572 | Second-Generation Transitions in Small Business: The Dos and Don’ts for Successors

Hey folks, before we kick off today's episode, I wanna touch on something crucial that we like to call Fake Delegation. Ever do that you think you delegate, but find yourself micromanaging or taking tasks back. It's frustrating, right?

You're left burnt out, your team slows down and your business doesn't grow. That's why we created Five ways You Fake Delegate. It comes from our own combined experiences and challenges in business, and our desire to always serve you best.

We've been there, and this guide is our way of helping you navigate those delegation missteps. Grab it from the show notes, it's free, and might just change the way you lead. Now onto our episode. Welcome back to the Chris LoCurto Show.

Today we're speaking to transitioning a family business to the next generation, the do's and don'ts for successors that is coming up next. Welcome to the Chris LoCurto Show, where we discuss leadership and life and discover that business is what you do, not who you are.

Welcome to the show, folks. I hope you're having a fabulous day wherever you are. Today we're talking about, this is part two of the transitioning a family business to the next generation.

Now, I'll tell you, you know, like I said in the last episode, if you haven't heard the first episode, you gotta go back. You gotta go listen to 571. Go listen to that first before you listen to this.

I'm gonna hit a couple more dos today, but we ran decently long in the last episode. Couldn't get it all in. And as I said, I'm just scratching the surface on this. This is just the beginnings of the dos on this.

So I'm gonna hit a couple more dos, and then I wanna jump into the don'ts of today. So, again, if you haven't listened to 5 71, go back and listen to it.

So on, we hit some amazing stuff on episode, things you should be doing, making sure that you together a phenomenal transition plan, a strategy, clear steps, clear communications, clear expectations, timelines, what is the buyout gonna look like?

You know, a buy-sell agreement. All these aspects of the things you need to do by aligning vision and goals, defining roles and responsibilities, having a a, a succession plan that we transition, the roles we transition, responsibilities, all that kind of fun stuff.

We talked a ton about investing time and training, and I can't say it enough. Make sure that you get professionals around you, the next leader, the leader, team people, and focusing on, you know, what does it look like to hand down this legacy, all those aspects.

A couple more things I wanted to just hit as far as dos today. Before we move on to the don'ts, one of those things that I think is vitally important. You know, we talked about the owner training, the next gen leader aspects of that, bringing in leadership training.

But one of the things that we really need to focus on as we go forward in this business is what does decision making for the next gen owner and leadership team look like?

You know, there's quite often what we see is, you know, the original owner will stay on sometimes as an emeritus type role, where they're, you know, kind of a guide or director, you know, somebody that you can go to to bounce ideas off of or, you know, make quality decisions.

But what does it look like if the original owner is not staying in the business at all? We transition, is there family help?

Is there going to, you know, for some people they don't want that, you know, for some next gen owners, they might not want to actually go to the original owner and they might want the independence of being able to make decisions for themselves. If so, sorry about that.

But for the next gen owner who really appreciates the father, the mother who created the business, or, or at least own the business previously and really respects the amount of knowledge and wisdom they have, is there a process that we can put together for bigger decisions, bigger guidance? Right?

I think that would be really smart for us to have that in place, to be able to go to somebody, you know, I, I, I have so many clients that have done this, and they get to go back to that family member and say, Hey, you know, here's some big things that are coming along.

What would you have done back in the day? How would you handle this situation? Right? What do you see as far as, you know, failure in this? So I think that's super important to make sure that, you know, we're not just cutting off all ties.

Hopefully we're not at all, but instead we're focusing on, you know, getting more of that wisdom into the business. So we make great decisions as the next gen, right?

Second thing is, you know, we, I talked about how our youngest, we have six daughters in our family, five of those are fully grown. And for us, you know, we are putting together, we have Rayna, who we have is new to our family, we adopted in the last year, and we're adding to a, a revocable trust.

Things that we want, things that we want to assign, right? So we're thinking through an aspect of a side business and saying, okay, she's a part of this right now. Will she want to run it later on? Will she want to own that thing?

You know, what would that look like? And what is the opportunity if something happens to us? How do we put something aside to make sure that she has that option or she has the option to liquidate it?

What does that look like? What does it look like for the other daughters in in this situation? You know, what does it look like for other aspects of things that we're doing in the different businesses?

So, I'm gonna suggest if you don't have an estate plan, you know, if you don't own a business and you have really a, you know, a salary, a couple salaries and stuff like that, you don't have a big estate or anything like that, probably not needed.

You don't need a, you can do a will. Yes. Well, they're most likely in some states, like in the state that we're in Tennessee, it has to go through probate. So we're trying to cut out some of those issues.

But really, if you don't have an estate, it's really not that big of a deal, right? It shouldn't be that difficult to go through probate. But if you do, and you have many aspects to that estate, you know, we own multiple businesses.

We don't want that to be a problem. We don't want, you know, our kids to spend thousands and thousands of dollars to try and solve this thing.

We don't want this thing to drag on for years, right? We want this to go through easily. So I'm gonna say, I would suggest and, and estate plan. So think about it this way, let's say, so for us, one of the aspects is assigning things for the future.

