Ask Ira: Advice Column
"Dear Ira" Fresh Air and Cold Water for the Perplexed Family Business (updated June 2014)
- Do your kids want your business for nothing, but encourage you to enjoy your retirement in high style?
- Did Mom always like you best, and now your siblings aren't speaking to you, and worse, not doing what you tell them to?
- Are your family members charging their vacations to the company card?
- Are you having trouble building a board because nobody wants to give you advice they know you won't follow?
IF SO, YOU MIGHT BE SUFFERING FROM FAMILY BUSINESS SYNDROME!!
That's where this column might come in handy. Ira Bryck, director of the UMass Amherst Family Business Center, will attempt to lend you some perspective and a fresh outlook on your family business problems. Simply email him, your question, at firstname.lastname@example.org
PLEASE NOTE: Your identity will not be disclosed, and Ira reserves the right to edit the question for clarity and some degree of general relevance. The UMass Amherst Family Business Center, the University of Massachusetts, Ira Bryck, and the center's sponsors, will be saved harmless from any reader's claim that their understanding or implementation of the advice in this column had an adverse effect. The column is for general informational purposes only. It is not intended as legal, accounting or psychological advice. Accordingly, readers should not act upon information in this column without seeking professional advice.
© 2002-2014 Ira Bryck - no reproduction or use without prior written consent.
My father in law helped my husband purchase a pool business with 60 clients back in 2001. It's a Sole Proprietorship in my husband’s name. It was purchased with money that my husband’s grandfather left for him (my father in law's dad) when he died.
My father in law has always done the book keeping. And keeps every detail to himself. My husband has steadily grown the business from 60 clients to 160 clients. We now have 3 part time workers as the referrals keep coming.
My husband is a worker though.. 14 hour days in the blistering heat. He's a simple Go-with-the-flow kind of guy, daddy's boy, easy, lives very simply, never asked questions and was fine having his father do the books. When my husband and I married in 2008 we combined finances and I was shocked the first year of our marriage when tax return time came around and we owed. Haha. That was the beginning of me being kept in the dark. So I tried to ignore what my husband's father was up to with the business and just busted my own tail with my job as a sales person. Life was good financially because I was so busy setting and achieving sales goals for myself and such. Plus I was bringing in just as much money as he was while at my job so we didn't need to stir the pot in the finances with my father in law yet...
Here we are 5 years later with 3 kid-s one who turns 4 next week- and I'm pregnant with my 4th. I've left work after the second and third child were born. Those would be our twins (20 months old). Our pool business income is all we have. It's successful and we keep getting more and more clients which is great, but my father in law is so hesitant to talk about anything business finances related. Especially when it comes to paying us more. (That topic keeps coming up with new expenses for the kids... Little league, swim lessons, preschool... etc) The business is growing, my husband is working longer and harder because of the demand, yet we are getting paid the same. My father in law has refused to share his bookkeeping with us. He says it's too complicated. He must be paying himself something that he is unwilling to share with us or something. I've come to that conclusion. He will not provide a basic profit and loss sheet for my husband because he says it's too much work and he doesn't have time for that. Besides he says he just does it all at the end of the year before taxes anyway. He claims since he's out in the field sometimes helping with repairs and does monthly billing he cannot adhere to me or my husbands basic financial requests of a simple monthly profit and loss sheet. Why can't we know what the business makes and spends? If he is going to be so possessive over these books he needs to provide that to us? We don't even know where the heck they could be... I didn't even know if the business was solely in my husbands name until we refinanced our home this year and they needed the business license certificate. I figured my father in law was part owner or something by the way he made me feel when we would ask about money from it. It's like we are kids asking our daddy for money to go to the movies.... We feel we have to disclose what we want to spend our money on in order for him to even have a conversation with us about it.
I'm so angry. By Feb 2015 we will have 4 children under the age of 4, we cannot make any new financial plans or decisions based on the fact that asking my father in law to share the company information and see our assets and pay ourselves more is out of the question. My mind is going to crazy places right now thinking of what he could be doing perhaps even illegally for short term gain. He's been stressed since the housing crisis and owns a couple of homes and one that is upside down.
I asked again for a monthly profit and loss sheet and what the balance looks like in the business account (which he calls business reserve... we are entitled to know that) He yelled at me and told me today for the first time that he feels like I am assuming he's stealing from the business.... Which is crazy because all I've been asking for is a monthly profit and loss sheet for our own peace of mind for my small family's future. He obviously is hiding something or he's just the world's most controlling father to his 36 year old son, and thinks I'm some dumb housewife that doesn't need to know what's going on.
My question is, how do I get all of the cards laid out on the table with him? Are there professionals that pretty much show up at his door step and say hey, your son wants to see the true assets of his company and what the company is paying for for yo,u and if the money is just sitting perfectly in a beautiful business account it if it's been used by you and your upside-down mortgage. And what about his secret books that he won't share with us? My husband at age 36 is finally ready to learn the business side if things rather than just being a work horse.
The only thing we've made headway in is that this Saturday we've arranged for him to chat with his dad and show him a few things. By the way this was not easy to arrange. I forced the meeting to happen. I'm very annoyed I can't be there because this will be all new info to my (god bless him hard working blue collar husband) so I hope my father in law actually divulges info to him. The only reason I'm letting this happen without me there is because I want to give my husband the benefit of the doubt. He loves his father so much.
But I can tell by the reluctance of info that his father is sharing that we will be having this conversation again.
Dear Sheep in Law,
As I've noted many times in this column, I receive letters from people I don't know, and only hear one side of the story. I would be making a big mistake in assuming that anyone feeling disregarded, kept in the dark, and suspecting their father in law could be hiding money from his son and your family is seeing the situation calmly and objectively.
But assuming for a moment that the situation is as you represent it, I cannot imagine a rationalization for your husband being kept out of the financial information loop, or for an owner of a small business to have his salary determined by a non owning bookkeeper, even if it's his beloved father.
I don't have a way to know if your understandable anger and frustration has crossed a line, and your father in law feels backed into a corner, but I'd suggest your best defense/offense is to calmly support your husband's right to have full access to the books, to have an objective explanation of the state of the business, to have your father in law following a job description that outlines the appropriate authority and control for a non owning bookkeeper, and have all your husband's questions answered to his full satisfaction.
I am not trying to marginalize you or your role as your husband's supporter, life mate and advocate. I just think you'll win the battles and the war if you're clear that your husband is the person who has the authority to see all the information, to control the company, and to determine his father's role in the company, assuming your husband is truly the sole owner of the company.
Your husband might tactfully, lovingly, respectfully, but firmly tell his father that he wants to hire his own financial analyst to explain to him the state of the business; that he's starting a new chapter in how the company is managed, with the owner taking more control of the financials, as is the owner's obvious right.
This person should be an experienced CPA with auditing talents, and skills in simultaneous translation from accounting to English; and a lot of people skills, to boot.
If something is truly haywire in the way your father in law is handling the money, your husband needs to find out. If there is some other explanation for what is going on, you are fully deserving to know what that is. You need to figure out how to change the perception of you from black sheep to loyal and upstanding wife and respectful but respected daugher in law, and help this situation get straighten out without unnecessary grief.
I hope this helps.
Ira, Hi, thank you for your reply. Shortly before I had typed you my husband and I had a serious discussion about this. He did say that he would figure things out but on his own terms, and that it wouldn’t happen over night. That was not enough for me because I am like a momma bear when I feel threatened financially when it has to do with our family and our cubs.
So writing you, I was in disbelief that things would get solved moving at a slow pace with love and respect… But… I think he and you are right. Now having an entire day to think about this I feel that’s the best approach and that it only comes from him from here on out. However, I will say that I do feel like stubborn old people (his dad) can gloss over info and cut corners of you give them an inch. I had to read your reply a few times to see things from an outsiders point of view that can look at it objectively now. My husband and I are on the same page and I have to trust that he can firmly, lovingly, and respectfully take over what is rightfully and solely his without burning any bridges and severing family ties. That’s what I needed to hear, and from someone with a business brain. Thank you. I agree with everything you suggested and my husband does as well. I will back off. It’s not my place to keep at it like this with my extended family. It’s very hard not to when we feel threatened financially. But it’s time and yes worry and stress are what I do best.
We have both agreed that we want to hire an an accountant, but my husband wants to see the outgoing statements to the clients he’s serviced that month, the expenses that are supposed to be in place to maintain the business, and then let the balance sheet speak for itself. If that’s the approach he feels comfortable with, I will sand by that. Because it will all come out at that point. I’m positive. His father will have to show if there are any discrepancies and just have a seriously father son chat about them at that point.
We really like your idea about defining a non -owners role in the company and what info they can have, and what roles they can assume. We don’t like that we somehow don’t even have access to pay ourselves more than the salaried amount that was decided on so many years ago. So finding out that info is vital. My husband is ready to talk about that too. Lastly, he truly does not think that his father is keeping, spending, or hiding money. He just thinks he has the worlds most helicopter parenting father that has alway done things for him rather than teach him how it’s done. He said that his dad never taught him to fish, and just always fed him daily. Day in, day out, year after year. Well, everyone is getting older now and won’t be around forever… So it’s time to take fishing lessons.
Thanks so much. You are very helpful and I can’t believe you do this so genuinely for free!
Have not found an article discussing when a wife can no longer trust what the husband demands in a family business ....
I have lost trust of my husband and our business - in how I am to be provided for in the case of his death (or alzhiemers). Someone demanding that I will be provided for but is unwilling to share how, (other than how dare I question it) is making me fear for myself and our two grown children's future. I am only a minority stock holder despite the fact that 'we' purchased the business from the past owner while we were married. All this came to a head when I questioned the validity of a hardship withdraw of 126k from 401k to help pay some back IRS (over $160 k due) taxes.
I am about to retain my own tax attorney as I am worn out by the battles occurring between my husband and I if I question anything.
I have great faith in our company to succeed but am not privy to much info.😕
He as majority stockholder has given more voting shares to our CEO and president , then myself, telling me I should trust 'them' to care for me. Despite that 'reassurance' it seems that after his death they could fire me at will.
If paying for assistance with how to mend the trust would help.Please let me know! My husband refuses any assistance. I am at a loss after over 32 years of marriage and two children, of how to look out for my own and families well being.
reliance on the integrity, strength, ability, surety, etc., of a personor thing; confidence.
confident expectation of something; hope.
confidence in the certainty of future payment for property or goods received; credit: to sell merchandise on trust.
You may have more rights as a spouse than as a minority shareholder in this situation, but your husband may not be convinced to have a frank talk with you about the future either as marital or business partner.
If there was a trusted outsider who you both respect and feel safe with, you might approach that person to help you as a neutral facilitator, coming with you to speak with your husband about the nervewracking situation you find yourself in.
If it is so, you might communicate to your husband, with the neutral person assisting in the discussion, that you need to have a clarifying discussion, to find out where you stand in several urgent matters in your stage of life as a couple and individuals. You might say that you would strongly prefer to have the conversation be pleasant and trusting and based on your long history together. And that you understand his reluctance to discuss such delicate matters such as love and death and money. Many people are uncomfortable with those topics. But many spouses are left in the dark when they are uninformed after the death of a spouse, and you are not going to be one of those.
You might tell him (or have your mutually trustworthy friend tell him) that you are scared and frustrated, and would much rather not have to resort to finding out what you need to know by more confrontational means, such as hiring your own tax attorney. And that you are inviting him into a discussion that can be much more collaborative and win/win, before you resort to such disagreeable alternatives.
This neutral friend should have good mediation skills and be very organized and logical, along with the ability to understand both of your positions. If your friends who are trusted by both of you don't have those qualities, consider a trained mediator, and maybe still have the friend there, to support both of you.
The fact that your husband has made this so difficult for you does not mean that you also need to make it difficult. You could make it easier on both of you by reinterpreting what he is saying, ie: "what I hear you saying is that you've taken care of me receiving what I need to live comfortably, if you were to pass awy. I'm glad to hear that, thank you so much. But I need to understand it directly, and also feel I also have rights as a co-owner of this company. I also hear you saying that you trust the company president and CEO, and that I should also. I'd like to feel as comfortable as you do, and as they say "trust, but verify." I'm sure you understand that I would be more comfortable being as reassured as you are."
I hope this helps. If you have more concerns, or could use more specific direction, please let me know.
My husband and I are in our early thirties, and we have been together now for 13 years. We have two children in grade school. We own and operate a small retail business in my hometown. Our store has been in business for 6 years. As we opened our store, we were also closing a different small business that was open for 3 years before we closed.
All in all we have been operating our own businesses for 9 years or more if you include the prior years or running vending booths at public events.
It goes without saying that we have had our share of ups and downs in both business and marriage.
At this point we have managed to stay a float without any bank loans or credit cards. We basically started with nothing and now we have a business worth somewhere around $25,000 in assets and a brand name that is well known in our area.
I supposed business wise we are doing just ok. We still fall behind on our business expenses and we still have debts with various companies and a couple small time investors. Although we are still treading water, there is the inevitable slow sinking that comes with a failing business.
My problem is that regardless of our dreams and our goals for our business to become successful, we have sacrificed everything. We are not able to pay ourselves a living wage. We are pretty much homeless and have been living in the basement below our store, which was supposed to be sub-leased. There is a bathroom but no shower, and our hot water heater is broken. We try to take showers at houses of friends or family, but when we can't, we boil water to get clean with. I’ve been cooking on an electric stove and doing dishes in a plastic tub. Home life is completely canceled out and business life has taken over everything. We lost most of our stuff when we couldn't pay the storage shed bill. The one and only personal expense we have is our rent to own mattress. Life has been as dark and bleak as the basement we live in. One the surface, people see a fairly thriving business, but just below the surface is our family drowning in sacrifices that we have made for it.
Recently I’ve managed to receive an amount of money from a child tax credit. My husband insisted that we spend all of it on inventory for the business. He believes it can be reinvested into the business and would help the business grow. He is content with the way we are living. As long as the business is thriving, then he is happy. I however, am not happy at all. I am determined to get out of this, and start putting my children first. They deserve more, and this business sis not providing them with the thing they need to live comfortably. At the very least, they deserve to live at a level of existence that is not completely hopeless poverty.
