Family Business Succession & Legacy
Family Business Succession & Legacy
In this, The Faces of Business, our guest, Marc Kramer, Podcast Host, Best Business Minds, President, Kramer Communications & Stress Free Family Business, talks about his experience helping family business founders with family business succession.
Marc is a serial entrepreneur who has built and exited his own companies. . Marc has developed global educational programs and currently hosts a weekly live podcast with listeners in over 60 countries. Marc’s current efforts are focused on helping family business leaders developing business, marketing, sales, financing and innovation plans along with working with companies transitioning leadership. Marc has dealt with many different situations helping family businesses with the generational leadership transition. He helps these families succeed their businesses and create the legacy they desire.
Marc and I discuss common generational transition challenges and solutions to them!
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Damon introduces Marc Kramer to the audience and is pleased to have him on the show. Marc has won two awards for his podcasts. Damon is interested to know about them. Marc informs the first award he won was from the Academy of Interactive and Visual Arts. The second one was from Devi Award.
Damon swiftly invites Marc’s comments on the Best Business Minds podcast. He tells a compelling story. In March, during the Covid-19 Pandemic, he wanted to provide a gripping educational experience for the entrepreneurs and family businesses. He has written six books for this purpose. One day, he and his friend, Laura Huang—a preeminent Harvard Professor and the writer of Edge—went through a book and casually reviewed it. Marc instantly hit on a novel idea about starting a podcast for current and potential businesspersons. They contacted interested people via emails and invited them to attend their Zoom Meeting. They expected some twenty-five attendees. To their delight, one hundred and seventy-two people showed up to their Zoom Meeting, making the live podcast an instant success. Marc further describes that he has listeners in sixty-two countries—South Africa, China, England, and France, to name a few.
Moreover, he illuminates the audience on the format of his show. Initially, he would review two books a week, every Friday. Now he does only one. There are thirty questions in total. The Host asks fifteen questions. While the attendees are asked to write down their questions. He, then, poses these questions on behalf of the audience. Additionally, Marc is super busy and is booked till April 2023.
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Damon asks Marc about the things he has learned by dint of the live podcast. He replies that he has learned a lot of things. Out of many, one is that people are wiser than him. They are from prestigious universities like Harvard, Wharton, and MIT. Even, there are billionaires. Secondly, he learned that to be a good leader, one has to be a good listener. Thirdly, diversity matters; one must take different points of view. For instance, work-from-home has its kind of consequences. Fourthly, he found out that ninety percent of CEOs, read one book, on average, every month. He also realized that Harvard and Wharton are elite because their teachers are “teaching real-world concepts.” As frontline teachers, they are “even themselves investing in startups.”
Damon adds that for Marc, it must have been “quite an experience,” and Marc readily agrees with Damon.
In podcast sessions, some important “ideas get reinforced,” when we repeatedly discuss them with our guests. One cannot doubt their accuracy “because these really, really smart people are talking about them.” These ideas add perspective to the speaker’s vision.
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Similarly, Marc believes that many businesspersons have confessed the biggest mistake they ever made was “didn’t fire people quick enough.” They have been too lenient to avoid mistakes by their workers. He thinks it is the wrong approach. Quite logically, he defends his stance by saying, if people are fired from jobs over mistakes and/or human errors, smart workers would never join the company fearing “walking on eggshells thinking.”
From Marc, Damon wants to learn about the common denominators of family businesses. Marc weighs in on Damon’s question. Owing to conflict of interest, male inheritors, say, sons or nephews, do not make good business leaders in family businesses. While female inheritors do. He thinks he has witnessed many cases in which daughters or daughters-in-law are better leaders. Because they are effective leaders, they command respect. Damon remarks that incoming successors must be trained.
He asks Marc to shed some light on the challenges in testing the potential of these upcoming position holders. Marc relates his answer to three situations. Once, he worked at a 150-year-old consumer product company. When the question arose about choosing a suitable successor, Marc advised the owner to sell his business to his children instead of handing it to them. Selling a business to children is a wise decision. Sooner or later, everybody needs money. When parents need money, they would not have to look at their children. In this way, parents can equally distribute their wealth among their children. Moreover, if a son is not working efficiently, he will be the one to suffer the loss.
Damon finds Marc’s advice praiseworthy. Marc further says that if parents intend to bring their children into the business, the former must groom the latter at the grass root level. Similarly, the parents must make sure that every employee respects their kids. The children are to earn this respect. They are to make their place in the company. If the children consider themselves royalty, they would hardly win employees’ trust. Resultantly, employees would not guide them. The employees “have a right to question your decision,” Maintains Marc.
However, our guest quotes a diametrically opposite example “of why one should not split the equity fairly among one’s amongst your children”. He says one of his friends inherited a company worth USD 1.2 million. He had two sisters and the company was mutually owned by these siblings. Over time, the guy worked outstandingly hard, growing the company’s worth from USD 1.2 million to USD 500 million. It was fairly distributed among the siblings. Marc thinks the sisters to be the luckiest ones.
He still regards it as a mistake on the parents’ part for handing their children into a running business for free. Parents “already have so much baggage from raising them.” Today’s parents are emotionally blackmailed by their children. They barely antagonize their relationships.
Marc also thinks that children, who work at other businesses for somebody else, are better to handle businesses of their own.
Damon seeks Marc’s comments on the probability of the upcoming generations joining their family businesses. There have been many kids, according to Marc, who wanted money, prestige, and so forth but they never worked hard to maintain their family business. They shirk responsibilities. If any such business runs into bankruptcy, almost all employees and their families suffer.
