Already a Bloomberg.com user?
Sign in with the same account.
I have a six-location hotel business. My 21-year-old son does not wish to take over. He wants to make movies with money that's been put aside for his education. I'd like to retire in a few years, but I have no other children. I do not want to alienate my son, but this was my succession plan and I hope it still will be. —S.S., San Jose
You raise a couple of issues: On the business side, you want to establish a succession time frame and encourage your son to succeed you in the company. On the personal side, you question whether it is appropriate for your son to use his education fund to finance his creative endeavors.
While your son is technically an adult at age 21, he is probably not ready to definitively decide on a career. "The reality is that children at this age need to explore various things in life," says Otis Baskin, a management professor at Pepperdine University's Graziadio School of Business & Management and a consultant with Marietta (Ga.)-based Family Business Consulting Group. "I've seen it happen over and over. They try other things that look more glamorous and then come back to the family business, realizing it's a good opportunity," he says.
You can't insist on your son taking over the business without alienating him and perhaps causing lifelong resentment. "While you're disappointed over your son's career choice, you should let him explore and find his passion," says Jeff Fishman, an adviser at JSF Financial in Los Angeles. It's not up to you, however, to fund a "random youthful adventure," says Fishman, who has many film-industry clients. "Many people think entertainment is an exciting business but it can be a grind just like any other industry. And it's very risky."
Consider helping your son with some funding for his movies, but agree on a dollar limit in advance. Meanwhile, he might agree to enroll in film school or pursue a business degree in a program that includes courses on the entertainment industry.
And even if he is resistant now, don't give up on your son entirely, says Steve McClure, a consultant with Family Business Consulting Group. If you can put off retirement until your son gets through his 20s, or retire gradually by promoting a non-family manager to a leadership position, you may yet see your company become a second-generation family business. "Keep the door open without pressuring your son," McClure says.
One way to do that is to establish a paid advisory board and put your son on it, along with yourself and a couple of knowledgeable hotel-industry experts. Don Schwerzler, of Family Business Institute in Lawrenceville, Ga., says that giving your son a different perspective on the company can be invaluable.
"The tyranny of routine is so often present in a family business. What the son has heard around the family dinner table all these years is complaints about nonpaying customers and late suppliers. No wonder he wants to go make movies!" Schwerzler says. "For a young person, the idea of getting locked into a family business early is scary."
At quarterly meetings of your advisory board, however, your son may come to appreciate the company's long-term value. "Make sure your other advisers are seasoned experts, not your buddies or your CPA or your lawyer. These are people who may be able to mentor your son and they'll be around in case a catastrophic event happens and he has to come into the business cold," Schwerzler says.
Meanwhile, seek out an outside CEO who can take over day-to-day operations for you and manage the family's business interests until your son is old enough to make an informed decision about his future. "Be up-front that there will not be an ownership interest for your non-family CEO and create other incentives, like a bonus plan, for growing the business," Baskin says. "Often we see a non-family-member CEO become a bridge between two generations, or someone who can prolong the company until there are grandchildren who can decide whether they want it or not."