I devised a plan to go back to school, to find an actual and real home, to get a job that pays. At the same time, my husband has started a side job that requires him to go out of town. Whatever money he gets from this will into the business. While he is away I am left home, to run the store, to care for the kids, and to go to school, and to look for a job. It feels like the more I struggle to break free of this endless downward spiral, he does something to pull me back into it. He makes it seem like it is for the family, like he is also working extra hard for the sake of our family. Like he does all of this for the well being of the family. But in the end, what does our family have to show for it? Like I said before, we have nothing. And now that I am determined to get something for them even if it means I have to stop working at the store and go to a job, he is determined to keep me in this box of a basement. He makes me feel guilty for doing anything that doesn't involve the store. He makes me feel guilty for wanting to move out of this basement.
I know he feels guilty more than I do. Simply because he is unable to provide for us. But the more he tries, the more he fails. We used to have the same goals. But the means don’t make the ends. We used to do this in hopes to give our family a better life but it’s taking away our quality of life. Now I question why he still insists. I no longer believe him when he says it is for the kids. If he really wanted a better life for them he would give this up and humble himself with an actual paying job. Which is what I am doing. My husband however has too much pride to do anything other than push for success. He says the store needs inventory, it needs equipment, and it needs capital no matter the pain no matter the suffering no matter the sacrifices. I say, my kids need hot water, they need a shower, and I need a stove, windows freedom. I need out. No matter the pain no matter the suffering no matter the sacrifices. Even if it means sacrificing my marriage, because really it’s the only thing I have left besides my children and I will never give them up. I fear that if we continue to live under these dire conditions, we could lose them.
My husband is so blinded by pride and the need to succeed; sometimes I believe he and the business would be better off with out me and the kids.
I am so sorry to hear how difficult everything is for you and your family. This is obviously a set of problems that has no clear and simple solution. You have wisely prioritized trying to find better basic living conditions for your children, and figuring out how to break this painful cycle.
On the business front, you say the store has a good reputation, and you think customers don't realize how bad things are. I recommend you get a second opinion about this, and you could get free assistance in that task from your state’s Small Business Development Center. They could look at your business, the finances, and other factors, and give you a better indication of the likelihood that investing time, effort and money into this business is worthwhile. At best, the company might be salesworthy, and you might attract a buyer that could fund you getting your family into a better living situation. Or bigger investors, who might have the money and expertise to help take the business where you have not. At the worst, you’d get the objective report that the store is not a venture that deserves more effort. The decision of whether or not to quit that venture, and look for other work, would be made much clearer.
You say that you and your husband no longer agree on goals. It would be good to find a trusted friend or other helper to facilitate a discussion between you where you prioritize what you each think needs doing, and why. That facilitator can be useful to ask good questions, a la “why should your wife continue to work in the business, when she feels it’s part of the spiral that is endangering your family?” and “as the SBDC says the business is insolvent, how do you justify investing the money you and your wife earned, that could be used for rent in a healthier home?” They could also ask you "what are the minimum conditions you'd tolerate, and for how long, if your husband insists on continuing the store, even if you don't?"
That discussion could also give you both the opportunity to express the various thoughts and feelings your letter says you only assume the other has. It's possible that under these stressful conditions you have not been as clear with each other as needed; or not as accurate at reading each other's minds as you think.
Feeling pride and a need to succeed are understandable and commendable. You both have been trying very hard to dig yourself out, and you also deserve some praise for that. But it’s time to agree on some new goals, that you can both work towards, including creating more safety and security for your children, and a future for your family that has some realistic light ahead. Many people have learned the hard way that you can hang on too long to a floundering business. But also, learned that there is life after a business failure, and things can definitely improve, after a big change.
With those goals, you can also then sit down with some family members, and discuss your plan, and get the emotional support, a helping hand, and maybe even a small family loan, so you can feel less dire and more prepared to take on this sizable challenge.
I wish you every good thing, beginning with new beginnings.
My husband's dad has a family welding business. His parents divorced, and his father remarried. His father has no will written up.
His father is now in his 70's. My husband is concerned that if his father dies the wife will get it all. My husband has also since had a falling out with his father and his dad "laid him off" and never called him back to work.
My husband is wondering if he has any way to ensure he will get some of the family business. He worked there for over 25 years earning a low wage because he was told he was "working for his future". He is considering suing his dad for "unjust entitlement". But yet he would rather not go that route if there is another way to resolve the issue to protect himself and our children's financial future.
To start with the bad news, there is no way to ensure your husband will get some of the family business.
The arrangement they had in better times was verbal and unspecific. Though even if it was precise and legally ironclad, the business could have failed, their dispute could have made the agreement challengeable, etc.
I don't know if their relationship and communication skills are such that your husband could send him a letter that requests they mediate their differences, and have a full discussion on all these issues. I'd advise your husband include in the letter how he shares responsibility for what went awry, and how he had such high hopes for their working relationship to be more fruitful and mutually beneficial.
It would not hurt to have a talented neutral facilitator involved, and your husband invite his father to interview one (or 2 or 3) that meet your husband's standards.
Much of the success of this discussion will have to do with how well they can behave, keep it logical, keep personalities separate from their respective needs. I would also not threaten a lawsuit while in this discussion- that can be considered later, if and when all else fails.
In that discussion, your husband could respectfully inquire if there is a will, and express that without a will, the state decides how everything is divided, and that it would be much better for his father to have his desires adhered to. Your husband should not act entitled to the business, but rather, make a logical and respectful case for why he would like another chance to make it work for the both of them in the business, and have the will and a more structured, written succession plan, for ownership and management, be drafted after a 6 month trial period. If after that trial it's decided that the partnership is not in the cards, there should be an agreement of what severance package fairly represents your husband's contribution over 25 years, especially considering the low pay and unkept promises.
I was wondering if you could give me your opinion.
My family owns their own business which is a mix of real estate and convenience stores and has become quite large. I have worked in and have been heavily involved in it all of my life (I am currently 27) but have wanted to leave to try other things and have more on my resume. I also wanted more on my resume for the "what if" fear of the family business failing.
In October I landed a job four hours away with a company and in a field that I have always had a heavy interest in. I have been here three months and have strong doubts about staying because I miss both my family and the family business so much.
The company has decent pay, great benefits and perks, and I have less job responsibilites. My old job I had a lot more responsibilities, good benefits because I was family but better pay. The pros and cons of both equal out however I miss my family terribly and the working environment of my old job. When I go to my current job I don't have any care towards it and feel my productivity is not what it could be even though I have a huge interest in the industry. I do feel that I do not fit in well with my coworkers, I tend to be more of a workaholic and they try to do less and less. Daily I hear from them that I am making them look bad and to stop being a ---- nerd.
I want to move back home and work for my family's business again however I am afraid of how it will look on my resume. I have multiple internships and part time jobs but the majority of my work history has been with the family business. I am afraid that some day if I ever need to find a job outside the family that I won't be hired (I've been told in the past by employers that family businesses aren't real work experience) and that my three months away were a waste.
I also was wondering what is the best way to leave. I would definitely give my notice at least three weeks in advanced but I feel guilty for leaving. My boss was very accomodating regarding my start date with moving, getting started, and is a great person to work with. Everything is perfect but I am unhappy when I should be very happy. I don't want to hurt my new employer when they have been so good to me and I want to leave on good terms and before my productivity really starts to harm my position. Should I force myself to stay as long as possible for the sake of my resume or end it sooner on a high note ?
Thank you very much for any and all thoughts !
Your letter has all the ingredients of a pretty complete pro/con list- all that’s missing is listing the many factors in their proper columns, and maybe assigning them each a score (you decide what weight to give each one, but for instance “not caring” could be a 4 out of 5 in the con list; “they were good to me when I started” could be a 2 in the pro list). Add a 3rd column, called “remedies for cons” where you could list, for instance “I could spend more social time with my family” and give it a 4, which might undo the 5 in the con column that is “I miss my family terribly.”)
You might also consider that your resume looking a bit heavy on the “worked for my family business” may not be the killer you imagine it is. People all over the world work for their family businesses; and are the envy of many. Family businesses being “not the real world” depends on the family business. Where it’s a safety net for the least capable, those least capable are probably not going to get great jobs elsewhere, based on the impression they give in an interview, not because they were hiding out in their family business. One third of the Fortune 500 are family owned- and hire many capable managers, family and not.
At the same time, I can tell you from personal experience, having closed a 90 year old family business myself, and then in a job search, that many employers shy away from hiring anyone that owned their own business, family or not. You will always have to impress particular people in a specific way to rise to the top in a job search. And search committees and hiring authorities are as prone to illogical prejudices as you can imagine. I would advise you to not put so much weight on “working for my family business is killing my future job hunting.”
As far as how to leave your current job without seeming unappreciative, you could just come up with some simple explanation that tells the truth, but maybe not the whole truth. “I don’t think this job is a good match for my tastes and talents” or “I have an opportunity that is hard to resist” could fit the bill. And if you do go back to your family business, make every attempt to make it as professional a structure as possible, including job descriptions, performance evaluations, compensation policies, etc, so that you can proudly say that your work there is part of the real world of work, and not anything that you, yourself, see as patronage or nepotism.
I have enjoyed your advice immensely. Would you happen to know the answer to this question?
My husband is 1 of 6 siblings, who now share equal capital stock and equal special stock in their very successful, commercial mechanical contracting business. It was turned over to them at their father's death, 3 yrs ago. They have all been with the company for over 25 years. My husband is 3rd in line and although we have a grown son, we encouraged him to go in a different direction. The 2 other older brothers both have sons that work for the company.
The 2 older brothers have presented the other siblings with a buy/sell to sign. One of the pages requests signatures saying that "any new stockholder of the corporation must execute a copy of the buy sell and be bound by the terms which shall be a condition of ownership of stock of the corporation." Should my husband say that,"there are to be NO NEW STOCKHOLDERS of this corporation and the LLC that they created for Life Insurance and Payment of the rent for the property the shop is located on? The brothers do a lot of "voting on this and that decision". If the nephews are given special stock or any of their dad's stock.....my husband wonders if it will affect decisions that should not be made..... THANKS SO much.
Dear No New,
Buy sell agreements give legal protection that certain untenable conditions will not happen; especially if funded by life insurance (so you're not suddenly the business partner of your in-law); or irreconcilable differences can be solved by some other source of money (ie: annuity or cash value of insurance policy) to buy or sell your way out of pre-agreed upon bad-enough circumstances.
It makes sense that new stockholders should have to sign it. It also makes sense to have other agreements about who will be new stockholders. A family business that has a qualified, talented, passionate next generation of owners is usually a good thing. Those heirs apparent need to be taught how the current generation has thought through decisions, had peaceful, uncontentious votes, have reconciled difficult differences, so they will be a future asset, not a future disruption. Or have what it takes to do it better and different than it's been done.
Attorneys are needed for the proper structure and filing of these agreements; but open-minded discussion, including many "what if?" exercises, can be facilitated by a talented neutral person (and then put in legalese). If your husband is nervous, maybe he can start creating those "what if?" discussion prompts, but offer them in a calm and trusting way, so that he and his siblings and he can have the needed conversation about how the next generation will develop the maturity, absorb the good parts of the current corporate culture, and make the needed changes that must happen with every new generation's reign.
My husband is half owner with his brother in a business recently passed down. The executor hired my unemployed brother-in-law to help sort out the books (unpaid taxes, employee withholding, etc.) and now the brother-in-law won't stop trying to bill for hours. The business is out of cash but the brother is trying to claim payment for hours worked in sales. He is losing money and selling inventory (probably pocketing sales since he is a Junior, with the same name as my deceased father-in-law). He won't stop. We see no profit, and the value of the assets is leaking away as he sells off product. How can we stop the losses? His title is 'president' so he claims he can decide to work there are no other employees, and the business does not have a license. Are we liable for everything he is doing? Help!
Dear Going Broke,
There are several questions that need answers here, before you can arrive at the big answer: What was the value of the business, when first bequeathed? What was your father's intention and hope, by leaving the business to his sons? Why was the one brother made president, and what authority was conferred with that management (not ownership) title? Are there any buy/ sell-like agreements in place? Would your husband's brother want to buy your husband's share? Can the business be divided in some equitable way, giving each brother an opportunity? Is there anyone the both brothers respect, who can lead them in a conversation about where they're at, and where they want to go? What power does your husband have to put his foot down, as 50% owner, and as family member? What can be done- legally or with a man to man intervention - to freeze what your brother in law is allegedly doing? According to your story, this is a situation that needs to be discussed rationally, and if it can't be, halted legally. Your husband might act as a one man "good cop / bad cop" explaining that this can be done the easy way, or the hard way. If the 2 of them can sit down and explore the options for each and both of them, great. Otherwise, walking away, or salvaging what can be salvaged, might be your "best alternatives to a negotiated agreement" as they say in the world of mediation.
My great grandfather and his brother started a family business then my grandfather was basically at the helm for his adult life. Once he passed away my uncle started to run the company and stated no other family members would work there bc at this point the family was larger then there are positions. All of the descendants own small shares of stock in the privately owned company. Today my Uncle is still president and his two sons work there and soon his grandson will be provided a job once he completes college in a few years.
The hiring is not the issue I have it's the secretive salaries and perks that are given to my cousins and uncle. One wife has told me several times about the money my cousin gets paid and that she isn't supposed to tell me because my cousin does not want my mother (its her brother that is the current president) to know the salary he and his brother are making. Additionally they receive perks such as trips, cars, and country club memberships and the stock holders are unaware. I am in a quandary over telling my mother that this is going on. My assumption is the more they expense the less they have to pay out in dividends. It's exorbitant the fact that my cousin asks his wife not to share these details has obviously perked my curiosity to the legitimacy of their salaries and expenses.
Reasonable people can disagree, often because of the perspective they have, based on where they sit.
The managers of a company, who are also owners, see themselves as entitled to a fair reward for the success they have created, and might see owners (who are not managers) as a nuisance, to be kept at a distance, and in the dark. They might feel this way especially if the shareholders inherited their stock, rather than invested out of pocket (even though those owner managers also may have inherited, and possibly owe their current positions to their lineage, more than achievement).
Family owner managers might subscribe to the theory that if you don't work in the company, you shouldn't own stock.
