Category Archives: Transitioning Your Business

The Challenges of Succession Planning

Succession Planning. That seems to be the #1 issue people talk about when it comes to family businesses. And just about every consulting, accounting, legal and financial group claims to do it and do it well.

Talk to family business owners over 55 and they’ll tell you that “succession” is probably their highest concern and, at the same time, their most confusing concern.

Those who are on the succeeding end – their adult children – have a variety of concerns, depending on how their parents are handling their discussions around succession.

Consider some of the issues they raise:

  • Son: “I don’t think Dad is ever going to retire. What kind of a future does this leave for me?”
  • Dad: “It’s impossible for me to just let go of the company I’ve spent a lifetime building. And besides that, the next generation is not ready.”
  • Daughter: “I don’t think I’m ever going to own any stock in the family business. Why should I continue to participate in it?”
  • Siblings: “We have a succession plan; it was decided by my dad and his brother years ago. My brother and sister and our cousins don’t like it, but we don’t make the rules.”
  • Sibling: “I don’t know how I’m ever going to get along with my brothers and sisters in the business.”

Think about these five quotes for just a moment. The first quote goes to Timing on when the trigger should be pulled for the senior generation to exit the business. Just because they can continue to work in the business doesn’t mean they should continue to work in the business.

The second quote deals with Identity and Training. Thu owner’s identity is too connected to what he does. He doesn’t have a transcendent purpose in life outside of work. Moreover, he hasn’t spent time (usually years) preparing his children to take over his business. Leadership and management are two different things. Just because they know how to work in the business doesn’t mean they know how to lead a company.

What we hear in the third quote is Hopelessness. More than likely, a succession plan isn’t in place, or if it is, it’s not been communicated well and it probably isn’t being followed.

The four quote deals with feelings of not being Respected when stakeholders are not included in the development of the succession plan. When stakeholders are not included in the development of the succession plan, the plan itself is bound to be wrong. But that’s the minor point – the frustration and negativity that grows in the soil of being diminished is the major concern.

The last quote illustrates the complexity that the 2nd generation siblings must navigate. Power, control, identity, roles, purpose, employment, retirement and a host of other issues that have strong potential to create conflict and divisions if they are not managed properly. Resolving these issues doesn’t come naturally. Complexity is the issue to resolve in the second generation and they rarely can do this without outside assistance.

Timing, identity, training, hope, respect, complexity and a host of other issues are wrapped up in a succession plan. Add to that estate plans, retirement objects and plans, answering “What’s Next?” for the senior generation and the different shareholder, Board of Director, contingency and other planning efforts in which the family must engage leads one to swiftly discern why most consultants say it takes at least five years and intentional effort to successfully achieve a succession of a business from the first generation to the second.

The quotes were taken from the book Family Business Succession: The Final Test of Greatness. Aronoff, McClure, Ward; Palgrave MacMillian

When Leadership Provides Status, Meaning and Power, it’s Hard to Give Up

For the senior generation in a family business, their leadership in their business and family has provided status, meaning, power, and other rewards. Hence, the greatest impediments to peaceful transitions are the senior leaders’ fear of losing it all.

Their dual role as a leader in the family gives them a sense of “specialness” that comes with the leader’s belief that he or she is uniquely qualified to lead. Status and specialness reinforce each other and the two combined is a core reason why the senior generation often stays on in the family business well after they should. Couple that with the second generation’s ambivalence as to when is the right time to ask mom and dad to step aside and it becomes easy to see why the family system supports the putting off of the necessary transition until there is no other choice.

This is why Christian Business Owners are taught to hold their business with an open hand – an entrustment from the Lord who is the ultimate HR director of their company. When a business owner walks closely with the Lord and values His direction more than the perks of ownership, when God calls the owner to retire and focus on something else, the owner more easily lets go of his position.

I’m not saying it is easy – just that it is easier because the personal value system of a Christian Business Owner is different from others – or at least it should be.

Status and power are fleeting. Meaning in life should come from our identity in Christ and a deep sense of fulfilling our calling before Him. Leadership is about service to others – not being the top-dog who gets the limelight. For Christians, our transformation in the Lord ought to change us to recognize what status and power really are: temporary and worldly constructs that will not last into eternity.

Think about men such as Napoleon, Hitler, Charlemagne, Nebuchadnezzar, Mao Zedong and others….men who would have become God had they been able to. Yet only one God became man – Jesus Christ. Our example of leadership, power and status is one who gave it all up in order to accomplish God’s will. We should be the same as Him. Philippians is helpful at this point:

5 In your relationships with one another, have the same mindset as Christ Jesus:

Who, being in very nature God,

did not consider equality with God something to be used to his own advantage;

rather, he made himself nothing

by taking the very nature of a servant,

being made in human likeness.

And being found in appearance as a man,

he humbled himself

by becoming obedient to death—

even death on a cross!

The mature Christian Business Owner will recognize when it is time to move on – time to leave his business to his children (or sell it) and take the next steps of obedience to Christ. Power, status, meaning and rewards will pale in comparison to what he (or she) has with the Lord.

If you’re a Christian Business Owner who knows it is time to transition out of your business but you’re having a hard time doing so, then please draw near to God and let Him transform your hear, your values, your identity – everything about you. You’ll then find that giving up the business when He calls you to do so will be the right step and you’ll take it in boldness and confidence, knowing that God has His hand on you and is working “all things together for good”.

