Family Business Matters

What to Do When None of the Kids Can Take Over the Family Business

By Tom Hubler, Executive Consultant

James Schultz appeared to be at the top of his game. A locally recognized leader in his industry, he had earned a national reputation for craftsmanship and business acumen. But his dream to have his three sons work in the business had become a nightmare. While each had grown up in the company, none demonstrated the necessary skills to take over leadership. James (not his real name) was beyond disappointed in his sons’ lack of performance in business; he was depressed.

As part of my consulting firm’s process, we asked about the business transition that occurred with James’ father, the founder, by then deceased. James told his story. He was already working with his father by the time he was in high school. In his junior year, he asked for some time off to try out for the baseball team. “My father didn’t say a word. He decked me, and then said, ‘Get out of here,’ ” James recalled.

He went home and the phone was ringing as he walked in the door. He picked it up and his father barked, “Get back down here.” James was disappointed that he didn’t play baseball, but continued to work in the company, enrolled in a vocational school where he excelled and after graduation returned to work full-time at his father’s company. He took to the work and eagerly learned how the business operated.

When James was in his mid-20s, his father had a fatal heart attack. The estate plan left the business to James’s mother, Susan, who now had 100 percent ownership of the company. The younger James took over the operation, working for his mother, and continued to develop the business.

As he expanded the business, James understood that the more successful he was, the more expensive it would be when it came time for him to purchase the business. He approached his mother because he wanted to see her lawyer and arrange for the sale. She refused to discuss it. This conflict continued for two years as he continued to raise the issue as he further grew the business.

Finally, James said to his mother, “If you don’t sell me the business, I will open a shop as a competitor across the street. I have the backing of a bank and am ready to go.” This motivated his mother to contact her lawyer, who arranged for him to purchase the business... MORE