My father opened our first jewelry store in 1968, exactly 50 years ago. I’ve been out of the family business for nearly 20 years but was reminded this week of the inevitability of time passing and the future (or not) of all our businesses. Is it a bad thing to not have a succession plan in place or do you intend to be the one who turns out the lights – the last owners of your business? Or, if you expect there will be a “next” generation, how is that transition going to go? Will it be a smooth transition where the next generation (whether family, key employees or a sale to outsiders) are known in advance, or will it be a chaotic end?
We have seen businesses transition smoothly from generation to generation and others crash and burn due to poor planning, poorer communication and absolutely horrible transitions.
Identify your successors early
Running any business isn’t easy and I don’t know anyone who has ever worked outside the jewelry industry who doesn’t agree that ours is tougher than most. It’s not going to be getting any easier and there is a growing list of skills required. And besides the ‘business’ acumen, the person or people who are going to take over the business may also want to actually enjoy it – since it’s going to a be a part of their lives for many years.
What is fair?
Growing up as the youngest of five boys, my father always thought he would have five stores, one for each son. Well, some of us just aren’t cut out for being in this business and have no business being in business in the first place. If you think it is ‘fair’ to have each of your kids own some percentage of the business, even those who don’t work in it, please reconsider.
Teaching the next generation
- Do any of these look familiar in your family?
- The kids didn’t get a degree in marketing, business, finance, law or accounting
- They didn’t get a degree in gemology
- They don’t work at the bench or do CAD work
- The kids come into the business without working elsewhere for several years (both inside the industry for other jewelers and companies outside the industry altogether)
Our industry is tough and it’s about to get much tougher. There is a skill set required and if you just take the kids in, without them having had a good base to work from, they will be ill prepared to carry on for the next generation. For anyone thinking about a succession, in case you didn’t know, the kids are not going to do it the way you did… they can’t, they’re not you. And times, they are a ‘changing. The question is whether they have the passion, skills and temperament to run the show in the future. Do they have the support of the team or will they be able to build their own team?
Transitioning can be painful or a pleasure if done correctly. Transition does not mean you just get to sail off into the sunset (unless, of course, that’s exactly the plan) but it means that the business is in the right hands to carry on for the next generation. Given the myriad of topics we deal with, from financial analysis, budgeting, marketing, merchandising, gemological knowledge, human resources, sales training, vendor negotiations, lease negotiations, legal issues, banking issues… and on and on, it literally takes a person years to learn enough to be good at a few of these things and be really good at delegating the rest. If you are 60 and your kids are in their thirties or forties, and they have not taken over each of these areas already, you’ve got your work cut out for you and you’d better get started. Today would be a good day to begin.
Success or failure
Someday, sooner or later, this sign may be going up over your door. But with proper long term-planning, the business can thrive generation after generation whether it remains in your family or not. However, let the business and its future leadership languish and it will be a painful demise. I have witnessed this happening more than a few times (not only to my own family’s business) and these are the retailers who are closing their doors by the hundreds, just in our little industry.
Where to start?
Where do we start with planning our exit or succession? Before you call your attorney and accountant, you may want to take a look around you – at your family, key employees, how your business is doing and your marketplace. Does your business have the people and processes in place to succeed in the future? Do the people you have, whether family or staff, have the skills, temperament, and passion to lead this company for another generation? Have you been delegating responsibilities over time so (when you do step aside) they are ready to take over?
If so, it’s time to have that meeting with your accountant and attorney. By the way, the professionals you have been using for the past 25 years may not be best suited to handle a transition. You should find people who are experts in transitioning family businesses to guide you. A transition takes time. It takes planning and there will be tax implications and many, many hours of meetings with the right professionals. Having 5 years is good, but 10 years is better.