Waiting For Dad To Retire:
'If He Doesn't Trust You At 40, He's Never Going To Trust You'
October 11, 2004 By Kate Beem
Note to Charles, Prince of Wales: Fish or cut bait. You're not getting any younger.
Pushing 56 and still waiting for his mum to decide when she'll hand over the reins, the British prince has much in common with some family business successors who stand in the wings for years hoping their parents will exit the business so they can run it.
The reality, says Rich Morris of ROI Consulting in Evanston, is that if a parent hasn't turned over the family business or made succession plans known by the time a child is 40, chances are it's not going to happen.
"If he doesn't trust you at 40 to run the business, he's never going to trust you," says Mr. Morris, who works with family and privately held businesses. Family-owned businesses in the U.S. have enjoyed a surge of success over the last few years, according to a 2003 study. Mean revenues of family-owned businesses have grown to $36.5 million, up 50% from 1997, according to the American Family Business Survey, conducted by Loyola University Chicago, Kennesaw State University in Kennesaw, Ga., and Babson College in Wellesley, Mass.
A survey by Loyola University Chicago shows that among family-business chief executives 61 and older, 55% of those expecting to retire within five years hadn't chosen a successor.
At a time when mandatory retirement is a vestige of the past and Americans are living longer, "middle age" eludes easy definition. And that makes things dicey for children in their 40s and 50s who are the heirs apparent to the family business.
If you live like you're going to get dad's business, you could end up disappointed and ill-prepared to do something else. Few people in their 20s and 30s save enough money to launch a business of their own. Then, middle age hits, it's time to pay for kids' college tuition, and a business isn't passed along to them.
"Most businesses can't start on a shoestring," says Lloyd Shefsky, co-director of the Center for Family Enterprises at Northwestern University's Kellogg School of Management.
Succession: Think Early, Often
Mr. Shefsky, author of the book "Entrepreneurs Are Made Not Born," most often sees tension between the first and second generations of a family business. That's understandable, given that the business is as much an offspring of the entrepreneur as his or her children. Mr. Shefsky likens the succession process for the first generation to new parents taking care of their first child: They don't want to let it out of their sight.
It's incumbent upon the successor generation to understand this drive. It's what makes the entrepreneur who he or she is, ROI Consulting's Mr. Morris says.
Communication is key to avoiding this kind of midlife crisis, the experts agree.
Early on, when a son or daughter expresses interest in the family business, the parent running it should begin to think about succession, Mr. Morris says. By the time parents running a family businesses hit 50, they should know when they'll exit and start planning for it by figuring out what they'll do once the business doesn't consume their lives. And they should let Junior in on the plan.
These discussions aren't easy, Mr. Morris says. Often, as much as the parent doesn't want to leave the business, the child — on one level — doesn't want to see the parent go.
During the heady years Murray Gordon spent building his business, Maga Ltd. in Deerfield, he always thought he'd be carried out on a stretcher someday. Now 61, he started the business, which specializes in long-term care insurance and does about $3 million in new premium sales each year, when he was 32 — five years younger than his older son Brian, who is the company's vice-president.
Mr. Gordon launched Maga Ltd. after spending 12 years working for other insurance companies. At the last one, he had worked his way up to regional sales manager when the company left the Chicago area. With three young children and without the job he loved, Mr. Gordon decided to create his own gig.
Brian Gordon, 37, never intended to join his father's company, but he was a natural at the insurance business. He helped expand the company and take it in directions his father had never considered, Murray Gordon says. Still, when they talked about the future of the business, their discussions didn't address who'd be running it in 15 years.
Then, four years ago, the older Mr. Gordon suffered a stroke. He found himself paralyzed and requiring surgery to remove a tumor from his heart. In an instant, the younger Mr. Gordon was running Maga Ltd. Brian Gordon did what he had to do, he says.
Eventually, Murray Gordon recovered and returned to the company, where he's still the president. But he has a different outlook now, he says. He sees a day — not too far off — when he won't want to come to the office every day. And although his son-in-law and younger son also work for Maga Ltd., Mr. Gordon sees Brian as his successor.
But that doesn't mean Mr. Gordon wants to leave entirely. He thinks he'd still want to work a little, he says. "I enjoy what I do. This is the thing," Mr. Gordon says: "If you enjoy it and are good at it, why walk away from it?"