Most business owners don’t place the value upon our experience that we should. But who can blame us? After all, we started with nothing besides knowing how to make or do something and built a business from scratch. We rarely stop and think why it should be any different for OUR offspring. And that thinking gets us into trouble. Here’s why and what we should do about it.
It doesn’t have to be offspring by the way. It can be a trusted worker. If so, then the same track information applies to them except the High School track.
What we miss is that they (sons, daughters or trusted workers) are taking over a business with a million in sales and seven families depending upon it for income. And this will probably include you as internal transitions usually rely on offspring paying you over time.
So you, your workers and their families will feel better knowing the successor has qualifications other than being a member of the “lucky gene pool.” So, if you want to improve their odds and yours, put them through the Executive Track.
Executive Track
The Executive Track is a compilation of knowledge, skills and sweat equity that a successor should possess before you determine if they are worthy of succession. It assures that they have the outside work experience as well as formal education and inside experience to be a successful successor.
Understand further that there is no guarantee that any candidate will complete it. I will guarantee, however, if they are unwilling to finish the Executive Track, then they are unworthy of taking over.
Parents intuitively try to treat children “fairly.” Unfortunately, they often interpret fairness to mean equal and divide the family business equally. That’s often fatal and unfortunate as it most often results in siblings never speaking to each other again.
Fairness is equableness of opportunity; not equableness of assets. Afford everyone who wishes the opportunity to participate in the Executive Track. Then select a successor from those completing it.
It Starts with the High School Track
Successors should have completed the High School Track by being involved with the business in the way everyone did chores on the family farm. Kids should pay homage to the business that provides them the lifestyle they enjoy. But, just because they swept the floor doesn’t mean they are ready to take over the farm.
One daughter told me that her father’s method of earning a living as a general manager at a high value imported car dealership was so “bourgeois*”
* In Marxist philosophy, the term bourgeoisie denotes the social class who own the means of production and whose concerns mainly are the assurance of their economic supremacy.
“Maybe,” I replied, “but it’s putting your skinny little assets through college, isn’t it?” Children should be taught the value of the family-based business during participation in the High School Track.
The High School track doesn’t mean they’re capable of succeeding you in the business, however. For that, they need additional training and experience.
Additionally, an offspring who is unable to complete the High School Track (do their chores) means they chose not to succeed you in business. If they are your only choice, choose to sell the business to an outsider.
Then Comes Education
While you may not have had business education (most owners don’t), the successor needs to know more than you know. Taking over a successful business is different than starting one from scratch. The vast majority of those starting businesses from scratch fail.
What needs to be known? I suggest two years of accounting (intro and intermediate whether they like it or not), business law (usually two semesters), at least one class in each in marketing, business organization and management and personnel law.
Then augment with additional training.
Complete at least one class in basic supervision; maybe a three to five day seminar with a test.
Selling fundamentals are occasionally taught in college but most find these classes outside of academia. Additional instruction in sales management is a plus. Oh yeah, they should continue taking sales classes pretty much their entire life. Some would probably do you good as well.
And the Dale Carnegie Course in Human Relations (sometimes thought of as the “public speaking class”) is a must-do. I highly recommend it for all management people. Classes are offered in most all areas of the country and can give even curmudgeons useful tools to better communicate with others. They have additional classes in sales, but none other substitutes for this basic course in my book.
One New York owner told his supervisor to take the class and when complete, he would get a raise. The student attended two classes and said, “To heck with it.” Owner then thought, “I’ll show him, I’ll give him a raise anyway even though he’s not expecting it.” This will be included in my forthcoming book, “Stupid Owner Tricks.”
Note that they don’t have to have a degree in business. However, if they do, they will probably have most of what’s listed.
But a degree in English Literature, Nuclear Engineering or Journalism does not substitute for the requirements listed above. Practically every community college in the country teaches these courses in a facility near you.
So, even if the offspring has a Doctorate in Egyptian Theology and has already come to work for you; they can enroll in night classes for these requirements.
No, you don’t pay them for going to class like an owner in Delaware did. Attendance and acceptable grades (I think A’s are acceptable) are part of their sweat equity. You may pay for the actual classes if you wish.
Facts are facts: successors must know something about what they are going to be doing which is running a business.
Say you didn’t have all this education and you turned out alright? You’re special. They aren’t. Remember, you are relying on their skills to pay you in your retirement most of the time.
There’s even more to the Executive Track than “do your chores” and “get an education.” We will pick up with real-life work next.
Are you ready to sell?
We do provide on-site valuations of businesses that include an estimate of value as well as include recommendations of “fixes” that will improve earnings and thus value if there are issues there. We also can provide a non-onsite arms’ length estimate of value for planning purposes for businesses if not in need of fixes. These are particularly valuable for owners with three, five or even ten year time horizons. If you are ready, then email me at tom@cprint.com and let’s see where you are.
Do you want to transition to son/daughter or employee?
Fine, does the son/daughter or employee have the knowledge to “run” a business? This is particularly important for many times an “internal” transition requires the seller to finance all or part of the sale. So, you need to assure that you will get paid in your golden years and not have to come back and run the business. The way to do that is to assure your successor is trained. Our CPrint program has helped many prepare successors for business over the years.
If you’d like more information on how our program could help you, please message me at tom@cprint.com
Happy Trails,
Tom
Tom Crouser Senior Contributing Editor, Quick Printing magazine Chairman, CPrint® International (888) 427-3714 235 Dutch Road Charleston, WV 25302 tom@crouser.com
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