By Hugh Roberts, CFP®,
The Rawls Group
“That was my dream – to have my kids join me in the family business, but now it feels more like a nightmare!” I recently heard this from a business owner client, but unfortunately, it’s way too common! Why does it work so well for some families but not others?
The Family Business Dilemma
First of all, a ‘family business’ is an oxymoron. Family is supposed to be about unconditional acceptance (I love you just because you are my son/daughter), while business is about conditional performance (what have you done for me lately). From my 40+ years of doing succession planning with family businesses, most family businesses are overbalanced towards family or business.
When family is the predominant focus: decisions are often based on making family members feel good, resulting in promoting too quickly, paying too much, and allowing family members to cut corners regarding training, time off, etc. All too often, this approach adversely affects your child’s ability to earn respect. You can give your child a job, a title, and a paycheck, but you can’t give them respect – they have to earn it! And without respect, the odds of succession success are lousy!
When business is the predominant focus: the needs of the family may be sacrificed ‘for the good of the business.’ This often leads to resentment from family members – “all Dad cares about is the business – he never has time for me.” This is often why children don’t want to be involved in the family business.
At The Rawls Group, we like to say, “There is no business gain worth a family loss.” You can always make money, but you can’t always repair relationships. This might lead you to believe that you should err on the side of being focused on Family vs. Business. But from a succession vantage point, those business owners who structure the development of their successor children so they have to earn their positions are more likely to succeed.
The Challenge of Perspective
Why does a focus on family challenge succession? For one thing, the great American parental dream is to give your children a better life than you have, i.e., more education, life experiences, homes, travel, and opportunities. One client told me, “My wife and I struggled to build our business, but my youngest child doesn’t know what it’s like to fly commercial (having only flown in our private jet).” No wonder your children don’t understand when you say you had to sacrifice to build your business. Their perspective on what sacrifice entails will be very different from yours!
At the same time, I often hear clients say, “I don’t want my kids to have to work as hard as I did.” This usually comes from recognizing that you sacrificed family time working in your business and don’t want this for your children. Unfortunately, most businesses require a significant time commitment to succeed.
Finding the Balance
Trying to balance family and business can be very challenging! One business owner client told me recently that she sometimes feels overwhelmed trying to stay on top of the demands of her family and business, both of which are extremely important to her. But as demanding as both can be, she and her husband have managed to maintain very healthy relationships with their adult children while managing a multi-billion dollar business. It can be done!
Unfortunately, no easy formula or magic pill will provide healthy family relationships combined with Business success. But, those who appear to be successful with Family and Business seem to have a few things in common:
Business and Family Harmony
Navigating the potential landmines of family and business is challenging but extremely rewarding. Having trusted advisors to help you defuse landmines, clarify issues, and clear the pathway is usually very important to keep the balance. I’ve often said, “I do a great job talking with someone else’s kid – it’s a lot more difficult with my own! (and they are terrific people).” Finding the balance that provides business success and family harmony is uncommon but incredibly valuable! A client once told me, “Watching my sons succeed in my business is the greatest joy of my life!” That’s a goal worth committing to!
Hugh Roberts, CFP® is a Partner/Director of The Rawls Group, a business succession planning firm. Hugh specializes in issues that car dealers and their families must resolve to preserve assets and develop succession plans geared toward building business value.