Episode Description:
In this episode, host Elizabeth Ledoux walks us through a checklist of items that are important for members of a family enterprise to consider when embarking on an intergenerational family transition. Tap or click the play button below to listen to: An Essential Checklist for Effective Family Business Transition.
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A business transition for a family can be fraught with issues, conflict, and challenges. Yet, with thoughtful planning, an attitude of gratitude, and Elizabeth’s checklist, your family business transition can be smooth and can create opportunities for people to learn, share, and grow together.
Download for free the “Family Business Transition Checklist”: http://transitionstrategists.com/44
Read Elizabeth’s article that she wrote for TIGER 21: “Intergenerational Transition of a Family Enterprise: A Checklist”: https://tiger21.com/insights/generational-family-business-transition/
This article runs through a checklist that includes:
- Prioritizing healthy relationships.
- Clarifying the enterprise’s culture and legacy.
- Managing the distinction between family and enterprise relationships.
- Establishing respect between and among generations.
- Setting a vision for the future.
- Acting with gratitude.
Connect with Elizabeth Ledoux and the Transition Strategists:
Website: https://transitionstrategists.com/
Facebook: https://www.facebook.com/thetransitionstrategists
Elizabeth on LinkedIn: https://www.linkedin.com/in/elizabethledoux/
Transition Strategists on LinkedIn: https://www.linkedin.com/company/transitionstrategists/
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An Essential Checklist for Effective Family Business Transition Transcript
Elizabeth Ledoux: But she kept feeling the push. Because the kids wanted more quicker, they were ready. And so shifting and flipping that mindset to being grateful that somebody is there who wants it enough, who’s excited enough to push you out. And then navigating what that push looks like and having open and honest conversations about what that is, helps you to leave, because I’ll tell you one of the worst things to happen in a in it transition is to have somebody who you’ve selected that you think has the skills and everything else, but isn’t stepping up, that’s too afraid of the risk that won’t take it. And you’ll look at him and it’s easier to to pull back on the reins and slow the horse down than it is to get them to run faster when they don’t want to run. Welcome to the business transition roadmap. My name is Elizabeth Ledoux. And through my years, I have seen how communities thrive. When business succession and transition are done. Well, me and my team at The Transition Strategists have been helping business owners develop and implement transition strategies for over 30 years. And on this show, we want to help you by giving you the roadmap to a healthy business transition. Let’s get started. Hi, everybody. And it’s great to be back here with you at the business transition roadmap Podcast. Today, what we are going to talk about is that checklist of items that we think are important for an intergenerational family transition of a family enterprise. And again, when I think of a family business, the family business is basically a business that serves the family at times. So some people think you have to have a family member coming in to that business in order for it to be called the family business. Some people believe that to that you have to have people working in it, to have it as a family business. And I’ve worked with a lot of companies who treat their people that are coming in there, you know, maybe their upper level executives, they treat them like family, they think of them as family. So I want you to put that spin on it. If you’re a person that doesn’t have a family member in your business. How do you think about the people that you’re considering as far as your next successors. So if you think about him, his family, this is probably a great checklist for you. So I’m just gonna go down a couple of big topics that we hit on, and I wrote an article for an organization called Tiger 21, just got a couple of months ago. And that’s what I chose to share on this particular podcast with you. People run into issues when they’re trying to figure out how to transition a business. And it can, a business transition for a family can either be fraught with issues and conflict and challenges or with some thoughtful planning. And with a attitude of gratitude, you can have some really meaningful work done and create opportunities for people where you’re learning together, sharing and growing together. We like to think of a family becoming closer in a business transition, versus a family falling apart or being more distant from each other. The first thing that we look at is in the checklist and in this article is to prioritize healthy relationships. And by the way, if you want to download this and walk through it with me, you’re welcome to do that it you can find it at transition strategist.com forward slash 44. So prioritizing healthy relationships that is so integral and I think one of the first things that happens with a business family transition. Family members and the relationships are so important that you know if you have a poor relationship inside of a business, you can separate the in the business you can say gosh, if your brother and a sister parents are no longer there, and you go you know what? I we don’t work together very well. And I think I’ll just go over here and I’ll do this and you can keep the business and you can buy me out and I’ll go ahead and get out. That is doable in a business and hopefully Have something that people can navigate. When you’re thinking about a family, you sometimes are pretty stuck with your brother or your sister. And he may