Author: Kathy Marshack

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Growing the family firm’s second generation

By Kathy J. Marshack, Ph.D., P.S.

Cathy and her older brother Charles have worked in her family’s restaurant business for 25 years. Cathy’s parents, the founders are nearing retirement and want the business to carry on under the care of their children. Cathy and Charles are ready and well trained for succession. So, where’s the problem?

The problem is the youngest son, Brian. Brian has never worked in the family firm, preferring to try other ventures. Unfortunately everything Brian has tried has failed. Cathy’s parents have “bailed” Brian out of one jam after another. Now as they face retirement, the parents want Cathy and Charles to share ownership and management of the business with Brian.

Cathy and Charles are beside themselves with frustration. They don’t want to offend their parents. However, Brian’s inexperience and lack of maturity may cause considerable problems in the business. Neither Cathy nor Charles relish the idea of taking care of their brother indefinitely as their parents have done.

This type of problem is all too common in family-owned firms. Most of us cherish the responsibility of parenting and are reluctant to give it up when the children leave home. In family firms where children may never leave home, the parenting role may continue indefinitely.

A parent’s job is to nurture and protect children so that they can grow up healthy and capable of independent adult life. But parents don’t teach independence directly. Independence is a state of mind that children must conquer for themselves.

Sometimes Mom and Dad fight because one doesn’t want the child hurt and the other wants the child to face their mistakes. Alternatively the child may be making a bid for independence but the parents thwart it. The parents complain that their grown child is not very strong or capable of leadership. Then they complain when the child speaks up for himself.

There are a variety of strategies for ensuring that the second generation in family firms really grow up. The strategy that fits for you depends upon the business, the parent’s skills and personality and the skills and personalities of the children.

The child needs an environment where they must prove themselves capable of leadership in the family business. For some this means leaving the business for awhile and working elsewhere. For others, it means getting an education before returning to the family business. Another child may benefit by working their way up from the “mailroom” with no preferential treatment from the parents. Finally, some children will be better family members and more capable adults if they never return to the family business.

There are two goals in family firms. One is to develop a thriving business. The second is to develop healthy independent adults who can contribute to society.

Keep in mind that the business can be successful without the child and the child can be successful without the business. That is, set your sights on accomplishing both goals independent of each other, and you may be surprised how they come together in the long run.

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Preparing spouse to manage business can ease succession later

By Kathy J. Marshack, Ph.D., P.S.

Jay was 28 when he founded his sign business. He and his wife Teddie were thrilled when they opened their storefront. As a young couple, they had a lot of energy and worked long hours getting the office and shop ready, buying supplies, developing a business plan, joining the local chamber and greeting their first customers.

Jay took over full management of the operation while Teddie kept her full time job as an account executive for a women’s fashion company. But Teddie was there through all of the growing pains of the business too. She helped with billing and emptied the trash. She took messages for Jay at home in the evening when he was working late. The goal was to build the business to a level where she would quit her job and come to work with Jay. In the meantime her job provided a steady paycheck and other benefits such as insurance.

As the business grew, so did Jay and Teddie’s family and responsibilities. By the time their second daughter was born, the sign business was doing well enough to support the young family without Teddie’s income. It would be tight, but the couple decided to take the plunge. Teddie quit her job to have the flexibility to care for her children and help out at the business.

For years Jay and Teddie ran the business this way. Although they shared equally in the ownership of the business and both worked long hours, Jay was really the manager and Teddie the home manager. Teddie would leave early to pick the kids up from school and get them to soccer practice. On some mornings she would come in late to the office because there was a dental appointment or a school field trip. At the office, however, she was fully in charge of her department . . . everything that Jay didn’t do, such as the bookkeeping, billing, purchasing and replanting the flowerbeds by the front door. Jay did the management, hiring and firing, marketing, customer service and the technical work. Amid all of this the children got more involved with the business, at first just watching dad build a sign, and later learning complex computer work.

If you are typical of most family business owners, you could probably plug your names into this scenario and change only a few details to make it your own story. Likewise, if you are typical of most small business owners, you do not have a succession plan. You have been so busy establishing and growing your business that you haven’t looked that far ahead. You may not even have the confidence yet that your business will be around that long. Or you may decide to sell the business and build several other empires before you retire or die. When you were getting your business underway, it never occurred to you that you were building a legacy; you were just going after your dream.

