When entrepreneurs are slowing down, but their children are not yet experienced enough to succeed them, some business owners seek non-family CEOs to bridge the leadership of their companies to the next generation. But finding the right person to be a temporary steward of a family business is much easier said than done.
When the Kids Aren’t Ready
With more people starting families later in life and children taking longer to settle into their careers, we see many business owners facing difficult succession issues. With increasing frequency, some business owners want to retire long before the next generation is ready, willing and able to take over the day-to-day leadership duties.
Making matters worse, when the intention is to hand the reins to a family member, business owners rarely develop a contingency plan and, consequently, may not have a key lieutenant who could step in and keep the seat warm until the kids are ready.
In these situations, the options can be limited. It is extremely difficult to find a leader who (i) has sufficient ambition and capability to grow a family business, (ii) has enough self-restraint to work within the cultural and resource constraints of the family owners and (iii) is willing to take the CEO role knowing that, at best, the job is being offered on only an “extended interim” basis until the next generation family members finish their apprenticeships.
Moreover, because families typically are not willing to give up ownership, when a family identifies a candidate that fits the bill, he or she often seeks considerable (perhaps even above-market) cash compensation. Therefore, the non-family CEO option can be available only to those businesses large enough and sufficiently profitable to accommodate a generous current compensation package.
For the other businesses, unfortunately, the only truly viable options are for the entrepreneur to delay retirement and gut it out until the children can take over or to sell the business.
Both options are painful, but when the decision is to sell the company, Bootstrap Capital can help make the situation more palatable.
For starters, we are comfortable with the sellers rolling over a significant amount of equity so that, for instance, they do not have to completely exit an attractive investment just because of a succession timing issue.
We are also comfortable having family members remain in the business and to continue their professional development. We understand that the non-standard career tracks in family businesses can make finding employment elsewhere challenging. And we also value the unique perspectives about the business that family members can provide.