sale+is+imminent.+Although+there+is+significant+complexity+surrounding+the+Board+of+Directors%2C+it+can+be+done.+A+sale+is+the+simplest+alternative%2C+but+the+question+becomes+to+whom+and+at+what+price%3F+Under+the+umbrella+of+a+%22family+business%2C%22+sales+and+transfers+among+family+are+generally+expected+to+be+made+as+fair+as+possible+and+commonly+involving+discounts%2C+while+a+sale+to+an+outside+third+party+merits+a+hardline+negotiation+to+capture+every+dollar+available.+How+do+you+find+balance+if+your+family+sells+to+your+partner%3F%3C%2Fp%3E%0D%0A%3Cp%3EOn+the+other+hand%2C+if+either+partners%27+children+or+family+seek+employment+in+the+business%2C+there+is+obviously+a+long+list+of+governance+considerations+that+easily+exceeds+the+scope+of+this+article.+One+significant+factor+pertaining+to+this+topic+however%2C+is+finding+the+balance+between+the+urgency+to+remain+bottom+line+focused+while+being+patient+with+the+developmental+process+of+a+successor.+Part+of+the+beauty+that+a+family+business+can+offer+is+the+lack+of+the+publicly+traded+company+type+of+pressure+requiring+immediate+returns.+The+strategic+planning+of+a+privately+held+business+can+and+should+take+into+account+a+much+longer+focused+timeline%2C+allowing+for+the+development+of+the+next+generation+of+leaders.+This+long+term+approach%2C+however%2C+is+likely+to+result+in+a+performance+dip+at+some+point+during+the+process.+If+your+partners+are+not+onboard+with+the+potential+for+a+self-imposed+performance+dip%2C+then+trouble+is+certainly+on+the+horizon.+This+is+a+difficult+tightrope+to+walk+as+every+successor+needs+the+opportunity+to+learn+from+their+mistakes%2C+but+is+it+okay+if+it%27s+at+the+expense+of+a+partner+simply+looking+to+maximize+their+return%3F%3C%2Fp%3E%0D%0A%3Cp%3EClarifying+expectations+of+the+next+generation%2C+whether+or+not+they+are+in+the+business%2C+is+a+critical+step+in+maintaining+a+lasting+partnership.+If+you%27re+thinking+that+you%27ve+got+time+and+it%27s+not+a+problem+right+now%2C+then+now+is+the+time+to+address+it.+Overcoming+partnership+issues+regarding+family+after+the+cards+are+on+the+table+can+be+like+putting+toothpaste+back+in+the+tube%21%3C%2Fp%3E%0D%0A%3Cp+style%3D%22border-top%3A+3px+solid+%23DDDDDD%3B%22%3E%26nbsp%3B%3Cem%3E%3Cstrong%3EJeff+Bannon%3C%2Fstrong%3E+is+a+partner+with+The+Rawls+Group+-+Business+Succession+Planners.+Entrepreneurial+owned+businesses+are+close+to+Jeff%27s+heart.+With+the+recent+passing+of+the+baton+of+his+family%27s+law+firm+between+his+grandfather+to+his+sister%2C+Jeff+has+witnessed+the+benefits+and+rewards+the+planning+process.+For+more+information+visit+%3Ca+href%3D%22http%3A%2F%2Fwww.rawlsgroup.com%22%3Ewww.rawlsgroup.com%3C%2Fa%3E+or+email+%3Ca+href%3D%22mailto%3Ainfo%40rawlsgroup.com%3Fsubject%3D%22+target%3D%22_blank%22+rel%3D%22noopener%22%3Einfo%40rawlsgroup.com%3C%2Fa%3E%3C%2Fem%3E%3C%2Fp%3E

Published: June 26th, 2018