If you are among the rare few who have considered succession planning, more than likely you and your spouse have discussed which child is best suited to be president or if management responsibilities should be shared by siblings. If you are in partnership with your brother, mother, sister-in-law, or some other family member, you probably have a legal and financial plan for how the partnership will transition should one or the other of you die or wish to be bought out. However, if the family business is a sole proprietorship such as Jay and Teddie have, and the husband is the founder and president, it’s highly unlikely that you have considered your wife as a successor to the business leadership. Yet it is the wife who is most likely to be thrown into that position with the death of the founder where no succession plan has been established.

In 1984 McKinley conducted an interesting study in which she found that a widow was more than willing to take over management of the business upon her husband’s death, especially if she had been working with her husband. But even among those widows not working in the business side-by-side with their husbands, there was a strong desire to take over the management. These widows reported that the business was very meaningful to them that it was a part of their identity, that they had psychologically helped build the business. They did not want the business to pass out of their hands, even if they didn’t know how to run it.

Furthermore, most of the widows studied did not know how to manage their husband’s business, because they had not been trained. Their function had been auxiliary. They provided support such as Teddie has done for Jay. Therefore, these widows, untrained in the ins and outs of managing the family business, had to turn to their attorneys, CPAs and other advisors to educate themselves about the business. This is not sufficient training for the complexity of running a small business, as any business owner knows. But these particular women were determined and they learned as their husbands had done . . .by the seat of their pants.

This seat-of-the-pants training may have been sufficient for the founder, but it seems a waste to have the successor not benefit by her predecessor’s lessons. Unless the business is a professional practice requiring college and certification that your wife could not readily get upon your death, preparing your wife to take over the business is a logical and practical step for most business owners. A side benefit is that once she is trained, the founder can turn his interests elsewhere, such as expansion or developing a second business entity. Growth of an empire is possible only when you have the flexibility and freedom to explore uncharted territory. If you are busy manning the helm, your growth will be limited to raising prices on product or adding a new line.

Preparing a wife for the presidency is no easy feat, however. It means acknowledging that the founder may die or wish to move onto something else. It means putting things into writing, such as compensation plans for your wife. It means letting go of control and allowing your wife to know all of the company secrets. It means that the marriage itself will be challenged. As the protégé grows in ability and leadership, the mentor may find himself eased out of power before he is ready. Can your marriage stand the strain of your wife being the boss, for example?

Making your wife your equal partner at work (provided she wants the job) and teaching her everything you know, will provide a solid succession plan. She will most likely be a devoted fan of yours and the business, and therefore a loyal and responsible guardian for the business. She will be a much better prepared widow than McKinley found in her study and less likely to lose the business. However, this also means redesigning the business today to accommodate two owners, two managers, two leaders. The consensus model of marriage that most Americans accept as the standard today will be brought into the business setting. Not only will husband and wife have to adjust to this change, but so will employees, customers and others used to a more hierarchical model.

Be prepared to change the structure of management when your wife becomes your management partner. No longer can the founder fly by the seat of his pants. Although you may feel that your style is cramped when there are two of you to answer to, remember that having a well trained successor (and one who loves you) means that the business has a much more bright and stable future.

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SURVIVOR ENTREPRENEURS; Strengths lie in vision, efficiency, leadership

By Kathy J. Marshack, Ph.D., P.S.

If you recognize yourself in this short quiz, then you are probably a survivor entrepreneur, someone who overcame great obstacles to accomplish their dreams in life. Many entrepreneurs fit this profile.

For example, if you are impatient with details, it is because you are a big picture thinker. You are a visionary who can see the outcome before the average person. While the details are important in creating the outcome, without the vision, your life can become nothing but maintaining the details of life. You are impatient with details and with people who spend their days committed to details. But without those detail people, would you have anyone to help you turn your dreams into reality? Others don’t really work too slowly, but it appears so to the survivor personality.

Because your survival depended upon quick action and attending to what was immediately necessary to accomplish your dream, this type of entrepreneur has honed efficiency to a fine science. Grass does not grow under your feet. Your gaze is constantly on the horizon, looking for the next opportunity or the next problem to solve.