Likewise, the parents must play their role whenever needed. Giving the children a free hand and not caring about their future is highly inadvisable. If any parent can rescue their children, they should come forward and work for their children’s financial stability.
Marc also tells a highly valuable strategy for owners of sizeable businesses, who wish to bring their children in. Currently, Marc is working with real estate companies. The owners know their children, even if well-education, are not ready to handle such big businesses. So, they have hired CEOs and inducted their children as internees. Children become what they learn. Damon opines that there comes a point in such substantial businesses where the owner considers “do I want my kids to undertake this.” Marc explains that he has closely watched, though hasn’t worked with Herr’s Snacks. It’s a second-generation, billion-dollar company. The secret of their success lies in their straightforwardness. They seldom put up with drama. Marc advises parents “to be very objective with their kids.” Keep testing their capabilities, because “when somebody fails, everybody fails.”
On the contrary, Marc believes he has seen many children who could develop the product. But, they were “nowhere near the strategic side of running the business.” Parents, as they get older, avoid venturing into risk out of fear of failing. “They know how bad things can go,” says Marc. He advises such children to win their parents’ confidence by starting small and humble.
Damon asks him about the Angel Venture Fair, which Marc himself runs. He answers that it is in its twenty-fifth year. Except for real estate and retails, almost all businesses can be a part of it. Most Angel Investors are entrepreneurs, who have made a lot of money and understand operations, and how to grow a business. The conversation concludes with these remarks.
The discussion comes to a close as Damon thanks Marc for his time.
Damon Pistulka 00:03
All right, everyone, welcome once again to the faces of business. I’m your host, Damon Pistulka. With me today, I’m excited. I have Mark Kramer here. And we’re going to be talking about family business succession and legacy. Now I’m going to tell you, Mark has a lot of things going on, I’m gonna roll through them. But when we had a conversation a while back, I just knew that I had to have mark on and we needed to talk about family business with the work.
He’s doing family businesses. But Mark is the host of the podcast, the award winning podcast, best business minds, we’re going to talk about that. He’s the founder of Kramer communications stressfree family business, the private investor forum. He is actually working on the angel venture fair. We’re going to talk about that a little bit. And, Mark, thanks for being here today.
Marc Kramer 00:56
Damon, thank you so much for having me. I’m excited to be here.
Damon Pistulka 00:59
Yeah, it’s gonna be fun. It’s gonna be fun. So first of all, in best business minds, you said your podcast, it’s in over 62 countries. You won two awards, what were these awards that you want?
Marc Kramer 01:12
Well, the awards, and I’m just thrilled that we won them won awards, the Academy of Interactive and Visual Arts, and these are global awards. And the other is the.com Devi award. And so we just won those in the last month. And one had 7000 applicants that when they told me hit 5000 applicants,
Damon Pistulka 01:35
wow, wow. Now, tell me a little bit about the best business minds podcast so we can share that with listeners?
Marc Kramer 01:41
Well, it’s kind of an interesting story. I started this in March of the pandemic. And I just wanted to provide an interesting educational experience for the entrepreneurs and family businesses I deal with. So I’ve written six books myself, and I had a friend who worked with me at Wharton, and now she’s at Harvard. And she wrote a book called edge. And it’s about how to overcome adversity. And we were going through it and adverse time.
And so I said to her, Hey, I’m thinking about starting a podcast, and I’m going to use Zoom and what you want to be on and she said, Yes, when tomorrow? I said, she goes, really? I just tomorrow? I said, Yes. And I said, I’ll send out a blast email. Let’s see who shows up. We were thinking maybe 25 people, but 172 people showed up. And after the show, everybody said when’s the next one. And that started. I was reading two books a week. And that became overwhelming two books a week. So I kind of packed to one book a week, and I do a live show every Friday.
But we’ve had authors from all over the world. We have listeners in 62 countries. And like tomorrow, I’m interviewing an author about diversity, inclusion and the business world. And she’s calling in from South America. I mean, South South Africa. And I’ve had him from China, England, France, all over the world that they’ve dialed in, to allow me to interview him. And it’s been super cool. What the one thing I did not know was that podcasts weren’t live.
I assumed I never listened to a podcast before I did my own. So I thought they were live took about eight shows into somebody said, Oh my god, this is so cool. It’s live. I said, Yes. So what does everybody do up? No, you’re the only one doing live show. So that wall with the author’s they like the live show. And when the people come on to listen to it, I tell them beginning just typing your questions in chat now ask them. So if I’m three questions into my 30 questions, I allow them I immediately go to their questions. So if there are 15 questions in a row by the audience, I ask all 15 questions.
Damon Pistulka 03:58
Wow, that’s a great format. That’s a great format.
Marc Kramer 04:03
Yeah, may have till May of next year.
Damon Pistulka 04:06
Wow. You’re booked home this year? Oh, that’s awesome. That’s awesome. Well, remind me because after we get done, there’s a couple authors that I want to give you their names because they might be someone you want to have. So the what? So let’s talk about this just a little bit what I mean, if you’re interviewing the best business minds on their books, what are some of the things that you’ve learned that you go, wow, I just would have never done this unless I was doing the podcasts will never learn this?
Marc Kramer 04:36
Well, there’s a couple of things. One is these people are a lot smarter than me. I mean, I get these guys from Harvard and Wharton and all over. I’ve had a few billionaires on my show. I’m thinking these people are smart. And the one thing that I have found about leadership was that to be a good leader, you have to be a good listener. And you had to surround your stuff with people smarter than you. And that diversity really does matter. Because everybody comes from a different viewpoint. So all of these guys have a lot of the same message. And so and smart people can come from anywhere. I mean, I have a guy from MIT on, and he is the AI expert in the country.
