EntreLeadership - Transitioning Ownership of the Family Business

Starting point is 00:00:03 Small business theme hour this hour on the Dave Ramsey show, an entree leadership theme hour, which if you didn't know is the title of my number one bestselling book, which is our playbook of how we've grown the Ramsey business from a card table on my living room to being the major national brand that it has become today. All the stuff we've learned, all the mistakes we've made would fill several books, but we picked out our favorite and funniest things that you can learn from us, put them in that book, and it was number one. and we're here to help you guys. We've coached small businesses. We love small business people and have helped four years. Rob is in Texas. Hey, Rob, your question for the panel. Hey, thanks for taking my call.

Starting point is 00:00:44 Sure. Hey, guys. Yeah, I'm in a family business and my father-in-law is the owner and I own 20%. I just want to know what's the best way to kind of start that conversation of how do we take the next step of, me buying him out. He's 67. I run the day to day and just kind of feel like it's time to kind of make that transition. Rob, I would like to first know, I mean, before we get in the mechanics, there's two parts of this. There's the mechanics and then there's the relationship. You know, so there has to be a good relationship where you and your father-in-law are having a mutually

Starting point is 00:01:25 agreed upon, you know, this is our desired future together and we both agree this is where were headed, and then the mechanics of the deal should support that. So have you guys been talking about this? What have the conversation's been up to this point? It's kind of, I mean, even early on, he bought it late in his life, so he was like 56 when he bought it, and he kind of was like, hired me on early on, kind of like, this is the goal. I'm not, I'm kind of at the back door anyway, and so it's always been the intention of me kind of taking over, and we've had those discussions along the way, and it's kind of, we kind of made the first step when I got 20% of the company, and then it's kind of, I think we're kind of at a stand, so I don't, I think we

Starting point is 00:02:13 both don't know how to take that next step. Well, I think, I mean, if he's 67, you guys need to be thinking by the time he's 72 at the latest, this needs to be fully transferred. And so you've got just a few years to accelerate the transfer of stock. You can do the several ways. You can do compensation via stock over a period of time where you pick up another 20% each year for the next four years. You can actually do a purchase where you do a valuation on the business and you actually just pay cash and buy stock from him. But the key is you guys need to be looking at no more than a, I'm going to encourage by the time he's 70, just because it's kind of late in the game. I would like, yeah, three years I think would be we should. I just have a quick question, Rob.

Starting point is 00:02:53 What do you, how would you define the standstill? What's the cause of the standstill? both sides because you said both of you were at a standstill. What do you think the issue is? Well, I think I'm more like, let's get the ball rolling and I just don't know how to navigate like him. I feel like he needs to be the initiator. It's his company, you know? He may not. In essence, I work for him. I mean, here's what I'll tell you. Here's what I'll tell you. Ideally, he is the initiator. I mean, we have the blessing of Dave as the founder, owner, and CEO has been initiating our succession plan here and leading us through a process that we're talking about this very intentionally and very consistently. But there's a point where if he's not breaching that

Starting point is 00:03:38 conversation, you have to start bringing it up and saying, hey, I'm concerned that if we don't talk about this, then it could create pain for our family. It could, you know, there could be stress here. And you can't have the whole conversation the first time, but you at least have to break the seal and get that going. But, I mean, Dave, I'm curious to hear from you. I mean, you're kind of in the seat of his father-in-law as the owner and thinking about success. with your kids. We talk about this stuff a lot here. We do, but as you said, it's, it's almost an obsession of mine. So, in your case, what I would do, Rob, is I would just sit down and say the first and foremost, I'm unbelievably grateful for the opportunity. I mean, that is the case. Yeah, I'm

Starting point is 00:04:16 grateful for the opportunity. I'm grateful for the 20%. How did you end up with that? Did you pay for it? No, it's a gift. Okay. Wow. Do you think the intention is for the rest of it to be gifted or for you purchase it. To purchase it, yeah. Okay. All right. And so then you say, okay, you know, I'm unbelievably grateful. I'm grateful for the 20% gift.