If you’re a passenger in the car (which is usually not the case!) you tell the driver to turn right at the next intersection before arriving at the intersection. It seems slow and inefficient to you to tell the driver only as you arrive at the intersection or even after you have passed it, which is what the “slow” people do. However, those slow people do enjoy the ride more than you do. For them the fun is on the way to the destination.

Your ability to do a lot of work is based upon efficiency and vision. Because you already can see where you’re going and because you are constantly scanning the environment for improvements, you are a marvel at being in the right place at the right time. However, when you err, you are exceptionally hard on yourself.

Yes the survivor entrepreneur makes things happen. He or she is a bundle of energy that few can keep up with. Because of your uncanny insight and charisma, you have the ability to be a great leader too. People admire you for your talents. They want to share in your good fortune by helping in some small way.

Be aware of the important responsibility that you carry. A leader who engenders this kind of trust has to be extremely ethical. Do not assume because your charisma has won people over that those same people fully understand what they are agreeing to. You are the one with the vision. You need to be responsible to lead people where the need and want to go, not just what is best for you.

Many survivor entrepreneurs underestimate their strengths. They often assume that others have the same level of tenacity, the same ability to work hard that they do. They may think others are lazy or weak because they can’t keep up. The survivor entrepreneur believes that all it takes is applying him or herself to succeed. However, it’s important for the survivor entrepreneur to realize that your big picture thinking is what has made you successful, not necessarily hard work. Because you can anticipate fairly accurately what the next move should be this saves you time, energy and many mistakes.

Others who do not have this skill must learn by trial and error, a timely and more laborious step-by-linear-step process. Not everyone has this visionary ability. It is your gift and one that should be used generously and wisely. Others have different gifts to contribute that are just as valuable, but without visionary ability, they really can’t so easily understand what you grasp in an instant. So take the time to walk them through what you know. When they do understand your picture, you may find that the detail person or the linear thinker has a profound contribution that you overlooked.

The word survivor is used to describe this type of entrepreneur because you have overcome extreme hardship to arrive at your successes. Some of you grew up in poverty. Some of you never knew one or even both of your parents. Some of you have overcome illness, physical disability, a poor education or learning problems to achieve the American Dream.

Some people wither in the face of adversity but not the survivor entrepreneur. He or she views adversity as a challenge, as an opportunity to prove what he or she is made of. The adversity may not be pleasant, but conquering it is a thrill. In a crisis the survivor entrepreneur is the hero.

However, it is important for survivors to be careful not to make a life of surviving. Some survivor entrepreneurs keep creating crises in their lives, often unconsciously, so that they can get the thrill of mastering the crisis. The entrepreneur may be able to handle this excitement but your family and friends may tire quickly of the emotional roller coaster.

Save the surviving for real adversity and take the time to stop and smell the roses with the ones you love. There are deep and profound rewards in the tiny things that occupy ordinary life too, if you will explore that territory. Just ask your child or grandchild to lead you to this simple life, even if only once in a while.

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Preparing for small business success can also mean preparing for wealth

By Kathy J. Marshack, Ph.D., P.S.

To many, managing your money evokes the image of penny pinching and squirreling enough out of a meager small business budget to save for retirement of send the kids to college. Preparing yourself for sudden wealth probably isn’t the first thing on your mind.

But, in so many cases, the average millionaire started out an ordinary working person and acquired wealth through building their small business. To avoid, or at least be prepared for, some of the problems that come with sudden wealth, it is necessary to plan. Hear are just a few real life examples:

Nancy had been a social worker for most of her adult life. Her standard of living was modest but she made a good salary for a single woman. She even qualified to buy a house. At age 32, she met Mark, a software designer who made a million overnight.

Frank was a poor kid who grew up in an inner city neighborhood. After a stint in the Navy, Frank decided to try his hand at mining, then real estate, then almost any other business opportunity that turned a profit. By age 40 he was a multi-millionaire.

Really, the only thing these people have in common is that they have wealth. Most people would not consider that a problem, nor even worthy of a column in this newspaper. However, another thing these people have in common is that they have to learn to manage their wealth. Like any other lesson in life, if you have no previous experience, there may be bumps in the road.