In fact, the foreword of the book was written by the Joint Chiefs of Staff had the Joint Chiefs of Staff, and the chairman, CEO of Google, on his 31. And that’s what he was. That’s who was writing his foreword to his book. Not your accounting or whatever. Yeah, yeah, yeah, just a little thing. And I learned about in neurology, I had a professor from Wharton, who told us that, you know, this idea of working from home is not a good idea that you actually lose about 30% of your cognitive skills, by not interacting with people on a daily basis. So this idea of working from home on a daily basis is not only not good for you, but also not good for building a team culture, as well.
And we are very diverse. And even our authors, I didn’t set out to be that. But we are because we have women, men, all kinds of folks who come on the show, and which I think is always interesting. And I think you’re from all of them are big on that you have to be thought out and planned that you have to go and have a plan that you’re going to go and execute on. And then everybody has to be involved in planning. It can’t be just a plan that the leadership develops without including the people all the way up and down the line. So you know, that’s another good thing that you learn.
And all of these people all were readers themselves, like they all told me, Oh, I read a lot of books and magazines all the time. And you find that when you do surveys most CEOs, almost like 90% Read a book a month. Yeah, I should be a genius for reading 52 books a year. But yeah, I’m not that. But I do walk away with thinking to myself, gosh, I’m humbled on a weekly basis, based on the kind of people interviewing and all my authors not we don’t do self published books, we do strictly books that have been vetted by major publishers.
And that’s our deal, even with the publishers is that that’s the kind of folks that will have on, but very forward thinking stuff. And the only thing you can learn is the reason Harvard and Wharton and those elite schools are elite, is because their professors, unlike other schools actually still work in the business world. What they’re teaching is real world concepts. And they’re even themselves investing in startups. So you know, they’re not giving you something that’s 1020 years old and out of date, these guys are on the front line doing. And I think that’s important, both for us in the business world, but certainly for our competitive position as a country.
Damon Pistulka 08:20
Yeah, great point. Cool, I just that that just has to be quite an experience doing that podcast every week, I just
Marc Kramer 08:29
telling you, you know, the stuff that you learn and stuff that gets reinforced with you as well, because sometimes you’re hearing the same thing over and over again. And so you know, it’s accurate, because these really, really smart people are talking about it. And, you know, I’ve had a lot of entrepreneurs on, and the one thing all of them said is, nothing goes according to the plan, you know, 50% of your plan is wrong, you just don’t know what 50% I’ll be willing to go and, you know, be able to make a move and change your course correct?
Or else the ship’s gonna go under. And so that’s one thing that they all say is that’s, that’s not the business I meant to start out with. And all of a sudden, I got driven in a different direction. And now this is what’s happened. Yeah, and they all believe in, you’ve got to be taken care of people up and down that you just can accumulate all the wealth for yourself. Not everybody from the janitor up. Everybody counts.
Damon Pistulka 09:35
Yeah. Yeah. I think the best leaders know that. And you can tell it in business when people do that because you’re not going to walk in I mean, you can just feel it. I’m not going to give it to the Grayson in right words. But you can tell when you walk into a business and everyone has been treated well and valued and you really don’t
Marc Kramer 09:57
want the things that that is interesting talking about later. So all of them say, I, the biggest mistake I made was I didn’t fire people quick enough. And I say to them, that is not the mistake. Because the fact that you give people a lot of leeway to make mistakes, allows you to attract and retain the best talent. If you were firing people quickly, for the fact they made a mistake, then the smartest people would stay away because they know that they’re walking on eggshells thinking, I literally I mean, gosh, I’ve interviewed Oh, well, on my show, I’ve interviewed 121 Author’s.
But I’ve been interviewing CEOs for the past 40 years. And every single one of them says the same thing, because I write a national calm for American City Business Journal, and I wrote for Forbes. And for the street, I wrote for Jim Cramer for a couple of years. And every CEO says the same thing. I mean, successful CEOs. Yeah, yeah.
Damon Pistulka 11:01
Well, Mark, I feel bad because I missed about 400% of what you’ve actually done, because you’re sitting here reading for Forbes in multiple books. But man, I just had some pleasure to be able to talk to you today. And when we were talking before you started talking about the work that you do with family businesses, and you talk and talked about transitioning leadership and some of the things that you see, and I just thought it’d be really interesting for us to get your perspective, because you’re not doing this with 123.
You’re doing this with a lot of family businesses and there are people out here that are listening that could be in this family business setting. They’re in there where the founder or even the second generation third generation, they’re going to go through a transition of leadership, or they’ve got to do some sort of leadership transition, not necessarily generational, but just a leadership transition. But what are some of the things that you’ve seen when you walk into these family businesses that are common? I guess, when you’re?
Marc Kramer 12:09
Well, one of the common aspects of a lot of family businesses, here’s a few of them. One is the parents who are running the business, and it could be first, second third generation, they all think that their kids want to get rid of them. That is the biggest misnomer. Not a single child has ever wanted to get rid of the parents what they want, is more control over what they’re doing. And they want more input in the decisions, but they definitely don’t want the parents and I have to tell the parents every time.
Now the last thing they want is you leaving because you have all the institutional knowledge they need to know why did you pick the accountant, the banker, the lawyer that you chose? Why did you choose this vendor, even though he cost more? Why did you do this, all these things. And then once they do take over, they need somebody to talk to because they can’t talk to the other employees, because the employees are trying to are counting on them to make the decisions.