Owners of that family business, who don't work there, but still are sharing the risk, and supporting the ability of the company to function, often resent those relatives who, through twists of fate and fortune, end up in the throne room.
They may adhere to the belief that a company's main purpose is to increase shareholder value.
What business families always need to do is engage in a fair and transparent discussion, well facilitated by a neutral party, to figure it all out. What is the correct return on investment for shareholders? What are the proper salaries? What are too many perks? Who is allowed in, and why?
Unfortunately, once the barn doors are closed, it's easier to stay in than get in. But those outside can start a fair and balanced discussion amongst themselves, lobbying for an inclusive process that those with the gold cannot refuse. I'd advise keeping it pleasant, even though you're discussing unpleasantries. "We aim to rethink how our family can best co-own their company, which is a very common situation, including owners who are not managers, who often are not adequately informed or rewarded."
Only if all else fails do you add "those of us who've been discussing it want you to come to the tableŠ we very much do NOT want to resort to a shareholder suppression lawsuit, which would be a lose/lose for our family. We also want you to know that we appreciate your efforts and talents as managers, and understand you should be fairly rewarded."
It always helps to create a formal discussion (again, well facilitated by a talented neutral person) where representatives from all sides send their most reasonable and personable family member, who will report back to the rest of you.
My father started a small business 35 years ago. My three sisters and I helped load and unload trucks during our high school years but his business is electrical supply and we were told we could not work in the business because it was a man's field. He did his own clerical work and there was no place for us to work in the business. About 15 years ago my younger sisters husband began working in the business. He first worked on the farm and made some deliveries for the business and now for the past five years he has been in sales also. My father is 80 now and can't drive the distances to call on customers like he used to. He built this small company into a multi-million dollar company. My father has always said the business and the farm would be divided equally between the four of us. This past week, by total accident, my older sister overheard a conversation between my younger sister and her husband with my father. They were discussing my brother-in-laws future in the company and this was a heated discussion. My brother-in-law felt he was owed more than just being an employee. My father told them that he had been working with an estate lawyer and the company had been divided equally between each daughter with the brother-in-law receiving a very large salary. My brother-in-law was less than satisfied with this arrangement and by the end of the conversation had gotten my father to agree to give he and my younger sister 51% of the company and each of the remaining sisters 16.33% of the company. He said he had to have control of the company and could not pick-up the phone and get permission each time a decision had to be made. I understand that and agree that he would need to have decision making power over the everyday items. Couldn't that be done with a contract or voting stock? There are millions of dollars in assests in the company name that vary from inventory to farm equipment(in addition to the business, he has a very large farm) that he had absolutely nothing to do with aquiring. Why should he and my sister get 51%? I understand that fair does not always mean equal and have no problem with him getting a large salary and profit sharing but don't feel like he deserves to own the company. After hearing about this, I asked my father about it and he said that he understood the son-in-law not wanting to be just an employee once he took over the company and the 51% seemed like a fair idea. When I questioned him about the fairness of giving that family 51% of all the inventory, equipment, buildings, etc... that they had no part in building he said he had not thought about that. What would a fair solution be? Fair does not have to be equal but 51% seems rediculous. I don't want family ties damaged but I don' want to sit back and let my younger sister manipulate my father either. My brother-in-law does a good job with the business and none of the three remaining sisters would have a problem with him running it. We do however feel like my younger sister and her husband were sneaky in the way they went to my father and tried to get him to change the percentages that each of us would receive. If my older sister had not overheard the conversation, we would have never known how that change transpired.
I agree that getting all relevant parties to sit down in an open and fair exchange would have been much better than having your father persuaded in a private and high pressure exchange.
And it's not too late for you to carefully lobby everyone to do so, and set aside (at least for now) what your father decided in the heat of the moment.
You are correct that a president of a company that is not majority owner can have all the proper authority to do their job. It's also very common that non employed minority stockholders often are frozen out of decisions and discussions, so he/she who has 51% can often control everything.
For the good of the family, fairness needs to be the Prime Directive. But along with fairness, a realistic discussion about what authority people have to make proper business decisions, and how those people are also accountable to shareholders. So not only fairness, but transparency and reality.
I find it helps to get people to buy in to values you can all agree on, i.e.: "Do you agree that for the good of our family- and the business our family owns- that we need to have a decision making process that is fair, transparent and realistic?" Then move on to define what specifics in the discussion will ensure those values. They are your constitution.
Once this meeting comes up with several criteria you all agree on enough to say you have consensus (or however you agree to decide), let a trusted accountant, attorney and other trusted advisors fashion what specific model can meet those criteria, to properly govern and own the company.
PS: ONE MORE QUESTION: "I find if helps to get people to buy in to values you can all agree on, I.e.: "Do you agree that for the good of our family and the business our family owns that we need to have a decision making process that is fair, transparent and realistic?" This is a great idea and I will begin our meeting like this. As for them asking for 51%, does that seem extreme to you? I don't want to be unreasonable, but what would an example of a better arrangement be? Thank you for your suggestions.
Some suggestions, without knowing your family, business, or anyone else's point of view:
Your father could distribute equal shares to his daughters, and your sister and her husband could buy the stock from you all that would give them 51%; but still, the 49% owners would not be suppressed or frozen out of agreed upon decisions (ie: major investments, amount of growth and risk the company is undertaking); that the company would determine, each year, its return on investment, and how much dividends will be paid (if it meets its goals)
Form a family council, that discusses what it means that the family owns a business – including entry and exit policies, being a good steward, and much more.
My grandfather started out hardwood flooring business in 1936. It grew to over 50 employees, my grandmother was really good with the books. However, my grandfather just knew the flooring end. As they got older my father grew into the business. His role started out as a general laborer and he worked his way up to buying my grandfather out. For all intents and purposes the business was bankrupt when my father took the helm. They discussed a buyout and worked everything out. He was 26 at the time. I began working in the business at 13 doing sweeping and small cleaning jobs. Eventually I worked my way up to driving my own floor sanding truck. My brother did the same, he is 2 years younger than me though. At 21 my brother moved to California and worked in a floor business out there on his own( not related to ours). I began to start working in the office and doing computer stuff(bills, invoices, and banking account stuff) eventually I built the business somewhat bigger than my dad had it. My brother came back to work with us. Then the crash happened with the economy and we buckeled back. My brother and the other sales representative went back to the field to work. My dad and I stayed for some time with 2 secretary's then ended up laying one of them off. It finally came down to me or my dad going back to the field. It was better for a young 28 year old to do the muscle work than my dad. So we continued this way. We agreed to put my brother and myself as a subcontractor to ride out the storm. The business was sick this we all thought was the best antidote. Throughout the hard times I did what anyone would do to survive. We ( my brother and I) both worked primarily with the floor business. However, I was not able to survive on the % the company paid me. My brother had it hard as well. We both used our companies to do other things as well. I started doing more construction to sustain the life I was trying to live. My brother used his business to do landscaping. My father continued to do the sales and provide us with a full time job at his company. As I got more and more into the construction industry, my father began to get upset because I was no longer able to work the full time he wanted. Also I as he said" went into competition with him" and picked up a few floor jobs to pay my bills. The economy seems to be getting easier here and my brother is pushing to get back into the office end. Here is where the problem is. While my brother and I were out doing all of the physical work to keep the company going. The last few years my father kept telling us that the business was doing bad. After my brother started to open the books he found all kinds of write offs as well as huge perks that he took (to what my brother and I feel we made for him) he never dropped his salary yet complained the entire time he had no money. Both of them want me back because I can do things they can't in the company. My issue is if he was hurting the business this bad and keeping us in the field so he could profit off of us why should I? Or am I wrong for thinking it was mine in the first place.
Dear In the Field,
Your story of you and your father and brother is about 3 survivors, each doing what they need to do to stay afloat.
Your father, possibly because he assumed the company was his, and its assets his to use as he needed; and because he couldn't physically take on the extra work, like you and your brother, benefitted from your efforts in a way that was not agreed upon. Had you discussed him spending what he did, you and your brother might have agreed, or might have made other life decisions. It was the lack of communications that blindsided you.
If you read the other questions and answers in this advice column, you'll see the vast majority are about family members thinking that others are unfairly benefiting from their work (including the perceived broken promises and agreements about who gets to own the company).
In your situation, I don't know what discussion is now going on. It may be satisfying and healing if your father could admit to, and apologize for, his offense. Getting him to pay it back might not be possible. Going forward, it may be useful to discuss exactly who gets paid what, for what work done. And who owns what, starting now, considering what each of you has brought to the table, including the sweat equity of each of you, and if what your father has taken for himself could count as him receiving payment for some company stock, that could now be transferred to you and your brother.
Owning stock in a company is only worth something if it pays dividends (which it often doesn't), or if you have a company to sell (in your case, you'd probably be able to sell accounts to a competitor, unless you and your brother wanted to work for the new owner). And the other benefit of owning a company is the owner thinks "he who has the gold, rules." If you all agree to rule together, then there's no advantage of someone being the sole owner.
The cost of being in a family business is that often the business kills the family relationships. The 3 of you could reaffirm your appreciation of each other, and commit to rebuilding the business in a way that is more abuse-proof, so that it only operates by paying each of you what you've brought to the bottom line. Plus, as your father built the company, and cannot contribute in the physically demanding way that you and your brother can, rewarding him fairly for what he built, and what he can now contribute.
I am the youngest of five children and out of the five, three of us work at our family business. I’ve been here for 6 years since graduating college. It’s great, working with family and watching the business grow. However, it gets difficult for me. Personally, I would like to have an actual family that enjoys each other’s company or visits one another on the weekends. I am sick of a sister that talks to me like a boss most of the time and when I voice my feelings about it there’s just a period of avoidance between us, as if my feelings are going to just dissipate. I’m tired of hearing my mother tell me that I couldn’t run the company like my sister and that she’s made the company what it is since our father passed away in 2000. I get all of this, I never deny it, but for some reason my mom thinks she needs to remind me of this here and there.
I’m not the perfect employee but I’m almost certain that I put a lot more heart and effort into my work and the overall keep and care of the company. Sure, sometimes I forget a task, but for the most part, I’d say I’m a pretty damn good worker. When I feel that me or my work is not appreciated or even acknowledged—most especially from my family—I become disengaged. Now, mind you, there are usually a handful of things that lead to disengagement, not just lack of acknowledgement or appreciation. I’m not that silly.
In my 6 years of employment here, I’ve probably felt this type of disengagement three times. Each time, “I hate my job and I want to quit”.
I know that these feelings eventually subside and are put aside for the moment, but what I’m coming to find is that the feelings do come back! I’ve told my sister that I hate the way she talks to me, as if I’m 12 and can’t comprehend simple statements (I don’t think anyone should be spoken to like this). Sometimes I think she’s just so “cold” that she seems to care when I bring it up but can very well keep up the same act.
This time, I feel a bit more serious about my thoughts of quitting. I’d rather have a real relationship with my family than stick around and deal with this. Not even the benefits will keep me here and unhappy, if leaving is what it takes to be happy. I love working here but sometimes it’s absolutely unbearable. I sit quietly at my desk for days and some days, I don’t come in at all. It’s disgusting and I want it to end.
Thank you for your time. Mine seems to be running out.
I’m sorry to hear of your continuing state of feeling mistreated. It is too common that families in business that manage to succeed operationally and financially fail so miserably to perform up to any standard of respect and consideration, not to mention family warmth and support.
There is no guarantee that your family will be more satisfying to you if you left their employ, but at least you might find a job where you’d be treated with more objectivity and professionalism.
Is there anyone in your family, whether or not they work in the business, that you could confer with about your need for better treatment? It may be helpful to build a coalition of people who could help you champion a code of conduct, where the family develops an agreement of how to treat one another. Another tactic to go along with this would be a job description that has very specific and measurable objectives that can be scored; so that you can point to your undeniable success at doing your job.
There is also good research by Gallup about what qualities of a workplace make for happy employees. You could try to get your family members to read the book, or at least an article about the book, and have discussions that could lead to improvements, including improvements in your outlook. http://www.umass.edu/fambiz/articles/just_business/creating_great.html
Furthermore, there is good work on what makes a happy marriage- though you’re not literally married to your work or family, you figuratively are- and I think the same rules apply- read up, and try your best to spread the word about some tools that improve satisfaction in relationships. The cheap way to find out some of this begins with this Wikipedia article (if interested, there are many good books by John Gottman): http://en.wikipedia.org/wiki/John_Gottman
You may have concluded, or might discover, that it’s unlikely that your family will change the way they treat you at work. You’re not alone. It’s a difficult decision to leave your company, as people often feel they are simultaneously alienating themselves more from their family.
I encourage you to be brave and sympathetic as you try all these techniques. It’s very possible that your family, as painful as their behavior feels to you, is not trying to hurt you. People act unconsciously all the time, often saving their most venomous tricks for family members. But they may not realize how vicious they seem. It may be helpful to sit them down, and explain that you’re beginning a one year trial period, where you need everyone to learn a few new methods, as I’ve suggested to you. Carefully track even small improvements, and decide after that if they are even willing to give it a try. That should help you decide what to do next.
My father has some very successful factories in India that he spent 30 years building. My brother works with him on the technical side and my father wants me to train to be the CEO (basically management). My problem is that I am in the USA. My husband is not interested in moving to India. But we are struggling financially, with my husband working temp for the last 4 years and day dreaming of his "perfect" job. He keeps talking of going back to school, but never has and if I say anything to him, he gets very angry and defensive - despite this I love him dearly. His parents hate me (his mother threatened to kill me), so I don't personally have any family ties, all my family is in India. I am depressed and cut off from my peers after having kids. I have just started a part time telecommuting job, where I am helping someone else build their business. I am thinking of moving to India and taking my Dad up on his job offer - even if it is for 5 years (my dad suggested that I try it out for 5 years and see how it goes). I know you can't give me an answer or make my decision for me, but I could be making a good amount of money as well as getting fabulous experience. My father says that in the end the business will be left to my brother and I 50/50, but what will I do with it when my dad is no more? I will not, at that time have the tools to do anything with the business. Am I wrong to want this move both for me and for my family?
The change I Need?
I can obviously understand the allure of accepting your father’s offer, which seems to solve several problems all at once. But you don’t mention answers to any of the following:
- Why does your father think you’re the correct person to be CEO?