Frank never really thought he experienced any setbacks as a result of his wealth. As he puts it, he “loves making money!” On the other hand, he is estranged from his grown children and is divorcing his third wife.

Again, if you do not think any of this applies to you, think again. The average millionaire started out an ordinary working person and acquired wealth through building their small business. To avoid or at least be prepared for some of the problems that plague Frank and Nancy, it is necessary to plan ahead for the day when you may have wealth. If you are in business, that is probably one of your goals anyway, so why not think positively?

The New York Times published some data on the “average American millionaire.” Surprisingly, most millionaires do not lead glamorous lives. They own bowling alleys, funeral homes and small manufacturing plants.

In fact, the average millionaire is a 57-year-old man, married with three children. He is self-employed in a practical business such as farming, pest control or paving contracting. He works between 45-55 hours a week. He has a median household income of $131,000 and lives in a house valued at $320,000. He drives an older model car. Although he attended public school he is likely to send his children to private school. Finally, he is first generation affluent.

It sounds to me like the American Dream is alive and well. However, many of these millionaires are not doing that well in the areas of personal relationships, health and emotional well-being. Some, like Frank, neglected their marital partners and their children because they were so focused on the thrill of making money. At mid-life now, Frank is trying desperately to re-establish these relationships, but his children feel that his addiction to money is greater than his love for them. Frank waited too long to strike the balance between love and work.

Nancy’s problem is more common than you think. Ordinarily, this type of mindset prevents the acquisition of wealth altogether. But Nancy was faced with the painful situation of having to re-evaluate her social values. This pain nearly put her in the hospital with a severe depression. She felt “dirty” having money, yet she felt guilty for wanting to keep it. Nancy had to do a lot of soul searching to realize that she was just as important as those disenfranchised folk she had helped as a social worker. When she began to view the money as a gift, as love, as energy from the universe, she started using it not only to help others, but to benefit herself and those she loved.

What Frank and Nancy have in common is the awareness that wealth brings with it responsibility. Planning for this new responsibility will put you ahead of the game when the time arrives.

Stewardship is another name for this responsibility. Once all of the bills are paid, once the new house is purchased, once you have exhausted all of your fantasies for travel, jewelry, cars and horses, the “average millionaire” still has to ask himself or herself, “What am I contributing to my community?” This is the bump in the road that takes the most maneuvering.

As long as you barely make enough money to pay the rent, or you work night and day to get your start-up business off the ground, or your days are filled with managing small children, there is precious little time to ask yourself “what will I be remembered for?” But the acquisition of wealth puts people in this spot, sometimes overnight.

Charlene took care of her basic needs after she and her husband struck it rich with their manufacturing business. She built a new house, decorated it, bought a condo at the beach, traveled to Europe, and sent her children to private schools. Then one day she woke up deeply depressed because her life had no meaning. She tried therapy. She volunteered for worthy causes. She joined social clubs. She took up sculpting. Nothing worked, however, until she read about foundations. This idea took hold of Charlene and she began the process of funding a foundation that would sponsor young women interested in entrepreneurship.

If you want to be prepared for wealth start thinking now about what you really want to do with that money. Ask yourself, what is really important to me in my life? If I could change the world to make it a better place what would I do? If you can answer questions such as these, you will have principles to guide you as you acquire wealth.

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Entrepreneurs should tackle the new year with new priorities


By Kathy J. Marshack, Ph.D., P.S.

Remember good stress is as draining as bad stress. January can be a time to recoup and restore your energy and peace of mind.

January is also a time to build a foundation for the goals you want to accomplish this year. It’s a long cold spell until our spring arrives in the Northwest. Use this time to rest, reflect and plan, but don’t be too busy. Time enough for that come April.

However, entrepreneurs are usually not ones to take this advice.

With the distraction of the holidays behind them, they quickly launch into new projects come January first. Entrepreneurs are good at accomplishing goals, but not all that good at establishing healthy goals.

Before you launch into your typical January behavior, however, I’d like you to finish reading this column and gain a better understanding of how to make New Year’s Resolutions that actually stick this year.

Many people walk around with feelings of fear and unworthiness. They are afraid to ask for what they want and therefore continue lives of failure, loneliness and desperation. Entrepreneurs fall victim to this mentality too.