So it’s a lonely job. The other thing is, is that a lot of people think that if a man had been running the business for three generations, a man should continue to run the business, they just think that’s just the way it is. And then when you go in and tell them, your daughter is infinitely more capable, because your son slept with the bookkeeper, and kid and even though he’s a smart guy came drunk a couple of times, to events, but the daughter has the respect of everybody I know you didn’t plan on her taking over. But she’s the right one to go and do it. Or there’s a father, two sons and a business.
And the daughter in law is really the most capable CEO, but the parent is worried that what if they get divorced now what happens to my business? And so you see all kinds of different situations with these companies, or one where I came across where the nephew was ripping off the aunts and uncles. And to lower the value of the business. So when he bought it from him, he could borrow it at a cheaper price.
Damon Pistulka 14:20
Wow. Wow. So you get this is like we were talking before I knew I had to have you on? Because you’ve seen some doozy situations, that’s for sure. You know, yeah. From the simple ones. And this is one that I think is really relevant is there becomes a point a if you have a child that is qualified, and we’ll talk about that in a moment, too, but and, and it is that time for transition. What are some of the things that that you really I mean, it takes a lot of coaching to figure this out, doesn’t it?
Marc Kramer 14:57
Well, it does take a lot a test takes them approaching, I just worked with a family who has a big consumer product company, it’s almost 150 years old. And then it’s two siblings supposed to take it over one siblings very smart, capable rising through the ranks.
The other one doesn’t really want to put the effort in, I had to tell the parents two things, I tell all parents sell the business to your kids, do not just hand it over to them, because you’re gonna need the money, possibly to even bail them out if things go bad, but to is if one child’s really not working, and how’s it fair to the child who is working in it, and find out that over 20 years that they’ve doubled the size of the business, but their equity is still worth the same.
Because the other child did that happened to my cousin, his brother was a doctor, he worked in the family business 30 years. But my uncle, my great uncle decided that he felt he should give each of them 50% of the equity, he was trying to do the right thing, but was totally wrong thing to do. And I have a client that I said to the parents, one daughters, a nurse, one daughter has been working in the business for 10 years, the nurse doesn’t deserve to get any of the upside, so let the other daughter buy you out. And if you want to give the other daughter some of the money from the buyout, then that’s what you should do.
Damon Pistulka 16:21
That’s, that’s the boy right there. So you just rattled through three situations that were so good. A first thing sell the business to the kids, because you need to take that money out. Even if you don’t need it to live, you want to have that money in case something happens to the business down the road. I think that is such tremendous advice right there.
Because you never know what’s going to happen you the best made plans, your kids may not be able to succeed, the market may change, there’s all kinds of things, but doing that selling that business to the kids, rather than just giving it to him. Tell us a little more about that. I mean, when you we sell a business, is it usually just like they just pay a little bit over, you know, pay some over time, the cashflow the business? Or do they actually go out and get loans and do it usually go get
Marc Kramer 17:11
loans, that thing you do is get the bank that you’ve been doing business with, and get them to be willing to loan as much as the business could bear. You know, we don’t want to over leverage. Yeah, and then take a note on the rest. One thing that parents do almost in every business, is separate the business from the real estate. So they have a separate corporation that owns the building. And then they rent the building to the business. So it gives them a set steady stream of income. And it doesn’t put the building at risk. And I always thought that was very smart.
Damon Pistulka 17:45
Yeah, that is great advice. So go out to the bank, get a loan for what the business can bear. And then take a note for the rest. I think that’s a wise advice, because you want to leverage your money. Utilize the banks as you can and, and so get the total amount because taking that money out for a rainy day is it could prove one of the best movie ever made,
Marc Kramer 18:10
I tell the parents you can stay on and a small consulting contract. So you could be there to answer questions for them, which I think is going to be incredibly valuable to the kids. And the other thing I tell the parents is, is that the kid should work the way up from the bottom up. You know, they should start by Colette by being janitors in the business. And they were should always report to somebody else. Never report to the parents. It’s a big mistake when you have them report to the parents, it’s even a bigger mistake starting them high up in the organization, you own a hotel, let them be in with the janitors and the maids doing that work first.
So they learn and see and appreciate what that is. And so people can respect them. One thing that you’re always trying to do for your kids is make sure that all the employees respect them. And I tell the kids, when they’re taking over the business, the employees don’t work for you, you work for them. You’ve got 3051 case was 300 families, depending on you making smart decisions. So that goes even for the parents picking the right child to go and run the business. And if the children aren’t right, then he or sell the business or find an outsider to come in. But you owe it to everybody who’s trusting you, which is not just the employees but your vendors and your customers.
All three of them are hoping you’re making smart decisions because they’ve become reliant on you. People paying their mortgages, their kids college, their retirement everything. So you got to think of this is not the days of 3040 50 years ago, when there were kings right you own the business you are the king or the queen. Now of course you’ve got conflict tissue from everywhere. So your employees don’t need you anymore. That’s they’re not tied to the local community. And you’re the only option or one of the few options. Now they can go and work from anywhere and work for anybody.
Damon Pistulka 20:15
Yeah, yeah, that’s for sure. And again, as we’re talking, I’m feverishly taking notes, because you’re just filling tons of great information here. First of all, having the children work from the bottom up, I think this is one of the things that is really important. And, and because they get exposed to all the different levels of the business, they may not have, if they say went to college and started off at a higher level position. So go ahead.