- Even if you’re the perfect candidate, is that why your father is offering the opportunity, or is it to attract you back to India and your family there?
- What other solutions are there, in terms of your husband acting on his career dissatisfactions and hopes for the future?
- What are the reasons you and your husband are living in the US, and preferring to not return to India?
- What logic is there in you and your brother working together and eventually being equal owners, even as you are CEO and he has a technical position?
- What would need to happen in your 5 year trial period for everyone to decide if this is a success or not?
- What role would your father play, and what would need to change after his passing? (and why?)
You and your husband need to have a serious discussion that weighs all the factors, and examine why the things you need to change cannot change in other ways. Joining your family business in India could be the right decision, if all the factors point to yes; but maybe not, if it just seems like the path of least resistance or a magic solution (if you ignore all the factors pointing to no).
My question is complex as I am sure you are used to. I am a young married mother of 3 small kids. My family has a hotel/ restaurant/ banquet business in a fairly small town. My mom retired after 20 years in the navy, and went to work with my grandfather, who is the owner (my step-grandmother holds 25%). He has since gifted my mom about 20% of the shares, with another 4% coming when he feels like it (he is behind schedule, according to their verbal agreements).
I personally have worked in the business since high school and have done well. I put myself through college, after not doing so well when my grandfather paid for my freshman year; and have a BS and am almost done my MA in Elementary Education.
At one point when I finished my BS I got a job outside of the business and was making 45K. I liked the job okay, but missed working with family, so I put in my notice and went back to work for my family at only $12.50 an hour. (I held my degree and am also bilingual English/Spanish, which is a great commodity).
Finally, in the beginning of this year my grandfather approved me getting a raise to $15 an hour, and talks about me going onto an annual salary, but that the business can not afford more at this time etc. etc.
I was called to take a position in a school at the beginning of this school year and felt that since I would be making the same money I make at the business, and be paid to do my student teaching, at this time it was best to accept. With the blessing of my mom I took the job. I unfortunately feel very torn. My grandfather is upset and talks about me being in the business long term and getting stock and living off of the business and that it will be mine and my mom’s to run. I miss working with the family and am not sure if I will ultimately be happy in the classroom setting. I do like working with the students but I also feel there are a lot of drawbacks, and I am still adjusting to the hardships around having a strict schedule and other regulations that come along with working for an organization other than your own.
My grandfather tries to put the responsibilities on my mom or myself, but then criticizes us and also does not empower us enough. I do not know what to do to fix the situation.
Is it reasonable to stay in the family business even though it is somewhat dysfunctional, and I very well may not make near the same amount of money? Should I expect more pay? Should I try and have a written plan for my expectations as to my future in the business as part of my plan on being there? What is normal for a third generation family member?
My grandfather has lived a very nice life but has neglected to ultimately care for the business the way it needs to be cared or, so the concern is that unless things are changed the future maybe bleak. Maintenance and management are not held to high standards and there are no procedures or protocols that are regularly followed. This frustrated my mom and me a lot, but we are ultimately not able to change it without his approval. He has not written out a will with a lawyer to top it all off and is in his mid seventies.
Thoughts? Because mine are
You are describing a complex situation that might be easier to solve if you boil it down to its essence.
You can’t figure out how to compare your choices, because the family business needs care and feeding that you wonder if you’ll be able to administer.
In the “pro” column for working in your families business, you have
- The seeming control and work/life balance of owning your own company
- Your grandfather’s desire to see you work there (part of his mixed messages)
- Your seeming good feeling about working with your mother
- The possibility of earning more than teaching
In the “con” column:
- The other part of your grandfather’s mixed message: you may not have the authority and resources to fix the company, as needed
- Your grandfather’s unkept agreements on transitioning ownership
- The current state of the business, which has undoubtedly affected its reputation and earning potential
It seems to me that a logical course of action is for you and your mother to create a battle plan, of how you would improve the business, if you had the means and the control to do so.
Guesstimate the budget and time requirements as carefully as you can.
Discuss the plan with a knowledgeable person (every state has the free services of the Small Business Development Center, often located near a state university).
Create a clear and simple presentation for your grandfather, and show it at a meeting of the 3 of you, but also, bring along the SBDC consultant, to act as a facilitator (assuming that person is skilled at that).
Make a loving proposition to your grandfather: not “take it or leave it” but more “I love you, and would love to continue the business you built, but can only afford to do so with this plan / with your written commitment / with this funding / with this authority granted to me and my mother.
Keep the love alive!! Tell your grandfather: I have options, and have to decide. If you cannot get behind the plan I’ve created for the company, which does still require your input and feedback, we are all deciding that teaching is my “best alternative to a negotiated agreement” as they say in the world of negotiation.
I hope this is helpful. I’d be glad to hear how it’s going later on, and contribute more to your hopeful resolution.
We're wondering what your opinion might be. My father-in-law started his own business over 30 years ago. My husband and his brother have worked there since their childhood and have now become co-owners with their father. They have 2 sisters. One lives out of the state. The other lives locally and works part-time in the office, but shares no ownership. She and her husband are asking (and not being very nice about it) to be insured by the business because they have to pay for [medical] insurance through his employer and are paying $500/month. It seems like they want a free ride because her brothers get insurance, BUT her brothers are co-owners who work full-time PLUS. What's your opinion? They are basically laying the biggest guilt-trip on my father-in-law and putting him in a bad situation instead of being responsible for themselves. Is it better to just suck it up and insure them to not split family or to stick with policies and require her to work full-time to be insured?
Thanks for your opinion!
Unsure where to draw the line
There are certainly times where the ends (ie: family peace) justify the means (ie: insuring family not in the business), but it's a case by case basis. In this case, let's start by talking about the word "entitled." That term has often come to mean the opposite of the dictionary definition (authorized, eligible); because it refers paradoxically to those who are not entitled.
If working for your company entitles you to health insurance, and a non employee (family or not) is not entitled (the insurance company may even consider it fraud) then the feeling that one is not getting what one deserves is a misunderstanding. In this case, you're saying your sister in law works part time- so the issue is whether it's a benefited position or not (often requiring a certain number of work hours, and the position is officially entitled to benefits).
It behooves your father in law to explain this lovingly and reasonably to his children. It is then his perogative to give a gift of love that might cover premiums for them, on the outside. Or not. Or formalize some arrangement where they are beneficiaries of the business, even if not stockholders, even minority stockholders, which would still not make them employees, but could receive dividends. That's another kettle of fish, in which you may or may not want to add a few golden eggs.
These sorts of discussions (who gets what) are best had pre-emptively, even as the children are young, before there are pressing needs and seething resentments. At the dinner table, the senior generation could tell a story that illustrates how the family business is a meritocracy, where people get what they earn, and earn what they get.
Then, when this situation arises, the parent can say "Remember how I always described the company as a golden goose? And how we needed to be very careful about how we nurture the goose (ie: not tearing off a thigh), and who gets the eggs?"
This is why I agree with the sage that said "there's nothing as practical as a good theory."
My family has owned a western cattle ranch for over a century. Generation 1 created a C corporation in the 1950s to pass it along to future generations, and also created the "Privileged Few Partnership" to own the cattle. The Partnership has always felt entitled to lease the ranch from the Corporation at far less than fair market value, and then sub-lease it to a third party at full market value. Justification for this was to minimize taxes for the Partners. This may have made sense when the Partners and the shareholders were one and the same, but the Corporation now has 17 adult shareholders. The Partnership, on the other hand, is owned by two minority shareholders of Generation 2, Wannabe King and Don’t Rock the Boat. All efforts by the majority of the shareholders to transition to an effective corporate structure and to conduct business in a fair and open manner for the benefit of all have been repeatedly thwarted by Wannabe King, who most recently signed a five-year contract (acting on behalf of the Privileged Few Partnership) to lease the property to a third-party. He did this without the knowledge or consent of the Board of Directors, and without any sort of contract, verbal or written, between the Partnership and the Corporation.
The relationship between the Corporation and the Partnership has always been a verbal agreement, typically renewed annually, however the Board of Directors has not voted to renew this agreement in three years. State law requires that any 5-year lease must be in writing, but no written contract between the two entities has ever existed. The Partnership has continued to make payments to the Corporation under the same (ridiculously low) rates agreed to years ago. In other words the Partnership grazes their cattle for free on Corporation land, the shareholders subsidize the Partnership to the tune of tens of thousands of dollars per year by leasing it to them at far below market rates (at the Partner's insistence), and the Partnership feels free to completely ignore the Board of Directors. Any suggestion that this arrangement needs to be revised is met with an angry outburst and dismissed with, "We've always done it this way."
Unfortunately, most members of the Board of Directors have little outside board or business experience, and have been historically reluctant to confront the angry and argumentative Wannabe King.
This is not the first time Wannabe King has misappropriated the property of the shareholders or committed fraud against a third party by leasing land without authorization to do so, and the situation has simply grown worse over the years. I believe the time has come to put an end to this nonsense, but given past experience I doubt that the Board of Directors will be willing to effectively deal with it.
I wonder if you have any advice on the best way to resolve this crisis in a manner that doesn’t require a hemp rope and a stout cottonwood branch.
Lost My Patience
You may note, in the many complaints on this page, that family businesses are often embroiled in a struggle between classes, be they voters versus non voters, gold-havers versus gold-wanters, and who got their first, versus who came later.
In your case, like many, rights need to be re-asserted continually. I say continually, not continously, for an important reason: continous means without interuption. Continually means needs to be restarted after an interuption.
Even if there was a method to your family's original madness, it clearly is serving a privileged few. You need to gather more than a few unprivileged, to make your point that fairness and transparency are about to rear their gorgeous heads.
I don't know if there's any Rotarians in your family, but it could be a good time to apply the famous 4 way test, known and loved by Rotary. Approach your like-minded siblings and cousins in the same boat as you, and ask them if the current arrangement passes these criteria:
- Is it the TRUTH?
- Is it FAIR to all concerned?
- Will it build GOODWILL and BETTER FRIENDSHIPS?
- Will it be BENEFICIAL to all concerned?
It's a hard test to disagree with, especially since there's no specifics attached. If you were to get several family members to agree that your family business structure is not true, fair, goodwilled, or beneficial to all, you could make a very principled claim, not just for a share of the fortune, but a renewed vision for your family.
Approach the 2 privileged partners, and a smiling but firm group of family, proclaim that you want this four way test to be the litmus test for what happens for all family members. Our country is based on the simple concept of "life, liberty and pursuit of happiness" and people that objected that it has never been done that way had the choice of staying away.
I wish you luck; and even more, the courage of your convictions, and even more, the persistence to spread your convictions.
I enjoyed going through your column and look forward to your advice regarding my situation. About 10 years ago I began working for my step-father's construction company in the field as a carpenter. Within 4 years I showed initiative to be part of the office staff and I began training as an estimator. When my step-father saw how efficient I was working with computers and my ability to read blue-prints he gave me a salary position in the office as an estimator. Since then I have grown into the role of a project manager and I'm learning in leaps and bounds each year. I'm in a good scenario where I constantly see opportunity to fill needs within the company and my boss/step-father usually backs any initiatives I take if he sees that it will tighten profits or cut losses. I have a good relationship with my step-father, he has been a huge helper throughout my lifetime and he's given me a great job. I've worked hard to earn His respect, the respect of the other project managers in the office that are not related and also with the field staff whom I manage on certain projects.
So here is where I'm getting stuck. I've expressed interest in ownership of the company for a couple of years now and the discussions between me and my step-father used to flow more frequently than they do now. He is still only in his mid 50's but he has expressed to me several times that he would like to retire soon yet he never brings me in to discuss how it will all go down. Part of me thinks he may not know how to pass it on or transfer ownership yet. I have 2 younger siblings that are both blood to him and I'm not. I know he sees me as his son and I'd be content with not having a majority stake in his company but I want some of it. My younger sister is just now going to college for a business degree but nobody knows if she will want to work at our company. If she does I know she will be an asset at whatever level. I just don't know what to do. He has told me he wants to see more drive out of me but that always leaves me guessing what more I can take on. I work well beyond 40 hours a week and I always bring my jobs in with substantial profits. I know he came from nothing and built this company to what it is, it is an amazing story…he sacrificed a lot to get what he has…and I don't think it will ever be easy to give up any of it for him but due to his recent bonding policy change they want him to have a plan of succession. This may be forcing his hand to make a decision on what to do soon and I just need advice on what steps I could take to best position myself. I have an incredible opportunity here but I'm not sure how to grasp it.
Some of the questions I have are related to how a potential buy out would even work. Do I first need to become a member? How would I get shares in the company and at what cost? My current financial situation is ok, the only debt I have is in my house and a rental property but I maxed out my home equity to buy it. Do I propose a partnership plan with a phased buy out? I guess what I'm saying is that this circumstance is beyond my experience. I'm currently 30 years old and maybe I'm rushing it, maybe I'm not…I do see myself running this company someday. Any advise would be greatfully received!
There are several questions and issues within your letter, some of which I'll address, and others I'll suggest the expertise you and your step father need to consult, at the appropriate time.
One factor that may be giving your stepfather pause is that he's still a young man, and there are several children who may or may not have an interest and a role in the company; so it may be premature for the 2 of you to cast anything in stone.
But you could begin a theoretical discussion, listing the various places where you agree. It might be good for both of you to understand this is a safe discussion, in pencil, containing theories and leanings that could change over time.
You could include in this "living document" the values you both agree on (hard work and initiative demonstrate next generation leadership qualities; the range of conditions that may define retirement, including scaling back without stopping completely; a fluid situation where younger family members could enter and even participate in ownership, if certain criteria are met; that your stepson status is not different in his eyes that his other children (if this is the way he feels, or at least how he's committing to treat you all equally).
I don't know the strictness of the bonding company's need for a succession plan, but generally, the best succession plan can't be cast in stone, either. It would be good to find out if this statement of values and intentions would suffice; or if they need to know the current person who would step in, if a crisis were to strike.