You may think that entrepreneurs represent the epitome of going for what they want. However, often what drives an entrepreneur to success is a deep-seated fear of inadequacy, or a desire to impress others.

With many entrepreneurs, the focus is on what they don’t have, not on what they do have. I have had many a self-made millionaire tell me they wished they could do their life over and have different priorities.

Those different priorities would include true understanding of the self and planning a life to maximize deeply held values and beliefs.

Let the New Year bring self-acceptance.

Because January first brings us the opportunity to make New Year’s Resolutions, I think it is about time to start a new tradition, that of appreciating ourselves for who we are. As one bumper sticker proclaims, “God doesn’t make junk.” Let your New Year’s Resolution this year be “I will accept myself totally and unconditionally and be the best I can be this year.”

If you can appreciate who you are, that each and every day you are making a valuable contribution to your community by just doing your everyday thing (not overachieving), then you will have a much more prosperous new year.

You will notice your talents more and strengthen them. You will notice your flaws more too, but you can build a plan to correct them.

Those opportunities that always come to others, will finally come to you. The opportunities have always been there, but your tendency to focus on losses and inadequacies prevents you from seeing the obvious and taking advantage of it to make your life work even better.

If you have been successful accomplishing other people’s goals, think how much you can really accomplish if you lead your own life.

Change your paradigm.

OK so it is hard to shake off years of self-imposed negativity or a belief that if you are not perfect or the best, you have failed. And you have failed at all previous New Year’s Resolutions, so why should this time be any different? This time, however, you have a new paradigm to work with. Instead of focusing on what’s wrong in your life, you are going to pay attention to what is right. These tips will help you get started.

100% of the people in the world have problems, serious problems at some time in their lives and usually regularly. You are not alone in this.

  1. You are not broken just because you are hurt (or angry, or ignorant, or misinformed, or make a mistake). Remember that being hurt is a symptom of something that needs changing.
  2. Bad things do happen to good people. Being good is not the goal. Maturing is.
  3. You cannot change the past, but you can learn from it. If you continue to brood over the past, maybe it’s because you haven’t learned from it what you need. Search for the lesson.
  4. Not everything in life can be changed, nor should it be. Accept the things you cannot change.
  5. Trust that you have the resources within yourself to make the changes you need and want to make. You may not know what those resources are, but trust that they will come to you one way or another.

Self-acceptance turns crisis into opportunity.

OK, so now that your paradigm has shifted, do you notice anything different?

Are the colors a little brighter? Is there a bounce in your walk? Are you making more money?

Do you feel love all around? No? Well that’s because, you still have work to do. Just because you think differently doesn’t mean there’s nothing left to do. Now the hard work of change is necessary. But at least you have the right attitude to get you to your goals.

If you recognize that life is a complex and problem-filled arena designed to assist you on your quest toward wisdom and maturity (just as it is for everyone else), then when you have a problem you’ll face it squarely with full self-acceptance. You’ll dig in, assess, diagnose and search out the meaning. You will use all the strengths at your disposal to create workable solutions. At the end you’ll be a little smarter, a little wiser, a little stronger, a little saner.

Long ago I learned that the Kanji for “crisis” is made of two figures. The first is “danger” and the second is “opportunity.” With self-acceptance securely under your belt, you will be able to wrest the opportunity out of any danger.

Although not all problems can be solved necessarily, all problems can produce learning in preparation for the next step in life. Use your New Year’s Resolution of self acceptance to help you live the life you were meant to have and to take you where “no one has gone before” to paraphrase Start Trek.

In other words, instead of just accomplishing things, instead of impressing others, instead of striving to be perfect, make your New Year’s Resolution to accomplish those things that really have value to you.

Happy New Year!

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Defining entrepreneurial style as a couple can keep business from getting complicated


By Kathy J. Marshack, Ph.D., P.S.

If you have read my columns in the past, you are aware that I frequently refer to couples in business as entrepreneurial couples. Now that I have bandied the term around for several years, it is probably time to formally define just what I mean.

Some of you may not even recognize yourselves as entrepreneurial couples because you have always been entrepreneurial, or come from entrepreneurial families, or the style is so common (especially here in the Northwest) that you never considered a definition important.

However, defining the type of entrepreneurship that you and your spouse share can be very enlightening. Knowing who you are and why you are that way will assist in problem solving and future planning, as the following case examples will show.