Bill English

A Biblical View of Work

It’s my observation that most people don’t care why they get an extra day off work, they’re just glad to get it. This was confirmed when one of my sister-in-law’s came over yesterday for Thanksgiving. I asked her how she was doing and she responded, “I’m doing pretty well today – I don’t have to go to work!”.

Many people work at jobs they don’t like and don’t enjoy. Perhaps they have tired of work they enjoyed ten or twenty years ago. Perhaps they would like to try new work, but for one reason or another, can’t afford to do so. Going back to school might not be a feasible option for them. Self-study might not be their “thing”. Perhaps the changing of careers carries enough risk that the fear of failure holds them back. For whatever reasons, many people work at jobs they don’t like and don’t enjoy.

Solomon seems to have had a cushy job. He had wisdom beyond anyone on the planet. He had an abundance of wealth and women. Yet he had this “hole” inside his heart that he couldn’t fill. He tried to use his wisdom to figure out what it was that would fill it. Several times in Ecclesiastes, he acknowledges the same basic point: “A man can do nothing better than to eat and drink and find satisfaction in his work. This too, I see, is from the hand of God, for without Him, who can eat or find enjoyment?”. [emphasis added] I would like to point out several items of note in this text (Ecclesiastes 2. 17-26).

Solomon admits that he had accomplished great things in his work. But that accomplishment was overshadowed by the realization that he would die someday and would have to leave all of his accomplishments to someone else who may or may not manage them well. He found this to be meaningless. He was also worried that they would not do as good a job as he had done in managing all that he had. Applying this to our day and age, nearly all small business owners have a tough time entrusting portions of their business to someone else. They don’t like losing the “hands-on” in the various parts of their business. And the entrustment of work to an employee often adds to their frustration as they learn to be a good manager and find that the employee might do things differently than they would have.

Solomon noted that leaving his work to others caused his despair (a strong word) because he was leaving his work to someone “who had not worked for it”. So, the first point is this: the transition of your work and your accomplishments is inevitable. You will leave your business someday. Either through death, liquidation or sale, you will leave your business. This is why good succession and “end-game” planning is so essential. If you’re running a business today and haven’t thought one whit about how you plan to exit your business, then it’s time to make that transition in your thinking. Start today on learning how to plan for your exit.

The second point follows closely to the first: there is something unfair about working hard to create a thriving business and then leaving it to someone who didn’t work for it. Those who don’t have any “skin in the game” will not fully appreciate just what you’ve done to grow and build your business.

But this is why it takes years to prepare the second generation for leadership and ownership in a business.  If they don’t go through a rigorous training time, they won’t appreciate the opportunity they have.

And, as a side note, this is one of the most infuriating parts to the Government’s redistribution of wealth. They take your wealth and give it to someone who hasn’t worked for it.  Forced charity is not charity.

Scriptures connect wealth with work. If you don’t work, then you shouldn’t eat. The Scriptures don’t tell the wealthy to hoard their wealth or to ignore the poor – on the contrary, James tells us to ensure that the wealthy don’t hoard their wealth and there are plenty of illustrations and commands to ensure that those with wealth give to those who are poor. But the Scriptures never condone the government taking your wealth and giving it to someone who doesn’t work. You might give your wealth to someone who doesn’t work, but the government should not step in and force you to do it. Boiled down, individual charity is commanded in Scripture, but forced charity is not charity at all. It is a tax-redistribution activity of a government that has over-stepped its proper role.

Lastly, note the end of this passage where Solomon writes that “to the sinner He gives the task of gathering and storing up wealth to hand it over to the one who pleases God”. Look at the wealth that has been created in our culture over the last 200 years. It really is astounding. We are the richest generation to live on the face of this planet. Solomon writes this as a matter-of-fact: Do we see this happening in our culture? Yes, we do. Consider the non-believer who has worked hard to create wealth in the form of cash savings and then comes and buys a business from a believer. That cash has been transferred into the kingdom of God via the sale. Now it is true that the business ownership has changed hands, so some would see this as a wash – a break-even where the kingdom didn’t realize a gain. But we need to differentiate between the business that produces the wealth and the wealth itself. Selling a business that produces wealth to someone who will give you wealth for it is a fulfillment of this verse.

This is one of the reasons that I strongly advocate that a business owner run his or her business in such a manner that they can produce a business that can produce on-going wealth and then sell that business for cash. I also advocate that business owners form foundations, either collectively or individually, to help ensure that their wealth persists and becomes an instrument of wealth creation. Many in the Christian community shun foundations and endowments, saying that God can supply whatever monies are needed at any time to fulfill his agenda on this earth. This is true. But this doesn’t nullify a proper use of savings in the form of a foundation or endowment that can continue to generate wealth and giving for the foreseeable future. In fact, once that money has been used to give more that it’s total amounts, I would submit that foundation or endowment is fulfilling the good servant’s role in Luke 19.

So, what is a Biblical View of Work? Well, in this passage, it is the following:

  1. Realize that the results of your work will be transferred to someone else someday. Don’t despair about it. Instead, plan for it.
  2. Realize that without a connection to God (vs. 25), that your work will be nothing but meaningless toil.
  3. Find satisfaction in your work. We’re not told how to do this, but since it is a command, it must be possible.
  4. Enjoy the fruits of your work (eat and drink).

Ecclesiastes is one of the best books to read and study if you want to know how God thinks about money and wealth. Find satisfaction in your work and that will be from God. Don’t worry about the “bigness” of your business – just find satisfaction in your work and leave the rest to God.

Bill English