I am working in the family business for my parents. I don’t have any shares and just general promises that someday it will be mine. I don’t agree with what my parents are doing and think they’re making some serious mistakes that could make this a tougher business in the future. What should I do?
THOUGHTS OF THE DAY: Kick them out. Leave. Work together to fix the problems. Decide how much you want to work in this business for the long term.
You do have options to consider. Start by taking the direct route: ask your parents to leave and find out what are their barriers to doing so. Often there are a mix of issues at play — financial dependency, fear of losing control, loss of something important to do and worries about leaving children alone to tackle difficult problems.
Make a list of issues and tackle them one at a time. If it’s financial, work with a financial planner or other skilled financial adviser to help your parents estimate what they need for a nest egg. Identify the gap between what they need and what they have at present. Work out a plan to pay into that gap over a period of time, keeping in mind that if your parents held onto their current shares of the company they’d keep all of the profits each year anyway. Negotiate to have your parents turn over shares as the gap shrinks or put the shares in trust with an agreement on turning over shares as the financial gap is paid off.
If the issue is loss of control, it’s time for a serious conversation about ensuring the future of the business. This is probably the toughest issue to tackle after dealing with financial gaps. Nothing is certain. Your parents can’t control the future, but they can take responsibility for doing their part to ensure the business has a future. If the business doesn’t have a succession plan it won’t survive. If your parents stand in the way of securing successors, they will be responsible for losing the business. Consider outside help dealing with this one — it’s complicated and not totally rational.
If your parents are still able to come to work, make sure their job is well defined and in their wheelhouse. Talk about the roles they can play doing meaningful work, providing advice and acting as a sounding board. If they feel that you’re paying attention, they may also gain confidence that you can learn enough to run the business without repeating the same problems and mistakes they did.
If you can’t break through, consider doing something else. As you negotiate with your parents, knowing you have other options evens the playing field, strengthening your hand. You may feel that it’s essential that you stay because without you the business might fail. That’s not your responsibility until they agree to turn it over to you. Ultimately you are responsible for your life and pursuing your dreams, just as your parents have been responsible for pursuing theirs.
Build a plan to get from now to the future, including turning over ownership. Engage with your parents, making a list of things that have to happen. Build a checklist. Ask for a written agreement that as progress is made shares will be turned over to you. Set a timeline so that both you and your parents can see if the plan is on track. Include things such as building up reserve funds, having a strategic and tactical 3-year plan, eliminating debt, building a management team and ensuring that the right outside advisers are in place. Get someone you can both trust to act as an independent scorekeeper and referee to help you build and monitor the plan.
Make sure you want the business. Ownership of a business can be risky and demanding. It’s a big shift to go from an employee with a paycheck to the decision-maker with responsibility for navigating the future while keeping the business safe and on track.
LOOKING FOR A GOOD BOOK? Try “Family Business Succession, A Briefing” by Cecilia Hegarty.