Several experts need to contribute to your total plan. When there's an understanding of how ownership and control might flow under various scenarios (only you are interested, others are interested, your stepfather plans on selling, and would give you right of first refusal) you could have a business intermediary come in to advise how an insider sale might look, and what shares would cost with a minority discount (meaning family members generally pay less than outsiders). Add that report to your memorandum of understanding, and get comments from your attorney, accountant, banker. You are adding more and more reality testing to this plan, as the relevant experts add their perspective. All the while, you and your stepfather understand that you're building a theoretical model, and not committing to a deal, so that you can bring up all the important hopes, fears, what-ifs, when you can give it your best thinking.
After the experts add their perspectives, it could be time for a family meeting, bringing in all the players, including offspring that are potential business members, and other family members who should be in the conversation. You might want to hire a skilled facilitator to run that meeting, so nobody has to simultaneously act neutral, while expressing their non neutral interest.
It's not a simple discussion, and deserves the time, patience and openmindedness that's required to build something that will accomodate the complexities and realities of your family and business.
My father is 60 years old. He has been managing his business since 30 years. The business is in an industry that I don’t have a passion or any interest for. We have been facing financial problems lately because of the mismanagement of the business. My brother, who is older than me, mismanaged the business with my father, and my father told us that the way he managed the business is wrong. My father is no longer want to depend on my brother. My father at his age should be thinking of retirement, but he can’t because of the business. My question is that if I don’t have a passion for that kind of business and every time I try to focus on our family business, it only last for sometime, and then I lose the focus because I think of different things. At the same time, I feel if leave the family business, and the way it is, they are going to lose it. I feel without me, the company will not function properly, and it will close. My guilt is killing me. I always tell myself that what I want in this life is completely different than what I am doing now. I want to continue my studies in the university as an undergraduate because I still didn’t join the university. What do you think I should do?
Betwixt and Between
If you ask 100 people what you should do, you might get 100 answers. How will you decide? You could do what you want, and suffer the guilt of not helping your family. Or you could do what you think you should, but you’re not interested, and it’s not clear about whether you have the talent to try to fix the problems facing the business. What would be the best contribution you could make, that would not make you feel like a prisoner of the business, and forfeit your personal goals? Could you help your family in a thorough and serious discussion, that examines all the options, including: hiring the talent the business needs, bringing in a skilled partner with a cash infusion, selling the company, you taking on an advisory role for a limited time (again, if you have the perspective and strengths that could help), having the business fail in the least damaging way, and so on?
You also need to sit down with your family for the heartfelt talk about your deep desire to help, versus your deep need to educate yourself and find a path that calls to you more. The shame you are feeling demonstrates your loyalty to your family, but if you could apply an equal dose of reason to the situation, might you express that loyalty without shame, and do what you must?
I hope this helps.
It has opened different ways to view the situation. Thank you. It really helped me. I'm trying to help my family, but when I do, this specific thought comes to my mind "You've got to give 100 percent of your energy and time to what you really want to achieve the success you desire." What is your opinion about it?
It certainly is true that achieving your goal takes everything you can give it. But if you give that 100%, will there be enough left over for the other important parts of your life, not to mention the many minor details that need attending to?
My hope for you is that you can express yourself fully and sincerely to your family, about how much you love and care about them, but you cannot sacrifice your dream to save a business that is failing through no fault of yours. It's not neglecting your family to decide not to join the business, in my opinion.
I'm sure you will do this with love, from how you seem.
My parents own a dry cleaners, which for the last 7 years i have been working. My salary has not increased in those years, so without discussing with them i had been taking money out of the business account to make up for the wages i have needed to survive or better yet live.... Any time i bring up my salary or how the business would not run without me, my parents only look at the fact that i was stealing, and are forgetting the hours i put into this business , which i'm sure are the same for any family business!! It really just seems like the family business thing is a lose/ lose situation. i feel if iwas being paid what i was worth, then there would have been no reason to steal if it's even called that since i was a signer on the banking account. How is it considered stealing, and shouldn't there be a line that states i really am part owner? Please clarify if at all possible.
There have been surveys of convicted criminals, where, more often than not, they acknowledged that there was a line that one not ought to cross; and that they went up to that line, but didn't cross it. Judges and juries obviously disagreed. Did you steal? If you define it as "take more from the till than is agreed" than Yes. After the Civil War, supposedly, freed slaves were routinely underpaid, assuming they were stealing the difference. One could make the case you have a bit of slave mentality, then. And are you underpaid? It depends. I deleted your name and actual income from your letter, but it's possible that someone in your job function in a business like yours should make what you're making. If research indicates you deserve more, that's a discussion that you and your parents need to have, maturely and professionally, where you present the evidence (there are good surveys available- call your local chapter of Society for Human Resource Management to find them in your area). You are feeling a heavy dose of "power imbalance" with your parents- not unusual in a family business- but need to step up, realize you're an adult (even if an adult child, which all adults are, until they're orphaned), and claim your rights. Also, as an adult, show some remorse for deceiving and breaking the trust with your business partners aka your parents, which may be hurting them more than the missing cash. I hope this helps.
I'm hoping you can help me find ways to best approach my situation. My father is a retired professor. When my sister and I were young he purchased 3 small apartment buildings - 14 apartments total. He has a trust agreement set up that upon his death the business will come to my sister and I.
The problem is that my sister has, shall we say, a very volatile personality. She knows very little of the landlord/tenant laws of our state (I have 17+ years in the property management business) and has done several things recently that we were lucky the tenant didnt file a lawsuit for. She gets angry at a certain tenant and is relentless in pestering my dad to evict that particular person (which has happened twice - he evicted on grounds of non payment of rent). She has some knowledge of the maintenance end of the business, but her people skills are atrocious. She has episodes where she lashes out at my dad, mom and I and anyone else who she perceives to be her enemy of the week. She steals things from local stores and starts drinking at 10 a.m. He has a pickup truck he uses to haul things for the apartments and when she drives it she drives very recklessly (I believe he has the truck titled in his name and not in the business name) - my concern is what if she hits someone and they sue us for more than the insurance covers?
The thought of running a business with her almost turns my stomach and I honestly can't envision being able to run the business effectively without wondering what kind of "stunt" she will pull next. I plan to sit down with my dad and have an honest open talk with him about the business, and what's best for it. Can you give me some advice on how to diplomatically tell him of my concerns about my sister having a hand in running the business? Thank you
I make my life as a family business "expert" easier by taking the stand that working with family is not a given, or a default. I feel family members should work with each other if they have enough good will and a strong enough relationship; the talent, passion, and ability to make money that qualifies anyone to do any job with any one; and the stomach, heart and brains to deal with the inevitable differences of opinion and style. If you can't pass this simple, yet complex, test, consider selling or dividing the company, and/or moving on to greener pastures. It is unlikely that your list of your sister's faults will change in your lifetime; but it seems that you accept this. I don't know how much your father sees it, or wants to see it. But you don't have to make your discussion with your father a complete Win/Lose.
It may help to create a list for yourself of your sister's positive qualities, skills, traits, even if you have trouble appreciating them effortlessly, and have to see her through more objective eyes. And then state to your father the behaviors that your sister displays that you feel hurt the business (behaviors, not attitudes or beliefs- stated as objectively as your can!! don't embellish, don't pretend to know her intentions) and how they are so different than the way you feel things need to be approached, that after careful consideration, you've concluded the 2 of you cannot be business partners. List for your father the couple of options you've come up with for going forward. They might include: divide the company (3 is an odd number, so not sure how this split would be even; or if you'd sell one and split the 2); create a maintenance company that your sister heads, and give her whatever business she wins on quality, price and service (and she could still own half the stock, but not work for the company); and whatever else you think could work. Give him time to add to the list of options, but be clear on what your terms are.
No parent has the right to make children work together if the children don't want to. Do your very best to stay tactful, calm, mature, generous; but stick to your guns. It goes without saying, but I'll say it: your sister may have a totally different version of the story, that needs to also be considered. In fairness to all, all sides need to be heard. Possibly mediation between you and your sister could create an agreement, including my favorite alternative job description: "what my job ISN'T."
Great Column & Great Advice!
I have a situation for you that-although I am sure it is not unique- I still cannot find anything similar to compare it against.
My mom was married to my step dad over 50 years ago. I was under three years old & he is the only father I have ever known. Older sisters and I are from my mom’s first marriage-her first husband was an absentee/dead-beat dad.
My step-dad raised us as his own - but never adopted us. After many years of marriage to my step dad my mom gave birth to my brother, and two years later, my sister. We were all thrilled, and are an extremely close family. I thought.
I started a small side business, in my teens, in my parents’ home & eventually it became a good-sized family business. After a few years my father quit his job & began running this business full time. I got married, and worked outside this business, as well as in this business-during any free hours I had. Slowly the business became more and more successful-due to my dad’s efforts and expertise-and everyone's hard work.
My younger brother & sister earned summer wages at the business-and I helped run the business on the weekends. (Since I was married and my husband and I had good jobs, I did not take any pay-we just helped build the business as much as we could in our free hours). Eventually (ten years later) I had a child & quit the 9-5 outside working world & went to work in the family business. Bringing the knowledge and experience I had gained from the outside world helped me grow our family business. A few years later (about 5 years) my baby sister got married, and a year after this, her husband got laid off from his work. My father hired him to work with us, and my brother decided to come to work with the family at the same time, as well. Both men were barely 24 years old.
The boys were made partners- after working side-by-side with my dad and me for more than six years. My dad came to me one day and told me he had made both boys partners. He completely excluded me from the business partnership because he said, "I had a husband who had a good job". This hurt me, and I felt betrayed-especially because my dad had told all the involved members not to say anything to me until it was a done deal, and neither my mom, my brother nor my sister said a word. Angry and hurt, I left the family business-however I continued to work there on weekends-and tried to come to terms with this betrayal. Less than four years later my dad and the boys were struggling to maintain a decent margin and I could see the business losing sales. I came back to work in the family business and dedicated all waking hours to, once again, growing the business. Every couple of years I asked to be added to the partnership-since it is the only way I can be assured that I will ever be part of the family business, permanently. Always my dad said, "I'll look into it".
Now, here I am ten years later & last week I asked again if I could be added to the partnership-my dad said "no, because my brother in law would quit if I was added to the partnership". I was told that I was a valuable and important part of the business - but it was a rock and a hard place. So, I find myself working for my younger siblings and their children's futures-completely giving up my own and my children's future at the same time. I know if I leave - this will leave the family business in a tremendous hardship-as I run most of the sales/production/purchasing and day to day management of the company-but I am needing to leave before this destroys my relationship with my family-I am feeling very bitter and worthless-and if I leave I will feel guilty too.
I have experience in a completely different field that would grant me a great job with wonderful benefits-but that I cannot stand the thought of doing on a day-to-day basis. I obviously love what I am doing. I could become a partner in one of our competitors businesses and be happy doing what I love-but that would seem like a declaration of war against my family. I love my family and no matter what I do it would seem that I am going to lose out in the end. Any advice? Even if you were to say, "I hear you, and feel for you" it would help me with this struggle.
I do hear you and feel for you, and hope that helps; though I doubt it will get you one step closer to partnership.
This is another version of the great family business story “If I Knew Then What I Know Now.” If I understand what you’re saying, YOU started this company, and contributed largely to its success through the years. Looking back, don’t you wish you did the legal groundwork to make yourself the sole owner of the company, and had contracts for all the employees, even if they were family members, even if that included your stepfather, who raised you “as his own”?
You don’t say who owns the company now, or who officially has the authority to make the decisions that are being made. Technically, the decisions going forward should be made based on business sense, but also, it seems like much of what has already been decided has been based on the circumstances of family, and traditional assumptions: this person needs a job, that person has a successful husband, if I leave the business I’m leaving the family, we can’t do the thing that will anger so-and-so.
At this point, you need to decide the cost of exercising your rights in this business you started and repeatedly repaired (as I always say, there’s probably other sides of this story). Will it cost you your family relationships? Will that expense make it impossible to work with family? What conversation with which family members will increase the understanding of your position, even if it doesn’t get you what you want? If you choose to compete, how can that happen with any better outcome than option A (demanding your rightful place in the partnership)?
Ideally, you could all- at a planning retreat, or at least over time- examine your contributions to the company, and do some sort of rebuild, looking at who does what based on what the company needs to best succeed, and who gets what, based on what they bring to the bottom line. You founded the company, but your step father steered it for a long while; and it doesn’t seem clear, from your telling, about who is most responsible for past success- but in this exercise, it would be more future focused, anyway.
I’d also be very careful about how you communicate all of this to your family. If your goal is to maintain healthy family relationships (a close family doesn’t mean a group of excellent communicators), you might want to stress “me wanting to be a partner does not mean I’m taking anything away from you- I think together, we can make the pie larger, and all enjoy more success together” etc). I wish you luck with it all. I also suggest, as I often do, that you bring in a skilled facilitator to keep the conversation clean and productive.
My father and I are manufacturers' representatives. We are essentially brokerages for tangible items.
My father also owns a store and has a manager run it. He uses his financial leverage to keep his side business afloat.
My concern is verbal IOU's and promises of making me in control of the company. My father does not want to let go of the reins or communicate any financial issues.
This year will be a good year we have a lot of good opportunities which I don't want to sour our future.
What resources would you recommend to get everything in writing? I am now also worried about tax consequences if transferring the family business to my name is not done correctly. We are currently financially strapped but I anticipate the next couple months to bring some windfall in our favor.
Knowing what you need to know is a good start. Your father may not have the answers, but hopefully has the expert advisors that could, or should.
You might make the point to your father that you need to tighten up the terms of your working relationship, so that you can sleep at night, and take the measured risk of investing your future in the family business.
You sell an invisible service (brokering) for tangibles. And your needs, going forward are both intangible (trust, communication) and tangible (clearly written agreements, tax consequences). The resource to get in writing what needs to be in writing could be a mediator, who hands off your agreements to an attorney for translation into legalese, and a tax accountant, who clearly outlines how to keep you in compliance.
Those agreements might precisely outline each of your responsibilities, contributions, expectations for financial return, risk tolerance (how to identify an opportunity you both are willing to take a risk on), and ongoing company policy.
But you should also have a written agreement that defines the boundaries you each need to respect, including that the purpose of this business is not to bolster a side business; but rather, to be a sustainable and profitable freestanding business that pays what it should to owners. And then, what your father wants to do with his fair share, he can.