Marc Kramer 20:50
Yeah, no, I just know, I think the same thing that they have to start out, in fact, one family, they have designated parking spaces, and they told the kids you have to park and the farthest part away from those spaces, you’re about four or five years away from earning that spot. I love it. And it’s super smart to go and do that, that kids one kid start parking, like we’re, you know, the executives Park. And one of the employees that really, I mean, you haven’t been here that long, you kind of haven’t earned your right to go and park in that space.
And they were like taken aback that an employee would talk to him like that. But that’s how the father raised the employees in the business to speak their mind. And he said, I need you to keep my kids in line when they’re wrong. You need to tell them that they’re wrong. And one of the families worked with two siblings, and the one siblings to the other. Listen, I need you to work as hard as I am. Because I need you as my partner here. And if you do not, if you do not put that effort in, we’re in trouble because I can’t expect the employees to tell me I’m wrong.
You know, last thing, anybody, every employee, it takes a long time for employees to trust the CEO that they can tell them when they’re wrong, because they’re always afraid of what if I get fired? Even though there’s options out there? I don’t want that I like waking up every morning, knowing where I’m going people like routines. Yeah. So it’s really critical for that, but I was telling the kids, you have a big responsibility to that, then one of the other things I do with parents is is I tell them, let’s put together a contract about who’s responsible for what and how things will flow.
So I did have a parent that I worked with for two years and I became very good friends with him. He refused to sign the contract. And I said to him, What are you afraid of? Why don’t want them tell me what to do you own 100% of the stock. They don’t own any of the stock, they can’t tell you what to do. But you’re going to saddled them with $3 million of debt, they have a right to know what they’re signing up for here. They have a right to know why you made this decision and have a right to question your decision. So it’s not fair to them, that you don’t get a say in what you’re doing. Let’s just say I’m not very popular after a while. It’s like the guest who stays too long.
Damon Pistulka 23:25
Yeah, but I mean, you’re given that I just giggled, I would I talk with you mark, because you’re telling people what they need to know. I mean, you’re telling them what they should really need to think about the tough decisions. When you know, when you back to what you were talking about before, when you had the instance of the two siblings, one works in the business and one doesn’t, but you give them both the same amount of equity in the business. It’s like that that is yes.
And as a parent, you go, I want to treat all my kids fairly, right, my treat them equal, I’m going to give them equal amounts of money. But if you’re the kid that’s in the business, and you got 50% of the business and the other kid is off doing whatever they want to do in their job someplace else, and you’ve quintupled the value of the business because you busted your butt. They get that upside, like you said it’s just it’s not fair. It’s not fair at all. I had
Marc Kramer 24:21
a friend who did that and he was not upset. He had two sisters. They got 50% of company the he grew from 1.2 million to 500 million. Oh my goodness. And His attitude was I didn’t come up with this product. My dad did. And so much money that okay, there’s so much to split. What difference does it make? You know, and so some people wouldn’t have that attitude.
And his sisters were really lucky he was that generous of a guy to go and do it because a lot of people would have said Are you kidding me, I mean, I build a $500 million business, and I’m getting 250 million, still a lot of money, but I didn’t get the full 500 million minus the taxes and all that kind of stuff. So they were very fortunate. And they did not step a day in that business. They weren’t, they didn’t work in at all, he did everything, including, by the way, that product meant nothing. He came upon something else that was kind of related to the product. And that’s what took off. So the product actually wasn’t what made them rich.
Damon Pistulka 25:35
Oh, my goodness. That is is an extreme example of why you should not split the equity fairly amongst your children after not all working in a business at the same levels. That’s for sure. So when you said another thing, too, is, and I think this is really, really important, is don’t have your kids report to you as a parent in the business.
Marc Kramer 26:03
Yeah, it’s a big mistake. Because you already have so much baggage from raising them. They know you know, they know how to push your buttons, yes, know how to push their buttons. And one thing that every parent is afraid of is upsetting today’s children, and having them walk away from them and never seeing them. Ivan had a child weaponize his own kids against his mom, by telling her you’ll never see your grandchildren.
And she’s calling me 1130 at night and in tears. And I had to call him right after I got off the phone with her and said, you’ve got an out right now, get out of your bed, go apologize to your mom, you can never weaponize your own children, against your mom, you don’t have to work there. But the end of the day that every parent is biggest nightmare is losing their kids. And so it’s very hard for parents to go and do. And I saw it numerous times at one where we, the father had told the son, you’re not going to be the CEO.
And we told the mom who was also supportive of him being the CEO, and we have always been protecting him. And that cause for the father to end up in the guest room for three months. Why? Yeah, so you know, you have these hard conversations that you have to have with people. Again, I’ve always put in the context of, you’ve got responsibilities to a lot of different people here. And you have to think of them first. And of course, we want to see your kids over time, when I work with these families, I tell the kids up front, we want to maximize your potential, we want you to enjoy the job.
And if you don’t enjoy the job, then you shouldn’t be doing the job. And you should maybe you shouldn’t even be in the business and your parents, today’s parents want the kids to be happy. So unlike you know, when we grew up in the MPI that family business, there was this expectation, you would join in, shut your mouth and do your job for the next generation. Not anymore. The parents are just as glad even this big consumer product company follows that you don’t want to do it. I sell to the private equity guys, you’ll get your pro rata share. And that’s it. You tell me what you want to do. Again, no forced labor here.