Starting point is 00:04:41 And I just, I want to know how I can help in the process of us completing that. Because I know we've all kind of talked about it, but a good, clear plan would be good for the business. It'd be good for our families. It'd be good for you. It would be good for me. It'd be good for our customers. A good, clear plan, clearly laid out and communicated with timelines, milestones, and a process.

Starting point is 00:05:09 And so if you're going to buy the other 80%, you know, we need to establish a value, and we need to establish how I'm going to get you that money because I'm not going to borrow it. I'm going to take it out of profits at some point somehow. And, you know, then you do that. But I think you just. the good news is he's not owned it a long, long time. He didn't start it. He bought it.

Starting point is 00:05:35 So he's not got the baggage of the founder. Founders, as we've studied small businesses, I'm a founder, we're hardheads. We're the people that start and make something from nothing, and we will fight and scratch and claw, but we also don't let go. By and large, founders oftentimes kill the very business that they love because they won't let it go. soon enough, systematically enough, and I've fought against that, the emotions of it, to force myself and to force this business through the whole process. And the best succession plans are gradual. They're not sudden. Well, and because of that, I'm curious if you feel like this is true, but it sounds like that first conversation should not be about what the plan is, but just agreement that we should have a plan.

Starting point is 00:06:21 Yeah, and then let's get about the business agreeing the next couple weeks working on putting stuff in the plan. I have a question for you, Dave, because I know you did this at Ramsey Solutions. What does Rob or anybody that's similar to Rob need to be thinking about what happens in the interim before there's a plan if something were to happen, unfortunately, the following. He's 67. So don't you have to kind of get an idea of what would happen in that situation? Where does ownership go? Well, that'd be one of the plans. Okay.

Starting point is 00:06:44 I mean, part of the plan. The plan is if you live to X date, we're going to gradually systematically work through getting you your money during that time. and then the final stock will transfer. Okay, if you don't live to X date, what is going to happen? And you got to talk about that. And, you know, we talk about that around here so much that I talk about my death so much, it's almost like I'm dying all the time. But we're all dying.

Starting point is 00:07:10 We're all going to die. So it's kind of morbid. Well, but to your point, in the absence of a plan, the family fights and things implode. And so it goes to the estate. That's a concern that I have right now. Whatever, if it's not written down or dad just mentioned this in passing at one point and you're trying to convince the rest of the family that all of a sudden her wife's brother. Where's that 80% go? That's what you want to avoid.

Starting point is 00:07:31 He's half of it. He's not got anything to do with it. Right. There's something along those lines. That's what happens. Mike's in New York. Hey, Mike. How can we help?

Starting point is 00:07:40 Hey, Mike. I got a question. I'm a good friend of mine who owns a small antique shop here in New York, which is right now, antiquing through eBay, northeast. mid-Atlantic, down to south have been closed. So income has dramatically changed. eBay is not very kind of hit or miss. Some people aren't very successful with this. My philosophy, and I'm a different career path.

Starting point is 00:08:16 My friend who I'm not in his shoes is a cancer survivor. And his thought is kind of now because I don't know what life will look like tomorrow, et cetera. How do I help my friend along, if it's even possible to kind of look long-term in that, yes, Right now, you're going through a rough time, and I feel for you. But, you know, you will last, you will live beyond tomorrow and hopefully live many healthy decades ahead of you. Amen. Well, I mean, I haven't survived cancer, so I don't know how, what that can do to your psyche. But very few lives or businesses prosper when they just live for the weekend, when they just live for the moment.

Starting point is 00:09:08 The Bible says where there is no vision, the people perish. And so I don't know how you help him other than just to try to help him get a bigger vision for his life that's further out into the distance than Friday. And that's a healing of his psyche after the cancer, I suspect. So maybe sit down with a good pastor. Let's talk about long term. This is the Dave Ramsey show.

EntreLeadership - Transitioning Ownership of the Family Business

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