In my opinion, you need to be ready to insist that this process provide you with the communication, officialization, and commitment to deliver on promises you need to be comfortable. If it cannot, how could you justify still proceeding along?
Q: In the "Incumbent-Generation Leadership: Governance and Resolution of the Past" of Poza's chapter 13 it explains how important it is for the next generation of a family business to focus on building the future of the business. But, building the future cannot begin until the problems from the previous generation have been resolved. To tackle these problems the new family members sometimes have to "prune the family tree." This must be a very emotional situation that could have devastating effects on the business and the family. Are there any known tactics that the current generation can use for "pruning the family tree" that neutralize the situation?
A: A family business entering the next generation would be helped by a discussion that is somewhat philosophical, but with very practical consequences. Have a facilitated mini retreat where family members of all generations have prepared, and will now deliver, a short talk that answers the following questions: What is the work ethic of our family business; and is it a match for my own work ethic? Does our family business attract workers with the necessary talent, passion and ability to make a profit? and I a good match for that, or can I improve our meritocratic profile? How is our family business a great match for who I am and what I can contribute? If it's not, what would I be better off doing for work? Why work in my family's business if it's not a good match? How can we create employment policies that attract the talent we need, and allows family to work here only if they are a good fit? How do we ensure that our family is welcoming to all of us, whether or not we work in the family business? After a well constructed exercise that covers these issues, you might find family members feel liberated to leave, or can be released from the family business prison (even if they were willing prisoners), with less shame, anger, and confusion; not to mention, clear and proud about why they are there, if they do belong there.
My family has been in the dairy business for the last 28 years with my father in law. My husband has always had the understanding that the business would continue and our middle son is interested in keeping it going, there are only verbal agreements. We are at a point where MAJOR rebuilding needs to be done (new dairy barn) in order to keep business going and now my father in law says he will sell out and basically keep everything.
Over the years we have made huge mistakes in trusting this man to do what would be right for all of the business and us. My husband has worked everyday for 28 years running the dairy and allowed his dad to take care of the “business” side of things. We have cows that we bought through 3 different lenders but somehow when borrowing more money they got lumped in with my father in laws without our say so or knowledge.
When the discussion of selling out my son asked “what about my dad and the 28 years of labor and management that he has put in every day” and the answer was “well if you work at Wal Mart for 30 years and leave or retire or move on they give you a party”
We have been naïve. His father is not and never has been a reasonable man. He has convinced us that our cows, home, every thing except our personal vehicles and household items be in is name. He has made the comment that those things that are ours are really his. This man has no respect for right or wrong and common decency. He will screw over everyone to be number one and come out on top.
There is so much more to the history and we feel this man hates us and will stop at nothing.
My husband asked me last night “why does my dad hate me?” and after many years I realize its because he is nothing like his father. He is a good man, husband, father to three sons, and would never screw someone over.
We are in danger of losing everything and have no idea where to start, but it needs to be fast. My husband and my family know that this is the end of any relationship with his family and we will be better for it. What should we do?
I am sorry to hear the degree of pain you and your husband are in, not only from the threat of losing your investment of time, money, and love; but also the betrayal by a man who seems, from your telling, to have no remorse in exploiting his son and family.
It does go back to the old "verbal agreements are as good as the paper they're written on," though painful to realize that a family, especially a family that prospered from each other's efforts for 26 years, cannot count on one's word as bond.
Your options are few, I regret to say. There is the option of hiring a sharp and aggressive attorney, to help convince the court that what's yours is yours (or possibly, what's your father's should be yours). As you say you're ending your relationship, no matter what, this would just be icing on the cake, to go out with a bang, not a whimper.
There's walking away, and applying yourself to the healing process; of forgiving yourselves for your naivety, and maybe one day finding a way to make peace within yourself, enough to even forgive your father, for he knows not what he does. Picking up the pieces, economically, might be easy, compared to the forgiveness work.
Perhaps there is some way to strategize in some clever (but legal) way to buy from your father what is yours. I don't know from your telling exactly how you bought your home, or the cows, and if what your father did was illegal. If there were just shaky agreements made, and now you'd have to pay for what you expected to be gifted to you, you are at a square one that is common, when the agreement in a family business is that the next generation needs to pay for the company. Typically, though, there's a minority discount, or reasonably, legally favorable pricing for an inside sale, that you are not getting, it seems. Or consideration of how the value of the business was, in some large part, the sweat equity of the buyer, ie: your husband.
It seems clear that there will not be a friendly resolution, barring an epiphany on your father in law's part; or another family member or trusted soul, who can come in and talk some sense into him. You cannot force an unwilling party to mediate; but maybe there's an intervention possible- someone he trusts and respects.
But often the most likely answer is the best answer. In this case, it may be that you and your husband are learning a very painful and expensive lesson, again, sorry to say: Trust your father, but cut the cards.
I love your web site, column, stories and advice. What a great find this past week giving me some hope for the following problem
My son has recently “quit” our successful 15 year family manufacturing business … again. He is 37, divorced with two children and no source of income now but has borrowed enough to keep them going for about 3 months.
He wants to be in “control” of his life. He is extremely talented and wants to do his own thing now with out my influence. Your statement about General Patton and Albert Schweitzer really hit home. He calls me GP but of course I don’t see it that way at all! But he is more a Schweitzer than a Patton for sure.
How do I manage moving forward, keeping the business going and being prepared for the financial problems for him, us and the business when he runs out of money?
We need help.
Thanks so much for writing, and for letting me know you enjoy the website.
As I frequently remind people that write the advice column, it's hard to make an accurate diagnosis hearing from one party in a complex situation. It's also difficult to hit the bullseye when you hear everyone's perspective, as you are limited by how much people understand their own motivations, and live under the constraints of fear, finances, family loyalty, hurt, regret, and a million more.
My sense, from your explanation, is that your son is risking a lot by leaving the business, reportedly successful, to face a dire economic burden in less than stable circumstances. He must really want to not be in the business.
What does he really mean by wanting to be in control of his life? Are the conditions of the family business stripping him of any sense of control? That sort of powerlessness is always said to be a major cause of job stress. Can conditions in the business change to increase this sense of mastery? Or does he need to make it in the "real world," in the sense that many successors in family business think the family business is a humiliating safety net, for reasons real and imagined.
Besides seeing you as the command and control leader, and himself as reflective and altruistic (assuming these are true, or at least his impressions), it's quite possible that his talents, however fabulous, are not what the business needs, in which case he may feel he is squandering his potential in the wrong venue.
I'd suggest a discussion, together, if that's in the cards, facilitated by a neutral and creative person, where you do a needs assessment and a skills assessment: of your company, of him as an individual and worker (for your company or another employer or sole venture), of you, as an individual and as an employer. Trying to be as objective as you can both muster, see where the skills and the needs intersect, and where they don't. Agree that there is no benefit to putting square pegs in round holes. This may lead you to conclude that a replacement for your son as a worker in your company may be a blessing in disguise, and maybe you can have a more fruitful relationship as mother/son, than employer/employee.
Be prepared to give him some distance, so that he can achieve what seems quite reasonable for a 37 year old man. Though a man that age may be closer to the stereotypical "mid life crisis," wanting new and more meaning in their life, they still may be struggling with very elementary questions, pondered even in childhood, to develop autonomy and self-esteem, but often not answered till much later: Can I make my own decisions? Can I control things? What if I can’t handle things well?
I'd suggest, for the greater good of your relationship with your son, to set a ground rule that the family business is no prison sentence, and if he doesn't want to be there, he shouldn't be there. Do what you need to do to keep the business operating properly. Consider a loan or gift, if you can afford it and are so moved, to keep him afloat. Buy the book for him "Now Discover Your Strengths" by Marcus Buckingham, and tell him it's your gift of love, hoping he finds his true passion in work.
Also consider if the business, seen strictly as an investment, is better sold to someone else that operated by you; especially if your hopes and dreams relied on you working with your son. But don't make rash decisions on this matter. Figure out how to weight the pros and cons of your various options.
Find a trusted person to help facilitate the conversation between you, if you're having trouble communicating.
I wish you all the best. Feel free to write again.
My husband works in a family cabinet making business with no outside employees. He is one of 6 children involved in the business begun by his parents years ago, and the one slated to take over the business when his parents die. Both parents are in their 70's, active in the business, and still making most of the decisions. The rules and structures once instituted by his father have been let go as the years have passed. As he considers how he will run the business, my husband needs some resources to help him put together an accession strategies and strategies to address the lack of structure in the business. Any suggestions?
At best, they could start with a facilitated discussion about the strengths, weaknesses, opportunities and threats facing the business in the 1,3,5,10 years ahead (aka SWOT analysis). You could find a local facilitator through your state's Small Business Development Center, or ask your local chamber or family business program). From the SWOT, you could form a strategic plan that gears your objectives and goals to the longer term mission and vision of the company. This will lend itself towards the job descriptions, performance evaluations, compensation strategies, goals for return on investment, etc., that are the proper policies for any company. Each of those items is an interlocking big step towards creating a system of doing business that will take a lot of conflict and heartache out of the mix. A more advanced step is to form a board of advisors, made up not only of family members, but also interested outside experts, ranging from some of your service providers to local owners of other companies, business faculty, or people expert in some area in which you are looking to perfect yourself (customer service, quality, internet marketing). I am continuously amazed at the number of companies that do all of this very little, and still manage to muddle through, often making small fortunes (and often making small fortunes out of large fortunes).
If your husband and his family started down this road, there would be no looking back.
You may feel that you have no choices, and are obliged to continue on this unsatisfying path. But I urge you to consider that if this is not a win/win for you and your parents, it is everyone's loss, not just yours. Whether or not your parents can see that they have an obligation to allow you to pursue a meaningful career, whether in another company, or in an improved situation in the family business, it is incumbent on all of you to make it happen. You might consider making them a very sensitively but assertively worded ultimatum: that your long term plan is to pursue a career that is rewarding, either in or out of their company. This will not happen overnight, so discuss with them a Plan A and Plan B. Plan A would be a process of discovering what aspect of the family business might be a match for your strengths and interests, and pursue that for one year, and reassess. If at the end of one year, you are as pessimistic as now, consider Plan B, which is you pursuing other jobs, or a venture of your own. If they will not speak with you about it at all, consider that a big clue that Plan A is not likely to occur. You have no obligation to be a prisoner of your family business.
This all assumes that there is a type of work out there that would excite and interest you more, and that is something you must honestly contemplate before leaving. There are good assessment tools for this sort of reflections, among them the book "Now Discover Your Strengths" by Marcus Buckingham.
I am hoping you can help or at least point me in the right direction, as my research on the internet is yielding no progress. Let me start with some background. I don't work for a typical family business but I do work with both of my parents, they are my bosses. My father left his job and started an environmental consulting business 15 years ago, when I was 10. My father has been sole owner and president since the beginning and my mother has always been the office manager/accounting manager (most consider her to be as much in charge as my father). The business started from our family basement and now has over 15 employees and my father has started a sister company on the side. I took a lot of pride in my father and his dreams so I enjoyed helping out from the beginning by doing little things like filing and answering phones. While growing up I would work after school in the office, helping with office management and small projects and eventually during college and high school I would take time to come into the office so that my parents could take vacations together. My parents were able to leave the business because I would handle day to day operations (we are a consulting firm so managers needed little help from my father to keep their projects running). I went off to college but was very unhappy and ending up leaving to deal with some personal issues. For about a year after that I bounced around in temp jobs trying to figure out my path in life and school but keep working at my father's company when needed on a part time basis. Let me also say that at no time was I ever considered an employee of the company, my parents paid me as an office expense - all very legal with the accountant and lawyer. After a while, I moved out, finished my college degree and found a temp job that wanted to hire me full time. At the same time, the same week actually, my father asked me to come in for an interview at his company. I interviewed at both places and decided for many reasons to take a full time position with my father's company. I am very happy working for my father and for the company and although the company's field does not interest me, I do work here in an administrative management arena that does interest me greatly. I enjoy what I do. However, I don't enjoy who I work with or the attitude toward me as a family member. You see, since I started here about three years ago some of the other employees (all non family) have felt resentment toward me. They have not (to my knowledge) spoken out against me to say that I was only hired for who I am related to but they make me aware of their feelings in other ways. For example, part of my job is to contact clients who owe us money after a certain time has passed to make sure they received the invoice and to find out when we will get paid. I handle this work for all of the project managers except one. He asked me not to contact his clients but did not give a reason. He has made it clear to me in certain requests (or lack there of) that he does not trust my work nor does he agree with me working here. Financially speaking, according to our accountant and my father, I have become indispensable at work because I keep our aging down significantly and I was single handedly responsible for implementing new procedures and programs that saved us over $500,000 in the first year alone (for a $2M business that is a big chunk of change). I can honestly say that at first I expected a somewhat hostile environment; I expected to have to work extra hard to prove that I was hired on my own merit and not based on my DNA and so I approached my work with confidence. To be fair, some employees (mostly those in my generation) have changed their attitudes and have begun to see me for my abilities, not my family ties. My father does not give me special treatment: my wages are not inflated, I do not own stock, I am given my share and no more during profit sharing bonuses. Actually, to his credit, my father has made a very conscious effort to make me just another employee. However, it seems as though those who do not see me for who I am are making things worse for me at work. The comments, attitudes and behavior is getting to be a distraction and is causing me to not want to come in each day. When I attempt to speak to my father about it he tells me that I should understand how they feel. He thinks that since most of the older managers knew me when I was little that it is hard for them to accept me as an adult in the workforce but that with time they'll come around. He says I should grow a thicker skin but it seems as though some of this behavior is getting worse each day, not better. I kept a log of the behavior/comments I was getting and discussed them with my father. He spoke to the employees in question but so far he hasn't held them to any of the consequences he outlined for their behavior. I don't want to force my father to take action but I no longer feel comfortable at work. I find myself emotionally torn between my love for my family and this business and the hostile attitudes I face when I come to work each day. To make matters worse, I have discovered some financial problems that the two vice presidents are bringing upon the business. It is not anything secretive or illegal, just some things that if fixed would help us yield more profit each year. I have come up with some things that would help the company turn these financial issues around but it is hard to get my father to stick to his consequences with his employees. My father likes to run both the management (president) and be an active project manager himself, so getting him to sit down and make decisions abut the management of the business is hard to do. I guess in reality I have two issues I would like advice on. First, other than leaving this company that I have watched grow and feel such strong personal ties to, is there any way to confront the employees in question and get them to take me seriously as an employee, not as the daughter? I feel as though I have tried every approach from being passive to being aggressive, nothing seems to work. And second, if I can't affect their behavior/thoughts regarding me, is there some way to resolve this issue with my father to get him to take action on my part. I think he is afraid that if he takes action it will look like favoritism when in reality, it will be normal consequences. I don't want special treatment, I just want to feel comfortable coming to work each day.