Damon Pistulka 28:29
Yeah. Yeah, that’s, that’s awesome. In that whole thing about not reporting to parents. Man, you just brought up the whole side of it, that I was, you know, I was thinking about how it looks to the other employees, but the whole internal family strife that it would happen and, and when you said to about the kids know how to push your buttons, you know how to push them, the whole emotional thing could get,
I mean, because if you, let’s be honest, if you’ve got a kid that pushes your buttons, while it can really backfire in a work setting where you’re getting angry, and people that work around you never have made may never have seen you even your blood pressure go up one bit, but your kid just pushes the right button to go off, you know,
Marc Kramer 29:12
are so often in family businesses that employees have grown up watching the kid. And so a lot of parents and I think this is also smart, and I encourage us, have your child work for somebody else for three to five years, then bring them back. Do not take him directly from college and have them work for you. And so some parents feel like they don’t want them to develop bad habits by working for somebody else. But I disagree with that.
I think learning to be nobody for somebody else. As the best thing Strawbridge and Clothier for generations had their kids work for Macy’s and other department stores. So they had to start from ground zero they were nobodies in that. They weren’t royalty like you know when you’re Strawbridge or the Macy. You’re a gamble. You are the royalty. But now it’s better off that they don’t start out as royalty. And know what it’s like to be like anybody else?
Damon Pistulka 30:09
Yeah, I think that that is sage advice right there. Because understanding what it’s like to be one of the people that punches the clock walk through the door every day like everyone else is valuable, valuable experience for those children coming into those businesses? Yeah. So yes, so good.
So good, because you brought up about the kids and the way they can push your buttons that just gets me That’s funny. Not funny, because it’s such a challenge. But when, when you’ve gone into these places, I mean, how many times out of say, out of 10 businesses do you run into where the kids aren’t interested, or at the other case, think they want to be in the business, but they shouldn’t be couldn’t be ever running the business?
Marc Kramer 31:02
Oh, that happens quite a bit. Where they shouldn’t be in you’re telling the parent, you know what, they liked the money, and they liked the prestige. But they’re really not cut out for this. They’re not willing to put the effort in, you know, I had one where I gave them great jobs. And it’s a great company. And they didn’t follow through on any of it.
And I said, that’s not right, you know, and I sat down with them, I said, I started out with stuff that would get you noticed in the company and everything and you didn’t do any of this stuff. You’re clearly not wanting to do it, but you liked the paycheck. And, and that’s what you’re interested in. And again, that’s not fair to anybody else, especially the employees and your own family members. Either you’ve got to do what needs doing to succeed there, or you gotta go. And that’s a tough, tough thing. Because the parents, I’m always the bad guy. I tell the parents, no problem. I’ll take that on. I’ll sit down, tell the kid this.
And then you can say, You know what Mark is out of control. We’re gonna have to do something about that. As they’re winking at me. Thank God, you told him that. Yeah, I always get thanked by the parents. They’re always like, there’s always one child that I come down hard on, after trying every conceivable way to get them to do the job that they’re supposed to be doing and maximize their potential, and then becomes okay, I’ve tried all the carrots. Now, I’m not bringing a stick. I’m bringing a club, I’m gonna beat you over the head with this club. Because it’s that important to you. And to the people around you.
Damon Pistulka 32:45
Yeah. And like you said, there’s responsibilities. It’s much bigger than the child or the parents.
Marc Kramer 32:52
Yeah. I mean, they don’t even realize until I start diagramming for them. Oh, the bank that loaned you money, that’s community bank, they go under, your whole community suffers, your employees, you screw up. Now they can’t make their mortgage payments and their kids college and their retirement has wiped out those vendors that are counting on you to pay their own employees, and you’re not able to pay because you’ve screwed up and didn’t do what you were supposed to do.
You know, and I go through every body that’s connected with them. They didn’t realize there’s a lot of people it’s stressful now they’re under stress, right? Because if they could, Jesus, I gotta be thinking about all this stuff. Yeah, that’s right. And don’t take it on if you can.
Damon Pistulka 33:35
Yeah. And it’s it is it’s, it’s you’re, you’re, you’re acclimating them to what they really are committing to if, if they want to go down that path. So, and I think it’s, I think it’s valuable. I think it’s something you got to do. Yet. It seems like your video is cutting out a little bit there.
Marc Kramer 33:55
Yeah, that’s weird.
Damon Pistulka 33:57
Let’s see. Oh, there we go. It came back. Now we’re good. So the, what have you and I’ve heard about this? So how many times have you run into were parents just say, You know what, Damon, it’s better off if you’re just not in the business, but we’re gonna pay you to stay home.
Marc Kramer 34:18
That happens occasionally, with families because and I understand that, in the sense of, you’re afraid the child will drowned. Yeah, and some people say let them drown. But now because it could go bad. And as a parent, it’s really hard to go and do that, especially if you know, the child has troubled or there’s issues involved.
And that’s a good time to bring in an outside professional. And I don’t mean, you know, like I my master’s is a management some kind of like a quasi psychologist. In fact, a lot of psychology goes into it, but I tell them, to bring in a therapist here to work with them. because we don’t want to see the child killing themselves, or doing some harm to somebody else, you know, especially themselves. So we need to take that seriously, and maybe get them help. Yeah,
Damon Pistulka 35:13
yeah. You know, that’s, that’s great and I’m glad I asked because I know it happens when people are not, it just doesn’t, doesn’t work out for whatever reason, but you don’t want to leave him, you know, onto their own or whatever that might be. So the last situation I was wondering about, do you run into it when the businesses are so successful, that the current generation just goes, You know what, even if my kids were capable of doing this, we really should hire outside people, because this is bigger than any of us really ever intended.
