If you haven’t talked to Rich recently, you may not know that he recommends against the folly of having parents or children, and that you skip directly to grandchildren, which is his latest joy and hobby. (Jen concurs with part of this recommendation.)

Grandkids (Jen’s kids) are certainly one of his most interesting hobbies, but adventuring with a 4-year-old and a 2-year-old always seems to get one of the three of them into some sort of trouble.

The 4-year-old loves to do projects with “Papa” especially those that involve building things. He is always on the lookout for the next project to do with him, normally something ranging from yard work to woodwork. Project time is always enhanced by conversations about everything and lots and lots of “Why?”s.

This weekend the conversation looks to be more challenging since their Dad, Cory, stepped into “it” big time. As Cory was taking him to bed (the 4-year old, not Grandpa), Cory said something in passing about “making babies.” The 4-year-old immediately perked up, since it sounded like a project to him and wanted to know more about “making babies.”

Cory danced a little and suggested that this is a complicated topic that might be better covered this coming weekend. (Which is when Grandpa is normally scheduled to do a project.) The 4-year-old was OK with that, but he wanted to know more about how this was all done so maybe he and Grandpa could work on this “baby-making” stuff this weekend.

Last summer, a weekend project resulted in a new sandbox; maybe a baby brother could be put together this weekend so he will have another playmate. As we write this, the story has not played out. Dad and Grandpa both hope the 4-year-old will forget about this baby-making project. History, however, tells us that he will remember, and that he will not be satisfied with incomplete, nonspecific or implausible answers.

So the stork and cabbage patch gambits are definitely out. Their best reasonable outcome for Dad and Grandpa will be that he asks Mom about it before the weekend.

An effective transition

So some of you have either not heard of Rich’s recommendation regarding not having children or ignored it because it is a stupid idea or gotten distracted by your spouse in some way that resulted in having children.

There seem to be plenty of scenarios with this result. Since some of you have a family business that can eventually be taken over by one of those children, we want to provide our list of thought-starters as you consider and plan for this possibility.

Transitions typically come in two configurations – cake or wake. The end-result is the same: The owner has left the building: The first kind is where the owner gets tired of the day-in, day-out grind, wants to spend time on his boat or spend time with grandchildren and hands the reins over to the designated successor. There is a party with cake and, often, there is alcohol consumed to celebrate this transition and wish all involved the best in their new pursuits.

The second kind is where the owner’s life plan is ended prematurely by a bus or illness. The owner’s life is celebrated with a wake. Often, alcohol is consumed in the process.  

In either case, the business is often thrown into a state of turmoil beyond anyone’s imagination – often, resulting in the consumption of alcohol.
Start the planning process as soon as the pregnancy test shows the magic “+”: This may be an exaggeration, but not by much. Most owners wait way too long to start the process.

Your attorney can help with the legal stuff. Ideally, you will work with someone who has done many of these complicated estate, trust, business succession plans. This may be your trusted personal attorney, but, if this is not his/her area, get a recommendation. Other the years we have seen poorly planned estate plans doom the business to being sold in order to clear up obligations and costs that might have been handled better with better planning.

We have even seen instances where owners do not have a current will. (Note: If you take nothing else from this column, MAKE SURE YOUR WILL IS CURRENT!)

Good handoffs to the next generation are not started after the kid has graduated from college: A scenario we have seen repeated over and over is where the parents want their kids sheltered from the daily struggles of making payroll, collecting from customers, delivering products in the middle of the night, which are often the realities of an active supply business.

This act of sheltering, in our view, does the kid the greatest disservice in life. They join the business with a false and blurry understanding of the business and are very likely to make stupid, embarrassing mistakes that could have been avoided.

Even if the child has designs on a life far from our great industry, these reality-show life lessons will serve him/her well in whatever career they pursue.

For a lot of businesses, the best successor is a daughter: While our industry continues to evolve, it is still dominated by folks with X and Y chromosomes. The good news is there is progress.

Thirty years ago, a wholesaler with only daughters was often on the lookout for a suitor who could run the business and produce sons. Frankly, we have seen a bunch of businesses where the daughter was not even considered or groomed as a successor even when she was smarter, harder-working and more reliable than any of her brothers. Now we are seeing more and more women take the reins.

Ideally, involvement in the business is optional for your children: In our consulting, we have seen many instances where the successor was forced into the family business even though the successor’s interests were outside of our industry.

Most of these situations did not work out for the company or the individual. The individual invested all the energy and commitment of an indentured servant, and it set the tone for the business operation. We have listened to these family members talking about their unrealized dreams in the course of describing why their business was not performing.

Providing a good example and mentor to the next generation helps them know what to do when they get the call: When the next generation does not get to see how it should be done, they are forced to “make it up” as they go – while under fire. Even if they are good at the work, they will get 90 percent of it half-right (with apologies to Yogi Berra).

Good mentoring won’t keep them from making mistakes. However, when they learn the ropes from an experienced mentor, they are able to build their skills without having to start from scratch.

Sometimes a parent is not the best mentor. For whatever reason, the style or relationship may dictate that another individual should act as the mentor. Better to do this than ruin the parent/child relationship in the process.

Mentoring is not easy: We find that the best natural business people often have trouble mentoring.  Their business is run so instinctively that they cannot explain why they are making any of their decisions. Good mentoring involves teaching the decision and, more importantly, how that decision was made. The decision process is critical because the mentored person will seldom encounter the exact same situations. Understanding the data used and the process, however, allows the mentored to adjust and adapt their decisions to the situations at hand.

Interning is great: As part of the nurturing process, having the successor work outside the family business builds experience. Working in someone else’s wholesaling business probably provides the most direct value, if you can swing it. But any work experience has benefits to the individual and the company. Some kids come into the business never having worked a day in their lives. (We don’t count cleaning their room as a job, although some come into the business never having done that either.) 

Hand off a good complementary team when possible: Often a savvy owner will surround himself with people who complement his skills. His successor will often have different strengths and weaknesses, and the team that will make him/her shine may be crafted differently.  

The kids have obligations, too: Some kids want little to do with the business until they get to be the boss.

We recently read of a business that was acquired by one of the large nationals. We were not surprised since we had watched the first generation build the business with lots of blood, sweat and tears. The next generation was great at reminding everyone, in case they didn’t remember since the last meeting, where he prepped and where he was going to college and how he was going to reinvent the business when it was his turn.

As it turned out he didn’t know everything and was offended by the level of work required to run the business. It turned out that doing the work was harder than basking in the success created by his father’s hard work. Kids who want to deserve to take over the business must invest in their own preparation and must be ready for the hard work that is involved in running a good wholesale company. 

Don’t forget that life doesn’t always follow our plans: A parent’s worst nightmare is that they won’t precede their children in death, but it can happen. Make sure your plans include what would happen to the company in the event that this nightmare is reality.

Whole books have been written on this topic, but we hope that our list will cause you to evaluate your situation and get a plan in place that will allow the next generation, son or daughter, to assume the helm with good odds of moving forward.