Side note, we did have consultants come in and give us advice for the business (including having my father set up a contingency plan for retirement and setting guidelines for my role here) however, not one of their ideas has been implemented yet by my father!
Thanks in advance for any advice you can offer.
You have described a situation where everybody's point of view is completely understandable, yet not all are at all acceptable.
This could be a happy story except for the disregard you are receiving from what seems like a minority of your father's employees. You like your job and are succeeding in a measurable way. Your father is paying you what you have earned, and not treating the company like a safety net. You have discovered talents that are certainly transferable to many sorts of companies. You have survived a trial by fire, and earned the respect of several people who were skeptical.
Many adult children working for founding parents face exactly what you're facing, and live with scorn, jealousy and resentment. And many of those adult children don't do enough to disprove their reputation (harder to disprove in cases where it's deserved).
To cut to the chase, I would hope that you can clarify for yourself and your parents how disturbing it is to be treated badly by people who owe the business owning family more respect and diplomacy. Would these irritated workers treat any new employee like they're treating you, or are you being discriminated against because they think you are being favored? Are they so unaware of how they are creating a hostile work environment? Are they unaware of how this hostile attitude reflects on them as workers? Are they so unable to restrain themselves and act professionally?
I 'd suggest you sit down with your parents for a serious discussion of the conditions you need changed with all due haste. While it's admirable your father has not discriminated in your favor, he needs to "have your back" to ensure specific fairness to you and to protect the greater good in your company. If he will not defend his daughter from this behavior, he might not defend a non family member who will sue for a hostile work environment.
Also, it would be good if you and your parents could focus on a set of principles and policies that are necessary to sustain a professional and profitable company. If a salesman insists that you not contact his customer, he could be protecting a customer that is not paying promptly. He could be protecting himself from the due diligence that your company is entitled to perform. In an exceptional case, if that salesman would agree to comply with appropriate measures to monitor accounts receivable, you'd be achieving the desired goal. But to allow your employee (whether technically consultant, contractor, or hourly earner, no matter) to bluster his way around policy, say no.
And if there are problems caused by even Vice Presidents, work to create policies that indicate that the highest goals of the company are to increase shareholder value, eliminate waste, and become as sustainable as possible. These practices will create long term employment for all, not short term avoidance of confronting key managers.
I would suggest you have some responsibility here to grow yourself as a leader. There are various ways in which the next generation needs to "step up to the plate," either financially, managerially, or to deal with the 800 pound gorilla. If you take the gorilla by the horns, it may surprise everyone that the owner's daughter has what it takes to be the next boss. (and if not, it will make it clearer that this is not the place to come every day).
You can do all of this with a smile, and the satisfaction of knowing you have improved the company that provided for you, your family, and your employees.
Hope this helps.
From Family Business Magazine's "Ask the Experts" Column
Reprinted by permission of the publisher from Family Business Magazine, Summer 2004, www.familybusinessmagazine.com
Q: We own a manufacturing operation with about 160 employees. Dad is not active now, and I'm the person responsible. My sister runs a small branch distribution office. Her husband works out of that office as a salesperson. There are two other people in that office. We are reorganizing and plan to eliminate the two other office functions by moving them to the home office. My sister wants to hire her 23-year-old daughter, who has a two-year degree, to fill the soon-to-be-created position of office assistant. From everything I understand, this is not the right thing to do. However, my sister can't understand why. I have two sons about to exit college. My other sister has one son, now out of college, and three daughters still in school. The ex-husband of this sister used to work in our company before their divorce. We are not yet sure who else might want to join the business, but one of my sons, who will graduate with an industrial engineering degree next year, has expressed some interest. Is there a list of do1s and don1ts regarding employment of family members in a family business? I have not gotten around to documenting a family employment policy yet. I hope it is not too late. Any help along those lines would also be greatly appreciated.
A: While there is no "etched in stone, gifted from above" list of do's and don't's, many experts and wise owners suggest a set of professional policies that - while not ignoring the family relationships, set them aside- and raise the hiring bar enough so only the very fit will clear.
But blindly submitting your family to this rigor does not guarantee the family and business the health and wealth that is the implied reward.
Rather, there needs to be deep understanding and appreciation of the meaning and purpose of whatever rules and policies your family business sees fit to abide by. To deny a relative a job because she does not have a business education or prerequisite outside experience could seem biased and discriminatory if she could get a similar job in someone else's family business.
But if family members understood, through a deliberate and complete education process, that your company is a meritocracy and not an employment agency for family members; and that deserving relatives might have a leg up in landing a job, all else being equal in the hiring process (affirmative action for family, in essence), then you will attract the most talented of your family's talent pool, and maintain the morale of non family employees. By preemptively stating that your business has standards not bent for family, you may maintain the dignity of unskilled relatives, by warning them to not apply for jobs that are beyond them.
Great care must be taken to explain the wisdom of paying market wages, and separate from an owners ROI or worker's merit bonus; or family members will suffer the consequences of too little pay ("Someday this will all be yours"), equal pay ("I won't discuss that one child is more capable than another.") or too much pay ("Here's a huge allowance - I hope you love me."). Properly done, your family members will respect the rights and responsibilities of the company, which is a sacred Golden Goose that must not be slaughtered to feed gluttons.
If your family belief is "family members must be twice as good to get half the credit" it should not derive from a lack of appreciation, as much as going a bit overboard to define the work ethic required by all. If you see the benefit to make decisions that are strategic, fair, and objective, you might see the benefit of outside boards, search committees, performance evaluations, compensation policies, even if you're sure you could do it all on the fly.
The time spent to aculturate family members into the values and beliefs that will help sustain the business is a valuable investment that will increase profits and respect, and protect against heartache and red ink.
This "Dear Ira" Q&A is reprinted from Family Business Magazine, which offers our readers the special discounted rate of $57 (new subscribers only—not for subscription renewals.) This special pricing (regularly $95 per year) is a value-added benefit of our newsletter and/or center membership. See www.familybusinessmagazine.com for more info, or call (800) 637-4464, Ext. 6072. YOU NEED TO MENTION YOU WERE REFERRED BY THE UMass Amherst Family Business Center TO RECEIVE THIS SPECIAL PRICING!
This is just one more variety of shocks to the system of the newly hired. Many times, in either family business or public company, it is much easier to hire someone to accomplish a task than it is to let them do it. Many new employees find themselves in a rut or back office, with promises made on the back burner.
You may sit down with the owner and all concerned to review what you considered your agreed upon goals, and what it will take to get there. Remind him of the cost of bringing you in, and what you left behind for this opportunity. Compare and contrast the road maps of achieving these goals, versus not, and ask him if he truly prefers to end up where he seems to be headed without the agreed upon changes.
Explain to him that you took this job for the challenge of making changes and improvements, and preventing what you both saw as the result of doing nothing. Decide together whether the terms of your hiring would be met, or not. Be prepared to leave if he is not prepared to keep you on your terms.
Is it typical? It's probably typical of this company and this man. Not of every company or everybody.
My husband joined my father's company 3 years ago and has been running it with little assistance from my father, my brother or myself who also work in the company. I have only one sibling and neither of us is qualified to handle the financial and administrative end of the business. Even though my husband is clearly the best employee suited to run the company, he has been given nothing in writing that states he will make most decisions. My father wants his son to be president when he leaves and for my husband to clear all major decisions with his brother in law. The problem is that my brother is not very understanding of business practices or capable of making financial decisions and spends his time working in production running equipment and avoiding management responsibilities. He is supposed to be Production Manager but my husband who is Operations Manager does his job and my brother's job as well. My brother wants to be President despite his abilities to perform the president's roles and responsibilities. My husband is quite uptight over the lack of acknowledgement he is given for his true roles. My brother and father seem to be in denial over the obvious. Again, my husband wants my brother to be the president of the company because he is his son. My husband is paid less than my brother because he is not the son. My husband puts in far more hours and makes most decisions for the business. Our business has been around for 16 years and my brother has been a part of it the entire time. My husband joined the business 3 years ago because my father wants to retire as soon as possible. My question is: who should have the title as president? My father and brother think my brother should. My husband and myself think my husband should. They are happy with my husband's performance but feel the title should be given to the true son. Another question is: should my father complete a succession plan since he is 60 and in bad health and should he make us aware of the contents of the succession plan? My father comments that he is going to make myself and my brother Co-Presidents with equal ownership when he is gone. There is an extreme amount of bitterness in my husband about the situation and he may quit someday due to lack of respect toward him. He says he will not work for and answer to my brother. The company would then be forced to sell. Please advise as soon as possible.
Things have changed since I last wrote you. Your advice was helpful. My brother has been removed from his position as production manager because he could not do the job. He is very bitter. He is now vice president with the same pay as before. A production supervisor has been hired to do his job. My brother can do technical set up on equipment but is training the new hire to take that over. My father, with much coaxing from my husband and myself, has decided the company is better off to pay him but keep him out of way of harming the company and losing more customers. My husband runs the company and is about to launch a new area of profit for the business. I am in sales and help make management decisions--currently on maternity leave. My father's role is: looking at the company checkbook a few days a week and sometimes taking care of accounts payable. He knows he can't sell the business because it has far too much debt to income ratio. He takes a huge amount of money from the business to support his and my mother's extravagant buying habits. My husband as general manager, makes half of the amount the market demands which is equal to what my brother is paid. My husband and I realize the company can not afford to pay him more right now. My question is this: my father is discussing a buyout plan to release him from bailing the company out. He wants to keep the ownership between my brother and I equal. What are your thoughts on this? I feel that my husband may also deserve ownership in the company. I have witnessed the lack of communication my brother has with my husband and know they will come to an impasse repeatedly. My brother does not get involved in most business decisions because he does not understand nor have the ability to understand. ( I do feel for him but these are the facts) When he does get involved it is pride driven. For example: he is afraid someone in the company will look more important than him. This keeps him sitting at his desk (feeling important) reading up on sports for hours.
How can I own 50/50 with a brother that despises my husband, doesn't pull his weight and would never agree to my husband getting paid more than him.
Do my husband and I want to own this company if it is economically controlled by my father.
My father has promised us a succession plan in writing for 2 years but has not followed through. He repeatedly changes his verbal plans.
How do my husband and I protect the financial security of our family at the same time be fair to my father.
My husband and I have no collateral and much credit card debt--limiting us to buy out options.
Loyal but Stressed
I have more questions than answers. Your answers are more helpful than mine, in getting you and your husband to do what is best.
What are everyone's goals? Are they in conflict with one another, or can most of them be achieved for mutual satisfaction?
How would you feel about buying into this company if you had no history, and were not family? What is the costs and benefits of being family?
Are you staying in the business to keep your family relationships intact? Is that the best or only way to accomplish this?
Do the numbers show that this business is viable and profitable, or at least could be in a "most likely case" scenario?
Could your brother be happy and productive elsewhere, or is the company a nest he is not capable of flying out of, if he so chooses?
If you could look 5 or 10 years in the future, would you prefer to see yourself in a totally different situation? What do you have to do today and very soon to make this happen?
There is a good reason why most businesses fail, and most of those failures (like most businesses) are family owned and operated. Many that don't fail are kept artificially alive on the life support system known as throwing good money after bad. Ask yourself the tough questions to determine if this is your situation, and if that is a life you want to live (maybe it is!!).
Hanging in There
I notice certain recurring themes in all these letters, and one more is that the afflicted family business member asks what can be done to remedy a situation that has gotten so uncomfortably out of hand that they can't stand it anymore, and must leave to stop the string of broken promises, investment going down the tubes, misbehavior and poor performance (of others), and excusing of that misbehavior and poor performance (of others). The two part problem is often (1) how to I fix it? and (2) why bother, if I'm leaving? So in your case, too... if you've had enough, will you bother fixing? In describing the problem, you seem cognizant of what must be done. But it's all Monday morning quarterbacking. Unless you stay and can somehow persuade others to do what is required; and then enjoy the fruits of your labors. Those labors are: questioning what has been done, why it was done, and making everyone understand why it must be undone, as follows:
- What was the return on investment for the investors?
- What in a business plan led them to believe they could achieve that return?
- What was in it for the inventor? What did he/she actually own?
- What was the job description and continuing role of the inventor? Why would poor sales reflect on him, making him the scapegoat?
- Why was your father's friend made the president? What did he bring to the table?
- What were the expectations, terms, measures of success for all involved? How were those factors derived?
- What equity position was promised you? Was it described in a legally binding agreement?
- How was it determined that the company needed the specific people it brought in as sales manager and other salespeople?
- What was the feedback mechanism to evaluate performance, and determine continued employment?
- What strength does the board of directors have to stem the bleeding, replace management, make major decisions?
- How big is the pot of gold, and how does one get their hands on it in a way that is good both for the company and its shareholders?
- How is that pot of gold protected from those who should not have access?
- How do you get everyone to sit down and discuss all these questions?
I wish you all the best, and strength to do what will make you proud, resolved, and fruitful.
I discovered the UMass site today and found much useful information. Thank you! Here's my question: I am married to a man who works for his father's business. My husband is 40 and has worked for his dad since he got out of school. His older brother has never worked for the family business, except as a computer consultant. Brother has been laid off and is considering joining the family business. This part is fine -- everyone agrees that B is a hard worker with solid skills who will be an asset to the place. However, in deciding whether or not to take this option, B discovered that his dad has never incorporated the business and has very little in place in the way of succession planning. We had all assumed that my husband would inherit the business, but it turns out that the business is left half to my husband and half to his wife, saying he wanted to "provide for her." She is over 70 and even if she wanted to be actively involved in the business, her health would not permit it. All of this has become more urgent as my father-in-law has been diagnosed with cancer. From where I sit, he needs to consult a good accountant and lawyer to devise a succession plan that cares for his wife without making her his sons' boss, and keeps the IRS out of everyone's pockets. My own father is a business consultant and former commercial lender, and would be willing to offer his services for free based on the family connection. So far, my father-in-law is not willing to listen to any suggestion that touches on the possibility of a) him dying or b) him ceasing to run the company. Do you have any thoughts on strategies for convincing a business owner to attend to these issues? We recognize that it's his business and he can do what he wants with it, but what he says he wants doesn't match what he's actually got down on paper.