Even though there are always exceptions to the rule there are three basic entrepreneurial couple styles to start with. You may be a blend of two or even three and you may have changed your style over time. However, I am sure you will find your bedrock image in one of these styles. They include the solo-entrepreneur with a supportive spouse, the dual-entrepreneurial couple, and the copreneurial couple.

Solo-entrepreneurs

Bob and Carol used to work together in their successful nursery and garden supply business, but Bob has since returned to his old employer leaving Carol to manage the business on her own, as a solo-entrepreneur. Bob has become the supportive spouse. He is employed elsewhere, providing emotional support to his wife’s business, but not really involved in the day-to-day management and headaches of running it. Carol, on the other hand, recognizes her talent as an entrepreneur and is much better suited to running the operation on her own as a sole proprietor.

Dual-entrepreneurs

Another style involves dual-entrepreneurs like Sharon and Dave, who each run separately their respective businesses. Sharon is a realtor and Dave runs several successful small businesses. Dual-entrepreneurs are like solo-entrepreneurs in that each spouse is an entrepreneurial spirit tending to their own sole-proprietorship (or even partnership with a non-family member). They also may function as a support person to their entrepreneurial spouse. What distinguishes dual-entrepreneurial couples from the others is that they each have the entrepreneurial spirit yet they are not in business partnership with their spouses.

Copreneurial couples

Larry and Dorothy, who for 15 years have worked side by side building their farming enterprises, are a copreneurial couple. Copreneurs share ownership, management and responsibility for their business as full-time partners. Copreneurs are different from dual-entrepreneurs in that they operate a joint venture. One partner may have more of the entrepreneurial spirit than the other partner, but they both are equally committed to the enterprise as owners and managers.

Defining your style

So what is the real value of knowing your style and that of your partner? Stan and Rhonda didn’t evaluate their entrepreneurial style before they launched their successful retail chain, but they could have avoided many painful bumps in the road if they had taken the time to really talk and learn about each other.

Stan was restless and wanted to try his hand at running his own successful business. When Stan began talking about starting his own business, Rhonda agreed that they made an excellent team not only because of their love for each other, but because of their combination of professional skills. She was excited to get started on the venture.

Clearly though, this was Stan’s adventure. True to his organizer style, he researched the marketplace to discover the most advantageous industry and location for his new business. Unlike the entrepreneur who pursues a business because they have a passion for a particular industry or product, Stan is the type of entrepreneur who can take any good idea and make it into a profitable venture.

When Stan discovered the right business for him, a store that specializes in a variety of environmentally friendly products for the home remodeler, the couple began the second phase of development. The plan was for Rhonda to keep her job for the steady income and benefits. Stan quit his job and threw himself into the work of getting the business funded and off the ground. Rhonda helped in the evenings and on weekends with whatever odd jobs Stan could not get to.

In this manner the business grew from one retail outlet to two within three years. At this stage the couple needed to reassess Rhonda’s role. Stan could no longer manage alone and still achieve his dream of building a franchise business. Although Rhonda was ready to quit her job and come to work full time with her husband, Stan was not emotionally ready to share entrepreneurship with Rhonda. Their relationship worked fine when Rhonda was a supportive spouse, but when she left her job, Stan felt that she was usurping his territory. After a tumultuous year of trying to work together as copreneurs, Stan and Rhonda realized that Stan needed to hire professional management and that Rhonda would continue working in corporate America. They just were not cut out for the challenges of running a family business. What best suited this couple is the model of solo-entrepreneur with a supportive spouse.

Your role as the entrepreneur or the supportive spouse is much less complicated if you, as a couple, clearly define the type of entrepreneurship that suits your personalities best. If you are a hard driven, competitive type, probably you will do best as a solo-entrepreneur. If both of you are this type, try dual-entrepreneurship. If you are team players and enjoy sharing the spotlight with the one you love, copreneuring is for you. And if you are the quintessential woman/man-behind-the-scenes, and you don’t really want to be too involved in the daily managing of your partner’s venture, you are well suited to be the supportive spouse.

If you have a loved one on the Spectrum, please check our private MeetUp group. We have members from around the world meeting online in intimate video conferences guided by Dr. Kathy Marshack.
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