Marc Kramer 35:57
Yeah. The bigger the business becomes, the more they realize maybe the kids don’t have the skill set, or they need to bring somebody in to teach the kids, I’m actually working with a real estate company has properties all over the country, the their two founders, two different families. Each has a child, each of the child’s college educated, both of them are lawyers, actually. And they’re not ready. They’re not primetime ray. So they’re looking for a CEO, that could run the business, but train the kids to run it. And I tell them have a five to 10 year horizon on this, tell the kids here is the written plan, here’s how we’re going to rotate you through, here’s what we’re going to teach you.
Now mind you, at the end of the day, we still might not think you’re the right person. So I just want you to know that upfront, I don’t want to you to be under any misconceptions that you’re going to get the reins to this business. If the CEO tells us that you haven’t been growing in it, and you’re not doing the right things to succeed, and we’ve tried everything, you’re probably going to be out. And when we do sell the business, you’ll get some, some money. But you have to start thinking about doing something else. So we’ll do everything we can to make you succeed, because there’s no reason why we wouldn’t. But this is what’s going to happen.
Damon Pistulka 37:23
Yeah, cuz I think that was one of the situation I was thinking about. Because man, if you got a $10 million company, 100 million dollar company, even maybe a $500 million income was one thing. But if you get something that goes in really big and gets a, you know, billion dollar company, at plus, it’s just a monster that gets to a point that you really wonder, do I want my kids to undertake this? First
Marc Kramer 37:48
of all? Yeah, there was a company, I didn’t work with them. But it’s a sizable company and has 100 family shareholders? Well, I’ll tell you one, that I’m very impressed with. And it’s her snack food company. And it’s actually just a second generation I met Jim her who founded the company. And, and they’re like a billion dollar company. And they have a very regimented training program. For all of them, they have an outside person who provides education and sees where people are falling short, and what they need to do to be better.
And there’s no guarantee that you could end up working in the plant. And that might be your whole careers working in the plant, you might be Director of Marketing might not ever get higher than director of marketing. Again, they realize that one of the things they do have is a no drama rule. So we’re not going to put up with any drama, you know, when you’re told this is what it is, it is. And if you’re going to start a problem. We have too many people relying on us, you gotta go.
Damon Pistulka 39:00
Like that. No drama rule. Yeah, especially. Yeah, yeah, that would be very valuable. Well, then it’s what you bring up is the real need to think about this and really plan for how am I going to prepare my children if they’re interested for success here. And it’s not just leave them to the walls, when they get to a certain age, it could be that there, there’s a mentor that you hire alongside of them, to get them ready to really take the reins or do what they’re going to do.
Marc Kramer 39:42
I tell them you have to be very objective with your kids. And take a look at their skills and be honest with yourself about it and be honest for them, because just like employees, when somebody fails, everybody fails. And so you have to take a look at and say You know what we put you in the wrong possession, or we didn’t train you, right? You know, we, we take some of the responsibility not on you, unless you weren’t giving the effort.
So if everybody’s doing everything to help you succeed, and you’re showing up late to work and leaving early, you gotta go, you know, but if you’re doing everything you can to succeed, it could be the positions wrong for you. It could be that the business is wrong. It could be that we haven’t trained you, right, but there’s a lot of different thing variables. And we have to take a look at all of those, and then make a hard decision.
And we tell you, you know, communication can’t over communicate that enough with everybody, especially family members got to constantly be telling, I mean, people have their son in laws come into the business. And let’s say there’s a divorce. Now what, or maybe the son in law thinks he can coast or the daughter in law thinks they can coast. Right up front, you have to tell them verbally and in writing and have them sign. Here’s what the expectation, I tell the parents videotape this whole thing. So nobody can deny, here’s what was told, make sure that there’s everything is there’s no ambiguity, everything’s crystal clear.
Damon Pistulka 41:18
Yeah, I just love hearing you talk mark, because you are laying out the things that I mean, could really help these family business owners just mitigate so many future problems, so many future problems, that I just love him, I just love hearing it. And your real world experience is what is so refreshing because you worked in the different situations where you’ve seen this.
But the last thing that I was thinking about is how many times do you see when there’s going to be a leadership transition and say, I’m the dad, and I’m running the business, and I’m going to transition over to the next generation. But those, my kids are really good technical people in the business, they’re not the business people. So we’re gonna hire a CEO and set up a board or whatever we’re going to do that’s going to run the business, and my kid is going to be my daughter is going to be the head of engineering, or she’s going to be that you whatever. And then that’s kind of how the business moves on passed to the next generation.
Marc Kramer 42:25
Yeah, I, you know, I saw that in a business where the one child was really had skills in developing product, and should be nowhere near the strategic side of running the business, or didn’t have the people skills to go and run the business. And you tell them upfront, here’s what it is. And not everybody’s gonna like to hear that, or they want their shot at it. And what I tell the parents to do is put them in a small team and see what they can do. Let them take bite size chunks, as opposed to the whole eating hot pizza on one golf. So and get them to see what that is, and have the employees that work with them.
Give them real feedback all along the way about how they can keep improving themselves and being able to do it. And make sure you surround them with people who will be honest with them, not in fear of losing their job and aren’t being honest with them. Remind the employees, hey, you all have a stake in growing this child into the leader. And if the child is not right for it, we all need to know that because we’re all in this together. I mean, we don’t want our own equity zeroed out, we don’t want you to worry about having to get another job. So I say you always have the honest conversation with the employees as well, to let them know what their role is in growing the kids.
