Transitioning a family business to the next generation
The transition of a family business from one generation to another can be very seamless and smooth. However, it takes education, planning, openness and humility. Author, speaker and family business consultant Janna Hoiberg shares what it takes to make a successful transition.
Education. Learning the business requires its own education process. That education is often not found in the halls of schools, but in the halls of the business, working with customers, walking hand in hand with employees, learning what it means to make payroll and pay taxes, the impacts of discounting and generating new revenue. This education is the foundation of value for transitioning to a new generation. The education involves the next generation proving themselves, showing vision, seizing opportunities and learning the business from top to bottom. It involves at a minimum a season, and the length of a season greatly depends on the business and can span multiple years. Economic seasons can be seven- to 10-year cycles (winter — harsh economic conditions, spring — times of new growth opportunities, summer — high growth, fall retrenching of the business and the direction it is heading). The season will allow a level of education that can be the difference between success and failure of the future business.
Planning. The best way to ensure a smooth transition is to create a detailed plan of action. Talk about everything. Yes, I mean everything. I know — someone won’t want to deal with the touchy subjects. Talk about them anyway. Create a plan that allows you to roll out of the company. Here is the reality: One of these days you will leave the company. It might be tomorrow, a year from now or a decade from now. Don’t leave your next generation a mess and have them not know what to do. Make your business legacy live on — and not live on in chaos. If you want help to do that planning, call your team of advisors. The next generation will love you for it.
Openness. Be willing to accept new ways of doing business, new products, new management styles. Not all new is good, yet not all old is perfect. The next generation of leaders must make their own mistakes, but be there to guide them and keep them from falling off the cliff.
As much as possible, do away with the prejudices you have about what the next generation can and cannot do. Get rid of family politics. Stop protecting Junior and doing things for him. Let Junior stand on his own two feet or leave the business. There is no shame in not being in the family business. Life is too short to not follow your passion. A message to Junior: Understand that you will change. You may not want to join the business now, but your passions, needs, desires and interests will change as you age. Mom and Dad, Grandpa and Auntie may start getting smarter and have a better perspective as you get out in the world, work a job and learn the realities of life. Don’t burn your bridges and be unable or unwilling to come back and see the value of that family business. Also, following your passion doesn’t mean sitting on the beach strumming a guitar (nothing against beaches and guitars). It does mean if you have a passion for medicine and the family business is a furniture store, follow that passion for medicine. Just because your passion was the business doesn’t mean you have to force your passion on everyone else.
Humility. If someone lacks humility, they need to start a family business. If they still lack humility after running a business, try transitioning a business to another generation of leadership. It takes patience and the art of learning how to step back and let others accomplish the tasks in new ways.
Learn more at “Charting the Next Generation Family Business” presented by Janna on Friday, March 10, 2017, at The Lutheran Home: Belle Plaine chapel. The public is invited, free of charge. For more information or to RSVP, contact Kristin at krwerner@tlha.org or (952) 873-4744.
Janna Hoiberg is a renowned international speaker, workshop facilitator, family business specialist, and author who has personally led thousands of business owners to success and inspired thousands more during the course of her 35-year business career.