Keeping It in the Family--Happily
Ask 2-year-old Jeffrey Gross what he wants to be when he grows up and he has a quick answer.
“Sales manager,” he’ll say, as he scampers around a truck parked at Ideal Sales & Distribution Co., his parents’ truck accessories business in City of Commerce.
Jeffrey’s father, Mark Gross, beams. Gross says he would like nothing better than for his son and 5-year-old daughter, Rachel, to follow him and his wife, Julie, into the family business.
At 35, Mark Gross is president and owner of Ideal. Julie, 31, is vice president and works part time in the business they bought from Julie’s father about eight years ago.
Because they are already sharing their business experience with their children, the couple have an excellent chance of passing it along to them, according to Leon Danco, president of the Center for Family Business and a family business consultant.
Ensuring an Heir
It is the business executives who are too busy to share their dreams with their children that end up with no heirs interested in stepping in when they retire, Danco said.
“If the father takes time to make a partner of his wife, the kids will benefit,” Danco said in an interview.
Nearly every day, Danco says, a business owner nearing retirement age calls him for help, frantic because he has failed to interest his children in running his business.
“I had a man offer me half a million dollars if I would just get his son interested in the business,” Danco said. “If you hate your father’s business, you hate it and there is nothing I can do to change it.”
Although it is important to try to pique your child’s interest in a family business, Danco cautions against forcing or bribing an uninterested child. And it is important to accept that while some children have a natural aptitude for business and leadership, others will never be suited to a role in business.
“If you have a Mozart, don’t try to turn him into a second-rate businessman,” Danco advised.
Apart from failing to communicate their dreams, many family business founders, who have struggled for monetary success, are uncomfortable about just handing over their businesses to their children. Danco said the idea of giving a successful business to a child on a silver platter represents to some nepotism and the “modern day equivalency of divine birth.”
For a smoother transition, he suggested that business owners try to work with their children for a while before moving out of the picture.
“When your children take over the business, it is a bit like becoming a grandfather and watching your children take care of the baby,” Danco said.
Even those founders who admit they are mortal and prepare for management succession often fail to push their children into jobs elsewhere so they can gain valuable experience before returning to the family company, he said.
“The family business owner is usually not Harvard-educated,” Danco said. “He teaches his kid tradesman’s ethics instead of grooming a leader.”
But what happens when there are no heirs interested in running the family business?
“If your children can’t run it, sell it,” Danco said. “Because if you let them own it, but not run it, the job of the outside professional is impossible.”
Danco said today’s family business owners have the option of grooming sons, daughters or both for business leadership. Julie Gross is a perfect example of a daughter who stepped in to run her family business after her father’s death.
Truck air conditioning and chrome bumpers may not be in every girl’s dreams, but for Gross, the family business has been a perfect way to work with her father and now with her husband.
“I remember coming down to work with my dad on a Saturday and playing with the trucks,” Gross said. “I’ve built radiators. I started delivering parts when I got a driver’s license.”
In an unusual twist, Mark Gross said he joined his wife’s family business after his own father made it clear that there was little opportunity for him in the Gross family’s hotel and restaurant supply business.
“I wanted to succeed him, but he wouldn’t leave,” Mark said, with a smile. “I wanted to be sitting in his chair.”
Instead, Mark sits in the president’s chair at Ideal, which now employs 25 people and posts millions in annual sales. Under his leadership, Ideal’s product distribution has expanded across the country, and the company began manufacturing as well as importing products.
But he and his wife admit that taking over a family business has not been easy. First they had to assure longtime employees that their jobs were secure. Then they faced having to change banks when the company’s longtime banker refused to lend them money. Later they were hit with the bankruptcy of a major customer who owed them thousands of dollars.
Now things have settled down to the point where they recently took a short vacation in Mexico.
“It’s a nice feeling that we are building something together,” Julie said.
2 Family Business Seminars
Family business owners inspired to solve a variety of problems may be interested in two upcoming seminars.
Leon Danco is leading a seminar focusing on how to plan for management succession. The seminar, which attracts family business owners from across the country, is scheduled for June 14-16 in Cleveland. The cost is $1,195 for the first person and $1,095 for each additional member of the family or company. For information, write to the Center for Family Business, P.O. Box 24268, Cleveland, Ohio 44124, or call (216) 442-0800.
The Center for Entrepreneurial Management in New York is sponsoring a three-day seminar on the family business experience May 4-6 in Cassopolis, Mich.
Scheduled topics include the role of the board of directors in a family business, estate planning, should the children work in a family firm and how husbands and wives can work as a team. For non-members, the fee is $1,600 for the first person, $1,000 for the second person and $800 for each additional person. For information on the seminar or to rent a one-hour videocassette about the seminar, call the center at (800) 247-7642.
Singer, actress and entrepreneur Olivia Newton-John has been named celebrity businesswoman of the year by the National Assn. of Women Business Owners. Since opening in 1983, her Koala Blue chain of sportswear boutiques has grown to 30 stores nationwide.
12 COMMANDMENTS FOR OWNERS
1. Thou shalt share thy dream with thy family.
2. Thou shalt inform thy managers and employees, “This company will continue forever.”
3. Thou shalt develop a workable organization and make it visible on a chart.
4. Thou shalt continue to improve thy management knowledge, that of thy managers and that of thy family.
5. Thou shalt institute an orthodox accounting system and make available the data therefrom to thy managers, advisers and directors.
6. Thou shalt develop a council of competent advisers.
7. Thou shalt submit thyself to the review of a board of competent outside directors.
8. Thou shalt choose thy successor(s).
9. Thou shalt be responsible that thy successor(s) be well taught.
10. Thou shalt retire and install thy successor(s) with thy powers within thy lifetime.
11. Thou canst not take it with thee--so settle thy estate plans now.
12. Thou shalt apportion thy time to see that these commandments be kept.
--Leon A. Danco, Center for Family Business