decide that you never want to speak with him again. But gosh, isn’t that maybe a loss for not only for you, but also potentially for your kids, and they don’t know their grant, they don’t know their cousins, and, and if your mom and dad are still around, then you end up we have one family that’s coming in next week, where the grandmother, her grandchildren for over a month, and they live very close in the same town. And they’re used to seeing each other almost, you know, two or three or four times a week. So it’s a big deal. It’s hard. The business, you can have inclusion, exclusion and separation. In the family, it’s a much harder thing to do. So prioritizing healthy relationships, I think is one of the most important things, then a couple of thoughts is Does anybody believe that others act with the best of intent and behave accordingly? Is that a foundational belief? Does everyone do that? And if the answer’s no, then a little bit of work to do, and have the generations do they want to want to work together? And to have they started working together? And are you on a good path forward? Is it nice and you’re working well? Or are you maybe not doing so well. And then last in that checklist is the opportunity to honor and appreciate diversity. This one’s amazing. You have whenever you have intergenerational transitions, especially if you’re working together as a family, you have the opportunity to really learn from each other, or, you know, the opportunity to think the other generation isn’t very smart. Think that the other generation doesn’t know what they’re doing could be the older generation doesn’t know what they’re doing, and is standing in the way or it could be the younger generation doesn’t know what they’re doing. And they aren’t doing it right. And they’re not prepared. So these are all, gosh, beliefs, feelings, that runs through different minds. And so is there in the generations, is there an appreciation for both sides? And are you able to do that? Or do you have the opposite. We’ve wandered into the opposite many, many times where the family is just not doing very well. And this is one of the places that we always start, we start with open communication, transparency, vulnerability, and help them to come together. And by doing that, then it makes that road a lot smoother. So we can go back into the business and then start to really make the transition work. We have just, you know, I love sharing stories. And one of the stories that I’ll tell is, it’s a family, it’s two boys, and a mom and a dad. And the two boys, they ended up taking over some leadership in the company, and getting some, you know, like, big titles like president of the company, one of them did, and the other one was the VP. They, as they walked into that were trying, they didn’t have ownership yet. So they had the title, they didn’t have ownership yet. And they were trying to do a good deed, right, they were trying to run the business to the best of their ability. And literally, the parents, were not giving them the authority of their responsibility to be able to do that. So there was resentment that started to happen, because the parents were like, hey, you need to do better. And you need to learn more before you can make those types of decisions. And, and the kids who are in their late 40s are saying, Gosh, you won’t let us run, and you won’t let us go and we feel trapped. We feel stuck. Because every single time we want to do something, or make a decision for I don’t know $5,000, which could be a lot. It could be a big decision, but it could be a really good decision. And even It might even be in the budget to do it. But they couldn’t make a good decision that where they thought it was a good decision without being reprimanded. So how do you how do you navigate the generations and honor and appreciate each other and love the diversity instead of challenge that diversity?
Elizabeth Ledoux: The next big segment is to clarify your culture and your legacy. So what are you trying to create in this legacy? Which goes back to your why? And we’ve talked in the past podcasts about the objectives matrix. What are you trying to do? What is your legacy? What do you want? Do you want this to be a multi generational family business? Where you’ve got generation five and six and seven? Or do you see this as not being that? Are you trying to help your kids gain wealth? We just did a nice big six program. And one of the one of the attendees, one of the participants, he was incredible. And he said, I, which really stuck with me, he said, you know, he said, one of my legacies is to leave my children, not just money, but leave them a job, leave them a way to make money. So he is leaving the business in his children’s hands, he could have sold the business, just put it into the cash in the estate and had some investments and passed along that money. But he thought that it was really important as his legacy to leave the kids with money and a job, job with purpose and making a difference in the world. So what’s your legacy? And then what’s the culture of this business? What are you trying to preserve there? In the house podcast, we talked a little bit about, what are you trying to accomplish in the how, and if you got a sale to a third party, one of the things that I’ve seen, the most awesome is the sale doesn’t go through because it’s not the right buyer. And making it not the right buyer may not be that they don’t have the cash or the money. It could be that they don’t, they’re not going to continue and carry on the culture. And I find that more true, because they’re usually there and they have the cash, somehow they can get it, but they don’t have the right pieces for the culture. So what is your culture? What are you trying to preserve? What are you trying to do with the business? What kind of a legacy Are you trying to