Crafting the Plan
When I was a junior in high school, I worked for a family business called Knowlan’s, a small supermarket owned by six siblings in St. Paul. Bill Knowlan, the oldest of the boys, was the president and charismatic leader of the company. Bill was a jocular person who frequently talked in riddles.
It wasn’t unusual for Bill to hold a meeting before the store opened to give the teenage staff a pep talk about how to treat the customers. At one of those meetings he said to the assembled staff, “What is Standard Oil’s slogan?” Immediately, one of my teen colleagues, Tommy Delmont, waved his hand enthusiastically and shouted, “My advice, sir, is get deicer.” Bill’s disappointed response was, “No, no, no!” What Bill wanted us to say was Standard Oil’s other slogan, “You expect more from Standard Oil, and you get it.” Bill’s message to us was that customers expect more from Knowlan’s and they should get it.
Another day at Knowlan’s I was stamping #303 tins of peas and placing them on the shelf. Bill walked down the aisle and said to me, “What’s your plan?” I stammered, “I don’t have a plan; I’m busy putting peas on the shelf.” Bill emphatically said, “What’s your plan?” I responded again in my exasperated way, “I don’t have a plan; I’m busy putting peas on the shelf.” Bill’s response as he walked off was, “A plan that isn’t working is better than no plan at all!” In my adolescent way I thought, what a dumb thing to say.
The truth is that I’ve never forgotten that moment and Bill’s sage advice. I’ve used it throughout my entire career and it was particularly useful when I taught the family business management class at the University of St. Thomas.
The importance of a plan. There are four plans necessary for a family business to be successful: an ownership plan, a management and leadership plan, a business plan and a family plan. When it comes to succession planning, I call these plans the inside-out succession planning process.
Core purpose. The process begins in the center, with the entrepreneur identifying both the purpose of his/her planning and the expected outcome of the plan.
Key motivators. Next in the process is identifying the items that motivate an entrepreneur to do the planning—economic security, health, family unity and legacy. All four of these are major motivators for achieving a successful plan.
The four plans
Ownership plan. Next, the process addresses the four plans for an effective succession plan. This begins with an ownership plan that includes creating a financial exit strategy for the entrepreneur and an estate plan that treats the adult children in the family equitably. Also included is a plan to transfer ownership of the business. Another important ingredient of the ownership plan is activating the board. Because there is no way to replace the entrepreneur, a new system must be created, and that new system is a board chaired by the entrepreneur.
Management and leadership plan. This plan includes the entrepreneur making a decision about his/her role in the leadership of the company. I refer to this decision as the last challenge of entrepreneurship. Owners don’t have to retire outright and leave the company, but they must change their job description and become the architect and designer, along with their family and advisors, of the new ownership system and the new management and leadership system. This new management and leadership system includes a family participation plan, which outlines guidelines and compensation plans for family members working in the company.
A formal business plan. When you are an entrepreneur, you usually don’t want or need a formal business plan, but when you shift from being an entrepreneurial company to a more formal and professionally managed company with many family members working in the company, a business plan is essential—especially a plan that represents the entrepreneurial spirit of the company.
Family plan. The family plan is used to prevent normal business and financial differences from eroding family relationships. What the family plan entails is building the emotional equity of the family while you are building the financial equity of the company.
In my work with family businesses, I use these four plans to assist them in creating plans to maintain and grow their businesses profitably, and, at the same time, create and maintain loving families. It is important that family businesses work and plan on both sides of the equation—the business and the family.
Thirty years after I received this initial advice from Bill Knowlan, I called him and invited him out to lunch. Bill said, “What’s the occasion?” I responded that it was a Bill Knowlan appreciation luncheon to allow me to express my gratitude for all that he taught me—how essential it is to have a plan.
Tom Hubler (firstname.lastname@example.org) is president of Hubler for Business Families, a family business consulting firm.