A tidal wave of generational trans itions?

f\ozENs oF ARTTcLES appeared durLf ing the 1990s about the coming tidal wave of business transitions from Baby Boomers to their Gen X and Gen Y children. The articles theorized that as Baby Boomers got to be 55 and older, they'd be looking to sell their businesses or pass them on to their children.

The question is: What has happened to the family business transition tidal wave? Here are six reasons why family businesses are staying in the hands of senior generation family business owners longer:

Age 65 is the new 50. People today are in better health for longer than ever before. We eat better, exercise more, smoke less, and take care of ourselves better than previous generations. Therefore, when a family business owner reaches "normal retirement age," he is often far from ready to retire. He is still filled with energy, ideas, and ambition.

The Great Recession. This recession shocked many family businesses, some of which believed the hype that the Federal Reserve had made recessions obsolete. Iftheir businesses have shrunk, senior generation leaders want to restore them to their former slorv.

Leaving the business at the tail end of a historic recession simply doesn't seem like a good idea to many.

Lack of Ownership Succession Plans. Many families still wrestle with the issues of ownership succession. How do I treat my children fairly and equitably when some work in the business and some don't? How will my children get along when I'm no longer around? Is it fair to treat my daughter who's c.e.o. the same as her brother who works on the loading dock, with respect to ownership succession? If I leave the company to my kids, will my spouse have enough money to be com- fortable after I'm gone?

Lack of Management Succession Plans. It's hard to beat experience. Even though a 65-year-old family business leader might have incredibly competent 40-something children, they are at a severe chronological disadvantage in the sense that the senior generation had a 20+ year business head-start and that gap can never be closed. While the younger generation might have all the tools necessary for future success, they simply can't replace the hard-earned experience Dad carries between his ears.

Most closely held companies also have two other management succession limitations: a lack of clear, written, transferable policies and procedures for the various jobs in the company and a lack ofknowledge transfer, which is the process for formerly transferring soft information (i.e., someone's experience about business practices and processes) to younger members of the firm.

Lack of Specific Retirement Plans for the Senior Generation. Although 65-year-olds today have plenty of energy and ambition, most family business seniors have no specific retirement plans that are remotely capable of consuming their energy and time. The idea of moving to a retirement community, puttering around in the yard, and the occasional round of golf isn't nearly as compelling and exciting as continuing to fight the daily battles necessary to put the family business back in its rightful place.

Since murky retirement plans make for a nebulous future, and the concrete reality of rebuilding the family business is both present and exciting, staying trumps leaving hands down.

Lack of Buyers for Family and Closely Held Businesses. Anyone looking to buy a business wants to see a proven methodology for creating top line sales, a management team capable of executing the strategies of ownership, loyal employees who won't leave the business if the family sells, strong financials, and a business that isn't dependent on one or a tiny handful of people to make all the decisions.

Unfortunately, even large family businesses usually depend on one or a handful of family members to make virtually every decision in the business. If someone buys such a business, he is really buying a job that takes 60 to 80 hours a week, creates a great deal of stress, and offers no escape hatch when things get hairy.

Most family businesses don't have anything to sell because they don't have genuine businesses. They have jobs (and pretty thankless ones at that). Will the family business succession tidal wave materialize one day? Given our steadily advancing ages, it must. Are most family and closely held businesses prepared for the ownership and

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- Wayne Rivers is the president of The Family Business Institute Inc., Raleigh, N.C. Reach him at wayne.rivers@familybusinessinstitute.com or ( 877) 326-2493.

Reprinted with permission of Key Resources LLC. No portion of this article may be reproduced without its permission.

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