Damon Pistulka 43:52
Yeah, that’s incredible advice. Right, right.
Marc Kramer 43:54
I had a son called me up and said, If you don’t get involved with this up killer, and was his mom. And I said, I’m really because she doesn’t really, you know, she doesn’t respect me. And so I got in, and I developed a process for each of them to share information. So the son wanted to buy a building. And because they’re working on the mom’s house, and I said, How often do you actually, people come to your office? Almost never. I said, and so I said, so how are you going to justify it? So let me show you how to propose something to your mom.
Then I told the mom, you can’t shoot him down. While the proposal is going on. You need to say to him, let me think about it. And let’s meet next week. You need to say to your mom, all I want you to do is digest this. And if you say no, it’s okay to say no. But then I’d like to get feedback on why you said no. So I can learn from this. So I said you should and be this you’ve got this great business and they did great business, you’re making a lot of money, and things are going super well.
Enjoy the ride. One things I do find is when things are not going well, they all managed to pull the carts around, you know, like their wagons. Yeah, they circle the wagons, they’re really willing to support each other. Like if things are bad, then they’re not at each other’s throats, you would think the opposite of things going well, yeah, everything is hunky dory. But it’s not the case. Every time I turn around, I’d be like, Oh, my God, the business is killing it. And yet you people can’t get along. How’s that possible? Anybody would die to have this business.
So I tell the kids, you’ve got your parents are afraid of failure, they’re afraid of you failing, they’re afraid of risking for the employees all kinds of fear. And as they get older, they become more fearful. Because they know how bad things can go. And they’re also looking at the end of their career and not wanting to take those risks. So you need to walk them through things, and show them that you’ve thought everything out that you’ve talked to other people that you’ve got this down. And you can even say, let me start small here just to show you what this could be.
Damon Pistulka 46:21
Great advice. Great advice. So we’re, we’re getting to about to time here, Mark. But I do want to talk about the angel venture fair. So tell us what’s going on there and what you’re doing with San
Marc Kramer 46:32
Leandro venture fair, and it’s in its 25th year, and we bring together entrepreneurs and angels who are looking to raise capital. And so they can come from any space except for real estate and retail. So any kind of business, as long as it’s a scalable model, that could probably grow to 25 to $50 million in five years, because the investors need to know there’s an exit to get down their investment, unless it throws off so much cash that you can pay them a great dividend for being equity holders in this business. But they’re essentially looking for a lottery ticket that can close their eyes and take a big swing of the bat and have a homerun that’s what they’re looking for, at the end of the day.
So most angel investors are themselves entrepreneurs, who’ve made a lot of money who understand operations, how to grow a business, some are some come from all walks of life. I mean, we have investors who are lawyers, insurance brokers, accountants, and you know, when entrepreneurs meet them, they think, oh my God, that’s another service provider.
But now these people have a ton of experience in helping early stage companies. And in our case, we have angel investors, family offices, venture capitalist, and corporate VCs, all who come to our event, which is at the Union League in Philadelphia, and we’re taking applications right now. Through the month of August. Okay, and you can go it Angel venture feiyr.com. That’s Angel venture feiyr.com. And read on the homepage, as you click on the link and you’re able to apply to be considered.
Damon Pistulka 48:19
All right. Well, if you’re in one of those Angel venture, or startup companies looking for angel investment, this is a great opportunity for you to get considered. And again, it’s Mark’s involved with this. It’s called the angel venture feiyr.com You can get there and get signed up and be considered for it. So this is great. I mean, because the this is where a lot of these family businesses, you know, they were
Marc Kramer 48:47
startups, they ever want to start up. Yeah.
Damon Pistulka 48:52
And it’s a wonderful thing in the United States that we can have so many startups in such a vibrant startup community and some of these businesses, you just I’m sure it’d be in in this, you just go to school, I would have never thought of that. But it’s a great idea. Well,
Marc Kramer 49:07
that’s America’s competitive advantage. I mean, why it’s important that we make sure that we don’t lock the front door so nobody can get in, is because all the great entrepreneurs have come from outside the country. You know, they’re, they see the great opportunity, you know, I kind of left, there’s no line up trying to get into Russia. There’s no buddy trying to cross the Russian border and say, Man, would I love to go live in Russia?
That’s a great country. Everybody wants to come into America, no matter how crazy our politics is, they’re still lined up to get into this nightclub, because they this is the hottest party on the planet. Yeah, you name another country in the world with the exception of Israel, that people are like, Man, I gotta get into that country. I don’t think you can name another country.
Damon Pistulka 49:58
No, I agree with you 100%. Now, you know, as crazy as screwed up as we are, we do a lot of good things very well. Yeah.
Marc Kramer 50:07
And entrepreneurial, and a meritocracy, where it’s not about who your family is. It’s about who you are.
Damon Pistulka 50:15
Yeah. Yeah, good stuff. Well, I just want to thank you for being here today, Mark. Again, we had Mark Kramer talking about family business succession and legacy. And if you’re just joining us later in here, go back to the beginning. Listen this because if you’ve got a family business and you are thinking about succeeding, this two children are really creating the legacy you want. He dropped so many good tips in here. Thank you so much for being here today. Mark,
Marc Kramer 50:42
thank you so much for having me. It was
Damon Pistulka 50:45
just it was a pleasure. So everyone, have a great rest of your week and have a wonderful weekend. And we will back be back again next week on the face of the business. Mark, hang out with me for just a second and we’ll talk for a moment. Thanks, everyone.
Marc Kramer 50:59
Thank you very much for being
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