keep? Then go into managing the distinction between family and enterprise relationships, those two things are different. But you have, when you’re a family, you can you play together. Hopefully, you don’t challenge each other too much. When you were a kid, and you know, you beat up on your little sister or brother, I have a younger brother. So I used to get in big trouble for beating up on my brother, and then my mom and dad would go, You know what, he’s going to be bigger than you sometimes. So you better be careful, he’s gonna be bigger and stronger. But I beat up on him anyway, when I was younger. So the idea here, though, is I got away with that. And my brother and I are best friends, we take care of each other, we have a great family relationship. And we laugh, and we have a great time and holidays, then, in our enterprise, the rules change, the relationships are different, instead of everybody being included in the family, and we have inclusion and exclusion, you have people that are not included that are not, quote unquote, welcome because they’re not voted on to the board. Because the board only has five seats, or the job, there isn’t a job for them inside of the business. One doesn’t exist for what they love and what their skills are. So you’ve got inclusion and exclusion. And you also, in a business, it’s a good idea for you to put things on the table and to have deep discussions and to challenge each other. And to, in a way, come to an agreement where you agree to agree, come to an agreement where you know that the business, it’s good for the business, and you take some of your own personal peace out of that. So how are decisions going to be made at the enterprise level? Because those decisions are made differently than at the family level? board of directors is a great place to train and to mentor young people, then how do you how do you hear and discuss some of these perspectives before decisions are made? And how do you get all of the input and whether you’re going into debt, expanding the business, making an acquisition, whatever that is, how do you do that? And then how do you manage? Who is able to come into the business, whether it’s at the board level or job level or even an ownership level? How does that all work? If that’s all kind of mapped out, people can see the difference between the family and the family dynamics and how that runs, and with the patriarch or matriarch leading it, and then they can see the difference of the enterprise with the patriarch or matriarch, not leading it, with them slowly moving out of the way. And with that next generation coming in, hopefully, while the matriarch and Patriarch are still alive, so that they can work together and enjoy each other and pass along all the cool stuff that everybody wants, you know, as a as an older person. So those two are different relationships. And I think sometimes they get blended together, when separating them is very, very helpful. The next segment is establish respect between and among those generations. So this one’s funny, because we only know what we know. And I can’t tell you how many times I’ve heard, owners say, gosh, I just don’t know if my successor is going to make it. I just don’t know if they’re smart enough, have the skills, have the drive, have the willingness, are really going to go for it and put everything they have into this to make it happen. And I don’t and then on the flip of it, the successors are saying, I’ve got this, I know what I’m doing. I’m ready. So little bit of a difference in opinion there at times. And so do members of the rising generation? Do they recognize how much they know and how much they don’t know, which is very important? Is there an appreciation from that rising generation of all the work that went into getting the business to where it is today, and really understanding that what that took, and also the wisdom of that current leadership? The Is there a respect for the transitioning generations, accomplishments and a gratitude of, hey, look at what you built. Wow. And thank you so much for trusting me as your successor to be able to go and do this and to take this forward. So I have gratitude there. There are a lot of pieces in that in mostly the rising generation trying to respect the transitioning generation. But then the flip of that is the transitioning generation, really remembering back to, you know, what they knew at that age and understanding that instead of building and growing with this company, what’s really happening, you know, you kind of build and grow, if you’re the founder owner, you build and grow and you grow with the company, and you make decisions along the way, these rise, this rising generation is coming in, when the business is well on its way. Typically, it’s, um, it’s a Yeah, moving enterprise, you’re not starting over. So what’s required of this rising generation is different when they start versus what was required of you, if you were the owner, founder, that the totally different requirements. So is that transitional generation really seeing what the rising generation is coming into an understanding how they can support them in coming in at the right level, instead of starting from scratch, because the business again, is it going entity of setting a vision for the future. So there are a lot of different pieces in this one, setting a vision for the future. Typically, if you’re the current owner, who wants to transition out, you’ve been setting the vision the entire time, you’re setting the vision for the future, you’ve been maybe doing that on your own, maybe you haven’t been you might have consulted friends or advisors and gone to some conferences and done some other things like that. But you really have then taken all that information and made those choices and decisions on the vision of the future for the company on your own.
