As the Great Wealth Transfer continues, many business owners are facing a difficult reality: None of their heirs are interested in taking over the family business, leaving the owner with a choice between selling their business to a nonfamily member or liquidating.
Phil Harwood
This reality may come as a surprise to some owners, as they assumed that their children or grandchildren would naturally jump at the opportunity to take over the family business. Other owners are not at all surprised because their heirs already have careers outside of the family business.
My story provides a real-life illustration. My grandfather — “Gramps” — founded an advertising business in 1940. The business thrived under his leadership and provided handsomely for him and his family. Two of Gramps’ four sons worked in the business while the other two chose other careers. But not one of his grandchildren chose to pursue a career in the family business. Sadly, the business failed to make it to the third generation.
Gramps loved being surrounded by family and having a family business. But he didn’t know how to give up control until it was too late. My father worked for Gramps most of his career but left the business late in his career when he realized that there was no succession plan and that Gramps was not going to give up the business until he drew his last breath. My uncle wound up the business several years later after it slowly died on the vine.
I was actively involved in the business growing up. Gramps and I had a great relationship all of those years. However, Gramps and I never had a conversation about me working in the family business. As a result, I had no interest in the family business as a career because the business was never structured to allow for that to happen. There was no vision for the second generation to take over, let alone the third generation. It was never even a consideration for me.
Thankfully, there are other family businesses that provide successful examples for family business succession. One of these examples is Bissell, based in my hometown of Grand Rapids, Mich. Bissell has been making vacuums and small appliances since 1876. With annual revenue of almost $700 million, according to ZoomInfo, the privately held family business recently stepped into fifth-generation leadership.
Most interestingly, Mark Bissell, the company’s fourth-generation chairman and CEO, who transitioned into a role as executive chairman of the board in September, told Family Business magazine in 2013 that he had been working on a succession plan. At the time, his children were 18, 25 and 27. That was 12 years ago. Mark said, “To have a family business continue, you have to have family in the business. You must create a level of excitement and desire while ensuring that there’s the capacity and ambition to do it right.”
As I reflect on this, both from my own experience and by considering successful multigenerational family businesses, a few key takeaways are present.
First, develop a vision for successive generations and communicate this vision. My grandfather never shared such a vision. On the other hand, Mark Bissell shared his vision with a trade magazine — essentially telling the world about it.
Second, begin the engagement process early. Mark Bissell shared his vision 12 years before the vision came to fruition. The next generation wasn’t ready at that time to take over the business. They needed to develop and mature.
Third, take proactive steps to engage the next generation. Mark Bissell talked about “creating a level of excitement and desire.” My grandfather never took any steps in this direction.
Planning for succession is best done early in the life of a business. It’s a huge mistake to begin planning for multigenerational succession after it’s too late, a mistake that is difficult to overcome. If you’re a business owner, now is the time to get started on your succession plan.
Now go forth.