Saturday, April 26, 2008

Family Businesses

One word to successful entrepreneurs with children.

You've worked hard for much of your life, you've built a company that (I'll suppose) retails shoes. It started off as a single store, and has become a chain.

Congratulations. I admire such a life. But what now ... a dynasty? You have a child or more, and I'll suppose they're young adults. Are you grooming one or more of them to take over when you retire?

Please don't, without considering alternatives. You can end up with a fellow who has no real interest in marketing shoes, presiding over the company because he believes it's his obligation to do so. And you'll probably be looking over his/her shoulder from your Florida condo. Not an optimal situation for either of you.

When you're ready to retire, go public. Hire the right advisers and prepare an initial public offering. If properly done, and given our assumption that you have a sound underlying business to sell, you'll get plenty of money for that condo and the lifestyle to go with it, or a second career if you prefer.

What about the kid? Give him a share of the IPO proceeds, rather than the business. Let him do what he thinks best with his life and the money. There are plenty of professional managers out there who aren't related to you, and the process of going public includes finding the right ones.

Just a thought. The kids prefer the cash. Almost always.

(This will count as what is usually my Sunday entry to this blog. You'll next hear from me on Monday.)

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