TRANSITIONS

Q & A with Ron Sturgeon How are businesses transitioning to the next generation? From what I see, many are not. Half of my consult- ing assignments turn into discussions about family, succession, and issues. Typically one or both parents don’t want to let go. I find many parents who are enabling their children, which leads them to be unproductive adults. This leads to a standoff where one parent won’t allow the other to stop the enabling cycle. Then, on the other side of the story, where the adult children are mature and responsible, the Dad won’t let go, and allow kids to make mistakes in the business. Moreover, I don’t understand their reluctance to just sell, in most cases, to competent kids or man- agers. The parents are 65-70 years old, and want three to 10 times what the business could possibly be worth. It’s easy to see that they could sell the business, take back a note for the business for 10 to 20 years, provide themselves with a nice income, make probate easier, and take momma on an around the world trip. They could keep the land and rent it, or I usually advocate selling it, too, on a long

note to provide income and allow the kids to improve the property, control it, and reap any increases in value that they can contribute to. How long is it taking for succession?

It takes a decade and a serious illness for parents to get real about the succession, and then it’s more complex. Also, many times, the business goes down in value as improvements pass the business by with a standoff of adult children who want change and the parents who want to hang on to what made them successful, which of course doesn’t work today. Is there usually a buyout, position changes, etc.? There should always be a buyout, but the parties

can’t talk in many cases. So I help with that. First I share what the business is really worth to the parent(s) and how I arrived at the number. Then, usually changes in staff need to be made. I give them the hard truth, that junior needs to be fired so that sister can run the business. The changes do not usu- ally occur immediately, but it gets the parties talking and gives food for thought. The differences between the generations is their opinions that affect the work- place.

36 Automotive Recycling | September-October 2015