The next generation was happy doing what dad did, but this goal was not enough to cause the daughter to be creative enough to grow the business so as to be able to buy dad out. This is very common with next generation succession planning and the solution is rather simple if handled properly. It starts with asking a few simple questions and a few revelations.
· Ask the daughter or son why they are in the business in the first place? What had they originally thought the major obstacles were going to be that they had to overcome? What are the obstacles now, what will they be 5 yrs, from now and 10 yrs from now. Very often the most common answer is “paying mom or dad out when they retire.” Parents need to step into the shoes of their children and make sure that whatever buyout plan is agreed upon that it is flexible in nature to account for down cycles in the business.
· When I have a chance to interview the child I ask one very important question to the child – “What’s in it for you to run this business?” The answers vary but generally they are some version of “ It’s a great opportunity for me and I can pay mom and dad back for all they have done for me.” Good answer but the child’s heart may not be where their brain tells them they should be. I’ll ask again – “What’s in it for you?”
· This is where we begin our 4eAdvantage approach to solve the problems and overcome obstacles. During the exploratory stage we gather information through our unique process that allows us to develop an action plan or road map if you will, in the empowerment stage. Next we are in full engagement because we help the child implement the plan and set up fiscal management tools to measure the progress along the way. Here is where having a flexible buy-out plan is crucial to having the child buy-in to the buy-out plan. Sometimes the business is running as efficient as possible but more revenue is needed. This is why we have embraced e-commerce and social media marketing. There is much competition today and relationship marketing is at the cutting edge and this type of marketing must be understood and utilized.
Biggest Revelation - If the child sees the business as a vehicle for them to achieve their personal goals and dreams and not just providing a retirement plan for mom and dad – their enthusiasm and passion will be exponentially increased. They will buy-in to the buy-out!