By Diane M. Calabrese / Published February 2018
Operating a business demands both care and nimbleness in responding to the tough calls. Yet whatever the issue, the steps toward resolution are the same. Think it through, weigh the options, make a plan, and act on it. Sometimes the process is a vexing one.
It’s always just a bit easier, however, if the counsel of someone who has been there and done that is available. Just knowing that another person has dealt with a similarly complex problem and handled it can be fortifying; it can be done.
Three members of our industry tell us about advice they received and advice they would give. All the counsel is valuable, irrespective of the generation to which one belongs. We can all learn from one another.
“I’m the sixth generation in the paint business,” says Jake Clark, owner of Armstrong-Clark Company in Sonora, CA. “I learned from my father.”
Clark started his own company 27 years ago. Prior to that, he worked first in a family business and then, after leaving (and selling his stock in) the family business, he did some other things, which included a stint painting shake roofs.
“I’ll be handing the business off soon to my niece’s husband,” says Clark of the company he founded. Currently, he and his nephew share an office where they can talk in real time as the transition is underway.
Clark says the “best advice” he can give anyone is “to be honest and straightforward but thorough—by finishing.” Completion of any tasks started is a must, and completion means just that.
“Make a list of things you must do, have at it, and keep at it until finished,” says Clark. “You can’t leave 10 percent. That 10 percent will come back to bite you.”
Also, be clear-eyed about the financial condition of a business, says Clark.
“Whenever I was short on capital, it was really difficult. Owners should make sure they have enough funds to do what they want to do.”
Critically assessing a business includes regular review of its financial health alongside plans for growth. [See the article on critical assessment on page 22 in this issue.] And any plan for a business must include succession planning.
“When moving out of ownership or leadership at a company, do it in a thoughtful way,” says Clark. “Take enough time and don’t rush the transition. Don’t assume anything. Don’t take anything for granted.”
A transition to a family member may not be a viable option for some family businesses. It’s possible no one will want to take the helm. It’s also possible that no one from the family should take the helm.
“Beware of the third generation—the curse of third generation,” says Clark. “The first generation starts the business, the second generation makes it grow, and the third generation comes in and runs it into the ground.”
Clark emphasizes that he does not suggest the third-generation scenario is inevitable or that it prevails. It’s just something to consider.
“I’ve been the third generation,” says Clark. “I did not do that. Instead, I sold my stock, 49.5 percent—not enough for decision making,” and he moved on and launched his own successful company.
Family businesses are a core component of economic activity in the United States and around the world. The Conway Center for Family Business in Columbus, OH, one of many entities that provides educational resources and programs for family-owned businesses, offers some statistics on how important they are.
According to the Conway Center, family businesses account for 64 percent of the U.S. GDP and 62 percent of U.S. employment. Across time, family-owned businesses are extremely entrepreneurial, i.e., making changes, additions, and going in new directions as required to remain successful.
Kim Micha, CPA, a principal and the CFO at High PSI Ltd. in Glendale Heights, IL, joined her parents’ company after working for a big accounting firm. “I came to our company from accounting, where we did not have direct access to the customers, and here our customers are front and center,” she explains.
“I learned from others here that we treat our customers like family and keep them coming back,” says Micha. “We also treat our coworkers like family so that we all get to enjoy our days a bit more. We have to spend a lot of time at work, so we may as well enjoy it. If we can have a good time and make our customers smile, that’s the best feeling. My dad’s business advice has always been to make the customer laugh to lighten up conversations. He is a great salesperson, so I have tried to follow his advice, as have many of us here. It is always good to try and remember not to take yourself too seriously and laugh a bit.”
Micha says the best advice she ever received came from her father. He told her to “keep smiling,” and that’s important beyond the workplace.
“Staying optimistic and not letting bad days get me down have been advantageous both in work and out of work,” says Micha. “That is advice I would pass on to another generation. If you can keep smiling, you can usually keep the people around you smiling as well. A happy customer spends more money, too.”
Advice to a younger generation may take many forms. It can sometimes be as simple as the counsel to trust one’s instincts.
“I know it’s counterintuitive in a piece about intergenerational advice, but I guess that it’s still important—find your own voice,” says Stefania Benetti, sales manager at PA SpA in Reggio Emilia, Italy. “Obviously, there is a lot to learn from previous generations, and the main tenets of business do not change—respect for the industry, honesty to your customers, and integrity in production.”
Finding one’s voice does not mean ignoring the foundational architecture of a business. “Seeing what kind of values the previous generations put in the business, maintaining if not strengthening your positions—these are all fundamental to the business,” says Benetti. “At the same time, you need to understand that times change, the company increases in size and sales, and you might need to look at things from a higher vantage point.”
Things may be very good at a company, but not keeping pace with the dynamism of the world can become a liability. “If you try to keep everything the way it always was, you risk suffocating the business,” explains Benetti. “The most difficult thing is to find a middle ground, a way to keep the core mentality of the business that you learned from previous generations, and still find your own path in an ever-evolving world.”
Benetti says the best piece of advice she ever received is to keep the entirety of the business in view. “Try to see the picture as a whole, instead of concentrating on the small details,” she explains. “It’s important to surround yourself with people who will take care of every single detail; but to run a business, you need to be able to take two steps back and see the results, instead of getting tangled in the small stuff and losing vision of the whole.”
A family member—whether in the same business or at another company—can be a great mentor and source of been-there and done-that advice. But no one is alone.
Professional organizations provide members with opportunities to learn from others and rich intergenerational links. Moreover, community-based business organizations offer advice to individuals who want to start a business but are not certain how to proceed or fret about getting all the preliminaries correct.
A strong economy boosts everyone’s well-being and spirits. So, the interest in lending some help in the way of good advice is widespread.
The U.S. Small Business Administration offers a Business Guide (www.sba.gov/business-guide) that’s a model of clarity on what to do (and what not to do) in terms of logistics—and how to avoid making mistakes that can be costly or legally problematic.
For instance, the Internal Revenue Service requires a business to report not only payments of $10,000 or more in cash (or cash equivalent) from one buyer in a single transaction, but also to report if the $10,000 or more derives from two or more related transactions.
And the guide gives solid reminders about the basics of operations that can make a big difference in sales. Anything that affects the perception a customer has of your company—from a receptionist who fails to relay a message to a product that arrives damaged—can diminish the prospect of a future sale.
The guide from the SBA encourages those starting a business to temper their enthusiasm with good practices that will serve a long-lived business well. Document in a way that will satisfy everyone—customers and vendors, bankers, regulators, etc. Trust but verify (e.g., customer and vendor credit).
Exuberance and prudence balance each other in an intergenerational business. An owner of a start-up company can achieve the same equilibrium by taking time to focus.