What a treat for a plant owner to turn over his successful business to one of his children. Better I should say that a husband and wife should turn over the business to their children. It is a prideful thing to do and I for one descended from a line of Cleaners three generations back. My plants and stores were successful because I had a key market area and my family ran the business in a wise and safe way. I could have easily destroyed all of that by “wanting to change things to my way of thinking.” Two out of three family businesses fail after family turnovers. All for a host of reasons. Wanting something is not enough for fathers of kids. Pride won’t keep the business going. Wanting to know how to properly take the business over is key. I’m not talking about a skill to work in any department, I’m talking about maturity in keeping up the business side of it all.
Slightly Declining Sales
One study of family dynamics is that 24 million (one out of three) kids live without a biological father in this country. That is alarming. So to be able to turn your plant and stores over to Junior is a very dynamic opportunity for the kid as well as a relief for the father and mother. But being parents, we worry. There is little data to point out how many drycleaning and laundry plants go under per year in this country. All statistics are general information about all industries. However, my research did take me to one piece of evidence that shows that the current 9 billion dollar a year industry we love, has had little increase from the 8 billion in sales we have been at the past decade. Sighting declining sales in our industry are due in part to not adopting new technology, not accommodating environmental regulations and not having a decent proximity to key markets. Not to mention the constant buy out of plants and stores by multimillion dollar companies, many having no background in our industry. Every little step like this decreases the world view of us as a stable industry to buy in to. But having Junior take over helps in many ways. Customers want to see family in the stores.
Maybe Your Kids Were Not Adequately Trained
Personally I have witnessed far too many drycleaners going under in my 30 years of traveling. Most often Junior or sis take over the family business and slowly run it into the ground. The kids were not properly trained. Just because your parents owned stores does not mean the kids will treat it right, or even know how to continue your success! I can’t tell you the number of stores I have seen closed after Junior took over because they wanted to stay in the office and chase customers on the computer instead of working the counter from time to time so your customers could see you and trust you. If your children are interested and qualified to run your plants and stores someday, now is the time to establish a strategy for a smooth transition of ownership to your beloved kids. Thankfully, I know a great number of plant owners who have succeeded in transferring their business over to their kids. It has been a pleasure to see this take place. It helps that people have taken the advice of a past icon of our industry when he said, “no one ever went out of business because of their quality work”. I would add to that a good business savvy and instinct. A good point to remember though is that usually it is not a good idea to put your kid at the top. Let them earn the respect of their employees by not having a grand title of responsibility.
Over time, you can evaluate your children’s qualifications and earnestness to carry the business forward. Your children can gain work experience in the business to evaluate if they wish to take over the business or to pursue other goals. An offspring can demonstrate performance ranging from exceeding your fondest expectations to the unhappy conclusion that the offspring is hopelessly unqualified to carry on the business. On-the-job training can begin in high school, or earlier, with emphasis on a start-at-the-bottom approach to experience in job responsibilities.
• A formal business education will also be important for your family successor including a college degree in business administration including accounting and preferably going on to a masters degree in business. Simply put, the more formal training the better your offspring will be prepared to keep abreast (hopefully ahead of) highly trained business rivals.
• You have sufficient time to ensure you have the funds needed to retire without depending on the company for ongoing income.
Get your potential successors involved in job responsibilities that will give them insights in every facet of the business. It will be important that their personal feelings and goals be considered. Evaluate the strengths and weaknesses of all potential successors, keeping in mind what will be best for the business. Don’t make the mistake of putting Junior at the top of management yet. My experience has shown that not all siblings are mature enough to “take the bull by the horn”. While most entrepreneurs would like the business to be taken over by their children, if none have the training or interest in doing so, family succession is not a realistic option. In such cases, the founding entrepreneur must look to other options including selling the business or closing it.
*The Top Ten Do’s
1. Start your transition plan now.
2. Evaluate the interest of family members to run your business.
3. Take time from business to plan for succession.
4. Retain a professional succession advisor.
5. Document and update your succession plan.
6. Create a succession team including family members.
7. Have specialized tax and legal advice.
8. Resolve sibling’s goals and discords.
9. Look to other options if succession is not realistic.
10. Involve your successor in business long before taking over.
*The Top Ten Don’ts
1. Put off business succession planning.
2. Assume that family members are qualified.
3. Assume that family members are not qualified.
4. Disregard the value of an advisory board.
5. Overlook planning due to lack of knowledge.
6. Ignore potential adverse tax complications.
7. Fail to keep life insurance policies updated and in force.
8. Dismiss the possibility of employee ESOP ownership.
9. Disregard the personal goals of potential children successors.
10. Combine business assets with family assets.
Other good ideas are:
Selling your business is a process
Folks, you may have made mistakes along the way, but when it’s time to sell the business, you only have one chance to do it right. So I hope these ideas and statistics will encourage you to take a real professional and business like plan to help you move forward on this type of take over. God bless those of you who have made the transition to your kids and I am encouraged that parents want their kids to enter into the family drycleaning and laundry business!
I’m headin to the wagon now, these boots are killin me!
Kenney can be reached for comment at: email@example.com
* Transcribed from Industry Statistics website