…When all’s well that ends well


So, You’re in the Family Business…
by Paul Karofsky

Janet: Come on, Dad, how many times will you change the terms of this buyout? Can’t we find a way to wrap this up?

Roland: I know, Janet, but your Mom and I have always had two cars. I don’t think the continued use of my company car plus a credit card allowance is asking for that much more. If you want me to visit with customers, I’m going to need them anyway. Don’t you want me to have a future role and be the “goodwill ambassador?”

Janet: I’m not just any buyer, I’m your daughter and I’m getting the feeling that you’re trying to find a way to make this not work out.

Roland: That’s not so. All I want is a fair deal for both of us and a comfortable role to continue to play. I’ve worked hard to build this business and to achieve a certain standard of living. And I have always expected that the business would continue to support me into retirement.

Janet reflects, “I hope I’ll be able to handle this. Ever since I first started talking with Dad about buying the business from him, the rules kept changing. First it was one price, then another. Next it was so much down and the balance over a number of years. Then it was a larger down payment and the balance due over fewer years. Each time he changes his mind, I have to go back to the bank to see if we can work out his revised terms. Now it’s a car and expense allowance. I’m afraid of what he’ll ask for next. Maybe there is some hidden objection that’s keeping Dad from making a deal. Maybe he doesn’t think I’m capable enough and isn’t really ready to let go. Maybe there’s even a part of me that is ambivalent about his having a future role in the business. I want him to be happy and I want what’s fair, but neither the business nor I are bottomless wells.”

Roland also reflects, “I started this company thirty-five years ago and have worked it daily with every ounce of my strength. But there does come a time when enough is enough. I know it’s time for Janet to take over and for me to let go. She has the knowledge and the skill and I know she’ll do a great job. She might even do better than I have. But I’m going to need that car and expense allowance if Janet really wants me to be the “goodwill ambassador.” These changes to the agreement are important to me. I’ve got to take care of myself and my wife. Besides, if I sold the company to anyone else I’d expect to strike the same kind of deal. I don’t want to bleed Janet or jeopardize the future of the business, but I certainly don’t want to compromise my lifestyle either.

What’s going on.

Roland has made this business his life’s work. His ambivalence surfaces. Though it is a part of him and the separation is not going to be easy, he appears to be confident of Janet’s abilities. He is comfortable in accepting a new role as “goodwill ambassador” but questions if this is Janet’s preference. Roland holds an expectation of maintaining the style in which he and his wife have been living, and has counted on the business being able to provide it. All the while, he supports the notion of “fairness” to Janet.

Janet is clearly frustrated at the seemingly endless negotiations over the details of purchasing the business from her father. As Dad keeps changing the terms, Janet hopes she will be able to afford them. Her mixed feelings are also apparent. Though Janet is mature enough to be purchasing a business that her father has run for more than a generation, she questions his confidence in her (reflecting her confidence in herself) and wonders if he might not have a hidden agenda. What remains dangerously silent is her ambivalence about a future role for her dad. Dad seems to sense this, yet neither is opening it up for discussion.

What to do.

Janet and Roland appear sincere in their desire for “fairness.” Yet an objective assessment by each is difficult. The emotions attendant to parents and children negotiating significant matters involving their future welfare often speak to the need for a third party facilitator. The family business accountant, typically the most trusted advisor, can frequently help with this role by mediating to a common ground and helping both parties satisfy their needs while preserving the best interests of the business.

Realistic expectations for both parties are a must. For Roland, these should include dollars and perks, an anticipation of what the business will be like being run by his daughter and a vision of his own future role. Janet must anticipate the future cash flow and financing arrangements to support the purchase, her own new role and that of her father. Both should be prepared for some ambivalence which may even spark resistance and questions around competence and affordability.

Janet and Roland must take their silent concerns about themselves and each other into the open. As they discuss their fear and anxiety around money and future roles, the strengths of their relationship that have brought them successfully to this point in time will support them over one more hurdle of succession.

With some guidance, reasonable expectations and open discussion can be the byproducts of effective planning. They can help families perpetuate the closeness of their relationships and provide a solid foundation for future generations of family business members to do the same.

Paul Karofsky was president of his family’s third generation business.  He completed graduate studies at Harvard University doing research in family communication styles.  Paul is Executive Director Emeritus of Northeastern University’s Center for Family Business and facilitates its Leadership Development Forum.  He is the Founder and CEO of Transition Consulting Group, Ltd and is a frequent speaker and resource to educational institutions worldwide.  Paul consults to family enterprises and can be reached at [email protected] or 561-626-1110.

Copyright © 2010 Transition Consulting Group, Ltd.  All rights reserved.

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