Elizabeth Ledoux: When you start to bring in this rising generation, the concept of bring them in and having a blended vision for the business. And at what point in time is their vision valid. This rising generation, sometimes they have some big ideas are really excited to come in and they think, you know, wow, we can take this business everywhere. But sometimes that’s not the case. And sometimes they don’t understand the cash flow and the cash required and all the different pieces and the work that goes into building and growing. So when you think about this setting a vision, at what point does their vision blend with yours? And how do you start then to to shift the vision from just being your vision as owner founder over to a collective vision, so that at some point in time, what happens is your vision becomes the collective vision. And then the collective vision becomes the next generation or the rising generations vision, vision. And they take that forward. Without that the business won’t go forward well, because somebody has to have the dream, somebody has to see where you’re headed, where the business is headed, and what you’re trying to accomplish. And I think many times, it’s hard for the owner founder to let that go. It’s one of the last things that they let go at times, because there’s a lot of risk and having too big of a vision. And on the flip side, though, I’ll tell you, there’s a lot of risk in not having a vision, as quickly as things are changing in our world with technology and people are moving and what they want and what they don’t want. The business environment is shifting, and not having a strong vision can also be it can be as detrimental to a company as having a too big of a vision. So how do you navigate that and come together to make it a vision for the future that’s blended? Gosh, the last piece here is acting with gratitude. Yeah, a business who even has a successor is a pretty lucky business. And if you have a successor or more than one, and you have a successor, who you when you when you have them in place, that you feel like they’re pushing you a little bit. That’s probably one of the number one issues at times that transitioners will tell me about. They’ll say, oh, Lizabeth, I feel so pushed out of my business. And I don’t want to be pushed out of my business, I love this business, I want to stay in, I want to work in it. I want to work with my kids, or work with my family, or work with my employees and continue to mentor them. So the idea of feeling pushed is negative. In many cases, however, you can flip that mindset and flip it over and be grateful that and I’m thinking about a mom that was transitioning out of her business. And, boy, she wanted to be honored. She wanted to have her children recognize the contribution that she made to the company, and everything that she’d done. And she wanted to not be pushed out. She wanted to be able to leave on her own accord. But she kept feeling the push. Because the kids wanted more quicker, they were ready. And so shifting and flipping that mindset to being grateful that somebody is there who wants it enough, who’s excited enough to push you out. And then navigating what that push looks like and having open and honest conversations about what that is, helps you to leave. Because I’ll tell you one of the worst things to happen in a in a transition is to have somebody who you’ve selected that you think has the skills and everything else, but isn’t stepping up, that’s too afraid of the risk that won’t take it. And you look at him. And it’s easier to to pull back on the reins and slow the horse down than it is to get them to run faster when they don’t want to run. So we want somebody who wants to run who wants to go, who wants to go get this business off the you know, get it, keep it going. And that’s the exciting part. So acting with gratitude. Do you have somebody who really is excited about this? And you go, Wow, I can’t believe I have somebody that’s this excited. Now what do I do? Right? How do we hold them back a little bit because they got some stuff to learn different problem than I can’t get them to move? And then again, the flip of it as a rising generation or a successor? How do we honor and help these people feel good, who have put in all this work in the many years to get the business to where it is today? So how do we do that? How do we say man, I’m ready to move forward as a successor and I really want to go but I wonder I want to be curious. I wonder why. What’s behind them not wanting me to move what’s behind them? Thinking that I’m not ready. What do I need to do to help them to understand that I am and how can we have a conversation so that I know what I’m supposed to do? When they know what I’ve done, so how do we, how do we honor that older transitioning generation? And really use their crystallized knowledge is what it’s called? How do we harvest some of that crystallized knowledge? And instead of making conclusions so quickly, keep our curiosity because with curiosity with gratitude, right? You can have curiosity. And with curiosity, you have conversations. And then with conversations, you end up making conclusions that are meaningful, and they make sense, and you can do something about them. The what usually happens, by the way, is the flip of that. Usually people make the conclusion. And then maybe they have the conversation, maybe if they’re not too upset about the conclusion, and with a conversation, then comes maybe some curiosity, and a greater understanding. So gratitude, curiosity, first, empathy, wondering why, why this is happening, and they’re behaving or feeling a certain way or thinking something, then the conversation, then the conclusion, and hopefully a conclusion together. So you’re on the same page. So acting with gratitude, or your family members, basically grateful for the business and what it’s what it does, and how it serves the family, and those that are employed, etc. And then do How are you grateful for the people that are involved in the family business? And for everybody’s involvement, it no matter what the level is? And how do you honor that. And then just being grateful in general, because usually, having a business and having the opportunity to take it forward, is truly a blessing. It’s something that most people don’t get to do. And being Miss transitioner, having built it, and then also being the successor is, it’s an amazing thing. It’s an incredible opportunity on both sides. So the checklist and some things to consider, when you’re thinking about transitioning a family business, we built this transition checklist for intergenerational transactions and transitions. And I hope this podcast was helpful, gave you some new ideas and some new things to think about that are on the softer side. It’s not really how and how much are we going to get but it’s some of the foundations that are really required to create camaraderie and to help successors come in and move the business forward without you. Again, you can find this checklist at www.transitionstrategists.com/44. And thank you for joining me today. It’s a pleasure. And my wish for you is that you’ll have a terrific family business transition with all of your family, relationships intact, working together in the business for the betterment of all that are involved, and also having wonderful wonderful times together and holidays as a family. Thank you for listening to this episode of the business transition roadmap. If you are listening to this and you find yourself wanting to go deeper into these topics and start the process of putting together your transition strategy. I’d love to offer you a free initial strategy session with my team, where we’ll help you to explore the future transition of your business, head over to www.transitionstrategists.com To schedule a call. Thank you again for listening, and I’ll see you on the next episode of the business transition roadmap.
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The Business Transition Roadmap with Elizabeth Ledoux
How do communities thrive? When businesses experience healthy growth and transition. Join CEO of The Transition Strategists, Elizabeth Ledoux as she and her guests identify what makes a successful business transition roadmap. If you know you want to transition or exit your business “one day”, today is the right day to start planning. This show will give you the roadmap.