There are many parts to this puzzle, and yet the picture formed is very familiar. You're in the good company of many a company in transition. There are some pieces that you don't bring up as problems, for instance: you don't state if your brother in law is OK not being named as an inheritor of any part of the business; or whether your husband and brother in law can work well together, or whether there is enough business to support another family member (or whether it can be grown to that point). But your two questions are:
Q: Should your father try harder to be heard with his professional advice?
A: I'd be surprised if your father's advice could be seen as impartial. Perhaps he could recommend a couple of arm's length colleagues of his, who- even if they charge- might be seen as more authoritative, not being family.
Q: How to convince a business owner to face death, or worse: not working anymore.
A: Though a loving intervention. If your husband and brother in law can come to a common understanding of how to achieve their many goals: business success, a healthy working relationship, professional policies towards ownership, compensation, etc; plus a realistic look at elder law and elder care issues, they can sit down with your parents and spell out for them what they need to happen in terms of parents having all the appropriate conversations, plans, legal documents. (I'd suggest they also sit down with your father's referral, for a "walk through" of the process your father in law might face). In discussion with your parents in law, the sons should make it clear that their priorities are business success, proper tax planning, the satisfaction, comfort and security of their parents, a legacy based on good strategy, foresight, and facing facts. Will this go well? Who knows? But this is the preparation that will increase your odds of people doing the right thing.
I'm sure my dilemma is nothing new, since as you state, seven family members in a business will have eight different perspectives of reality, but here goes. Reality is not a big deal in California, but I think I might be honest to my own detriment.
I have worked in the "family business" for twenty years. I am the youngest of five children, none of whom was ever interested or otherwise promoted to management level, except for me. I was put in charge of Dad's Southern California operation, and he lived in Arizona, managing his operation there, and a third operation in Northern California. My father is an angry tyrant, who bullied customers, secretaries, suppliers, and production workers into submission. Ocassionaly, I was his victim, but not too often. He depended on me for quite a lot. And he depends on alcohol quite a bit, too.
My father has had one calamity after another in the last few years. One company went bankrupt. Partnerships ended in flames. A "Malice, Fraud and Oppression" verdict finally clinched his fate: he had to sell his prize crown company to his competitor in order to payoff the MFO judgement. I stood by his side, trying to keep my finger in the dike. The Southern California operation was the one business left standing. My husband and I were convinced that the company had the potential to be turned around, if we could only buy him out. It seemed like a good idea at the time, because the company was going south quickly, and needed to be rescued.
My father came to the office every day, full of rage, embittered by the failures of his business career. My husband and I approached him, and said that we would like to buy the business. He said ok, and then proceeded to extract an appraisal that was ludicrous from a business valuation hack. Our sales at the time were $900,000, and annual profit about 1-2%. The deal was a stock redemption, secured by the assets of the company, which were less than $500,000. The contract is several inches thick, and contains an absurd debt-to-equity ratio requirement that we failed to comply with on day one of the agreement and into infinity. The terms of repayment were fairly reasonable, considering the enormous valuation of $1.7 million. We pay interest only at a decent rate for fifteen years, but it's still a ton of money, and it's inhibiting our ability to fund growth and even sometimes seasonally just plain survival is threatened. We have a second to die life insurance policy that would partially fund the balloon payment. He told us at the signing that the note amounts were high, just so that he could receive a level of income that would be satisfactory, but that we could pay my sisters whatever we wanted with the life insurance benefit. He does not expect to outlive the note term.
So, we got the business. We have owned it for four years. Our sales are more than $4.0 million. Our profit is more than 4.0%. We have the same CPA as Dad. This year, I noticed that in our financials, an old footnote read: The debt-equity ratio has been waived for FY 2000. I pointed it out to the CPA, and he asked me if it had been waived this year. I said, No, not to me. So, the CPA wrote in his opinion letter that we might not be a "going concern" because the ratio was not waived, and the seller might foreclose on the assets. My husband and I flipped out. We pleaded with the CPA to change it. He refused. We toyed with the idea of not giving the statement to Dad. But that would really steam him up! We decided that we would certainly get a response from Dad, and maybe we would have an opportunity to gird our loins and attempt to negotiate a better price.
We have now a mean old letter from the old man's attorney, threatening foreclosure, unless we let him run the show. Needless to say, if he runs the show, the company will go under and our four years of effort will go down the drain. One recommended advisor told us to appease the old you know what for a few years, and basically convey the assets and customers to a new entity and screw him. We don't want to do that.
Our attorney attempted to get our CPA to redo his sloppy mess, and he has refused. Our atty recommends that we get a new CPA to do an accurate statement, excluding the seller financing from the debt equity ratio, and keep the new statement for evidence in any possible foreclosure proceeding. He thinks we should appease a little bit and have a friendly meeting, but gradually wean Dad off of meeting with us. I think we should follow the attorney's advice, but bring along two buy-sell alternatives to Pop: He can buy us out in cash, or we will agree to buy him out in cash, but at a more reasonable price tag that will bank "financeable." What pray tell do you think, Ira?
While I appreciate your concern with the issues of treating your father fairly, I can't see where you have been dealt a fair hand (as always, assuming that there is another side of the story with all sorts of different facts and figures, perspective, thoughts and feelings). Whether personal or business, relationships and transactions need a certain amount of good faith. If you were sold a business that you have more than quadrupled, and still cannot make the payments, and the seller (father or not) is chomping at the bit to come back in on a default on impossible terms, something is seriously amiss.
Furthermore, I cannot imagine what good is served by you still using your father's accountant, who seems to have more loyalty to him than to you. In the end, any CPA has the same master: the IRS and Generally Accepted Accounting Principles. But how about advisors who can help you watch your back? If I was in your situation, I'd be shopping for a new CPA tomorrow.
I agree with the concept of weaning away from meeting with your father- from your telling, he is no supporter. Whether or not you have the stomach or ethical flexibility to move the assets into a new corporation, you have to admit that you are playing poker with someone who tries to win at any cost.
While you may be very good at the business, and love every waking minute of building it up, your success is based on what you get to keep. You are still working for your father. If he wants to buy it back under similarly oppressive terms, you'd get to keep much more.
I wish you lots of luck in your dealings with your, but I caution you to be well represented in the negotiations by someone who has no vested interest in being loved by him.
Thank you very much for your response, and for the follow up. We have hired a new accountant, as of yesterday, and he assured us that he would not, under any circumstances, represent my father. One clarification, which only makes the situation worse: We have been able to make all of our payments, in full, to my father on a timely basis. And he is still trying to foreclose. I called a BK lawyer this morning, who I will consult with tomorrow. He asked how much our arrearage (sp?) with the father amounts to, and the answer is $0.00! Our accounts payable is running about net 60 days, and our creditors are not too rough on us. But we're out of cash, personally, to put into the thing....We have a couple of very important opportunities, and think that one new customer could be a potential buyer of the company. But you are so right, that we should be trying to keep what we can and move on if we can. I'll keep you posted about the resolution. Believe me, we are going to find an ethical solution that doesn't jeopardize our faith, which is our primary treasure.
I think they are not right or wrong. There are many factors that go into a decision to include or not include family members, and become multigenerational. There is no one thing called "family business," just like there is no one configuration called "snowflake." A few of the questions your parents might ask themselves are:
- Do we have a company that can support more family members?
- Do we enjoy working as a couple in a way that becoming multigenerational might disrupt?
- Are our children talented in a way that will make them successful and satisfied in our business?
- Do they get along with that "all for one; one for all" attitude that is so rare and so vital to siblings in business?
- Do we want to continue the company, thereby deciding to not sell it, and cash out?
- If we did pass on the company, would we have something else to do with our time; assuming our children would one day want their turn at the wheel?
- Is the idea of having a family business a turn-on or a turn-off?
After spending much of my life in business with my parents, and getting a pretty up-close look at many others, I would conclude that the main reason to work with family members is that you enjoy their company and are greater than the sum of the parts. If this is not the case, I'd ask myself if this is the best place to spend most of my waking life.
Hope this helps.
Screwed By Family
Ready for Takeoff
Many Hands on Deck
(BTW, yellow is for friendship, and flowers are pure)
PS To give you a better picture of him here are some of his usual past activities. He has gotten into trouble many times when left alone for too long. Here is a short summary of some things he has done: • Set a trash can on fire, set a commercial building on fire • Threw a cat into the water • Heated up a salad bowl on the stove top and thus giving me a burn. Kind of a sick sense of humor • Used to take cute, little grade school girls to school until some elders in the neighborhood notified my family that he is not supposed to do that • only plays with kids, even now • often when interacting with other male adults, they end up trying to cheat him, make fun of him, or just ignoring him.
Dear Yellow Carnations,
While I can understand your mother's good intentions, I quote humorist Al Franken, when he asks: "you stay together for the children, but will they stay "together" for you?" Does she not have a greater obligation to make sure your brother is getting the help he needs, then just keeping him close? And while the squeaky wheel gets the grease, why punish the wheels that are not making as much noise? As for you, you may be open to a wider type of search. I can heartily recommend taking a very simple assessment included in a great book, "Now Discover Your Strengths." The book comes with a code that you enter into a website designed by Gallup Organization, and the results explain your most dominant strengths, that can help you expand your thinking on what type of work you may find exciting, energizing, fit your talents, and so on. Obviously, you may also need to expand your geographic borders to find more potential employers; or maybe consider beginning some sort of business or consulting yourself. While I certainly have nothing against getting married, I can't see how that's the either/or you must face at this time. Balance is very important, and your mother may not be realizing all that it may take for her daughter to lead a fulfilling life. If you want to let me know the general vicinity you live in, I may be able to steer you to a good counselor to help sort some of these issues out.
I think you have the guts, the soul and the brains to succeed; whether to survive and improve your family business dilemma, or venture out to greener pastures. I'm sure that even within the constraints and values of Asian culture, there are avenues to greater safety and fairness. You have emerged from an intolerable situation already; you can do it again. Becoming the most fulfilled you can possibly be is an honorable gift to your family.
My father has built up his business over the past 25 years from a $12,000 investment with $100,000 worth of sales to $1,700,000. He wants to retire in the worst way. The problem is the following. His accountant says the business is worth $450,000. My Father wants to sell it to my brother and me for $250,000. His accountant says the Canadian government will not allow this to happen. They will tax it higher. The business has made money for 25 years (not much- $10,000 to $40,000 after expenses, typically). However, due to a loss of demand for one of his four main retail areas, he has lost $30,000 each of the last two years. My brother has just started out in life new wife, new child, new house; so has little or no net worth. I have approximately $325,000 in net worth, however $180,000 in rrsp's, and $80,000 in real-estate (our house), that balance is in vehicles and some cash ( $10,000). How can we make this happen before his health gets worse????
I plead ignorance to the particulars of Canadian business appraisals and tax laws, and even in the U.S., would refer you to a good accountant and business appraiser for their piece of the puzzle. But a good start would be to sit together with your father (and mother, if she is alive and involved in his finances and life decisions), and you and your brother, to determine: 1) A theory of how the transition of ownership and management should be structured. Will you and your brother be equal owners? What will each of your positions be in the company? Are additional investors needed and/or practical? Are their sources for lending that would even out you and your brother's investment? Are there gifting strategies that make sense for your father's estate planning, and his income needs in the years ahead? 2) What are the prospects for the future success of the business? Is it a good investment for the next generation? What return on investment can you expect? Are you and your brother uniquely talented to deal with the struggles ahead? Do you get along well enough, and make decisions rationally? Are you open to outside, objective advice to guide the company through rough waters, and take advantage of opportunities? 3) Put your expert advisors to work for you. Begin a discussion of the guiding principles that will determine the best way to achieve your goals. Brainstorm on the most creative ways to achieve them, to the benefit of all involved. Let your strategic goals drive the discussion, then figure out the best course from a legal, accounting, banking point of view; rather than have boilerplate solutions drive the plan. Many families have major misconceptions about what is possible, and getting several expert advisors together can make many obstacles magically manageable.
I've been in business for 29 years. I am 67 years old. I have a daughter and son in law that work full time with an admitted non-ability to run our business, as well as a daughter that works 2 days a week. They have all been with us for 20+ years. My youngest family member, a son, joined the business 3 years ago with a degree in computer systems and no management background. At first he was welcomed with open arms by all, and it was thought he'd eventually run the business. But since he's been under fire from my other children, causing me great heartache and frustration. I still think he's our only family member with any chance of succeeding me. What to do?
Please help me think through a situation I'm facing with my business and family. I began in '93, after West Point and some years in the Army; starting in Engineering, Project Mgmt, and progressed through the company. In '94 and '95 the business lost $600K each year and was on the brink of bankruptcy. I took over the operations in late '95. From '96 on the business has done much better. We have reduced debt from $1.2M to $500K, and have had consistent earnings of ~ $200K - $300K per year on ~ $6M in sales. My Dad passed away in June '98, but was not really involved in the operations since '97. I am now nearly complete on my purchase of the company from the estate, paying $600K with a purchase money note. It's a good deal, but based on where the company was 5 years ago I feel I've earned it. I am very frustrated because I have 3 sisters who say it's a "sweetheart deal" and it concerns me that they don't appreciate where the business was and is now. Had the business been liquidated 5 years ago, when then bank almost called the note. We are close to closing but I told my family that I'm not sure this is what I want, as I sense that my sisters (all older) will always feel that I "stole" the business. Two years ago we tried to get offers on the business to arrive at a fair value, and the best offer we could get was $400K due to the very competitive and cyclical nature of the business. Also, the 9/11 tragedy has had an adverse impact on the business. I have always settled for a modest salary based on the business size, but have held out for the upside potential. The estate probably has another $2M in assets, excluding the business. Please give me some honest feedback.
Don't Call Me Sweetheart
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