What does it look like if both Heather and I die? Then what does it look like for all the stuff that we own? How does that get distributed and all that kind of fun stuff.

What if you're in the middle of a buyout, right? So what about the child? Let's say you transition this business over to the next gen owner, one of your kids, and in the middle of a buyout, you pass away.

What if there's a divorce between you and your spouse? God forbid, right? It would be smart to be able to have this in place. A, at at least a revocable trust is what I, a family trust agreement is what I would put in place to make sure that you have things set up. If, if this happens, then this, if this happens, then this.

So I think that's another really smart thing to do in this process of, of setting up this transition. Alright, just a few other dos that I wanted to throw in there.

On top of all the dos that I added last time, and again, just scratching the surface, let's talk about some don'ts. Let's hit some things that I think are often missed, not thought about.

So, you know, things that we want, we don't want to stumble over as we are working on this, what should be hopefully a fantastic transition. One of those things, let's start off on the don'ts with the family Drama. Drama. We call it don't dismiss the feels.

Don't dismiss feelings and issues and unresolved conflict. You have got to make sure that you are creating awareness of feelings, issues, drama, whatever, early on.

Listen, if you are somebody who likes to deny that or hopes that it goes away or procrastinates on solving that stuff, then what I can tell you is the closer you get to this transition, those are gonna get bigger.

Those are gonna grow, grow. You might see family drama being the very thing that pulls down this whole process that affects the growth and productivity of the business. And guess what? It could be the thing that causes the transition to 100% fall apart.

So for me, what I highly suggest is that you are in constant communication on how people are feeling about things. Yes, I know that sounds so ridiculous. I don't really care how you feel about this.

Well, and this, you should, because what if somebody's feeling like they're not getting enough training on something?

What if somebody is feeling like they are way behind on understanding how to run the business, but they're not willing to share that?

What if somebody's afraid to share how they feel with you because they're afraid that if they do, you're gonna dismiss it? There's all kinds of things you need to think about when it comes to the family aspects.

I mean, you should do this anyways. If it was somebody who was, you know, a, a, a team member in the business who was gonna buy the business, but the more that you recognize that feelings are probably hidden, they're probably, you know, deep down inside of somebody and you don't know what's going on.

As they start to come out, you will start to see things unravel. So make sure that you're doing enough communication with the next gen owner, maybe even the next gen leadership team, whatever, to make sure that we're getting to a place of full understanding, clear communication, clear expectations, that you're not dismissing things, that you're understanding how difficult this may be.

You know, for a lot of owners, a lot of founders, you know, a lot of new entrepreneurs, or not even new, but just the person that has the entrepreneurial spirit, many times we're able to go knock things out. We're able to accomplish things.

You know, there's so many things I can do because that's just the way that God made me, right? But if I'm transitioning this business over to somebody who doesn't have that bend, then they may be feeling insecure.

They may be looking to tell me what they think I want to hear. They may be looking to not disappoint me. And if I just take everything at face value, then I might be doing not only my child a disservice, but the business a disservice to.

So as we say, don't dismiss the fields. Don't, you know, make sure that you are hitting awareness of what's going on, and digging in and finding out, and having great discussions and avoiding family drama. So there's another thing. What if you have other kids that are going to start to sabotage this process?

You might have other kids in the business, and if they're not the ones who are buying this out, there might be some, you know, sibling rivalry going on. Whatever it is, you can come up with all the different, you know, possible scenarios. The goal is make sure that you are completely aware of what's going on and that you're hitting it head on.

Folks, if you've been listening to me for any length of time, then you know, the number one issue when it comes to business, when it comes to family, when it comes to friendships, is having a lack of high quality communication to make sure that you are absolutely winning in every aspect of your life. It all starts with having great communication.

The best way to get that communication is to understand your personality style and to understand the personality style of the folks that you're spending the most time with, whether it be at work, whether it be at home.

The best way to do that is to go to chrislocurto.com/store and get your personality profile and personality profiles for your team today. Get it for your family members today.

As you go through that profile, you will begin to see the greatest ways to communicate. Go to chrislocurto.com/store today. The next don't is don't be too casual.

Now, one of the difficult things when it comes to family transitions or even family business, if even if you're not transitioning, is the casualness. Because you are family.

If you've ever worked in a business that was a family business, and there's multiple family members that work in it, you can see this incredible casualness among those family members. And sometimes it's really crappy.

It's really bad because what you see is there's all this leniency. There's this lack of communication because they're dealing with stuff, or talking through stuff, or handling stuff, or doing whatever, and other people on the team aren't treated professionally, right?

So there is a level of professional that you need to have when it comes to explaining the plans. You know, what's gonna happen, what's going on, not only with the the next gen owner, the child, your child explaining and walking through and working through all of these plans.

Keep that very professional. Don't, don't operate in that strategy in a way of, well, we'll be good. This'll work out, this is all fine. You know what's going on. You understand this? That is the worst thing you could possibly do.

You are setting it up for failure by doing so, right? And you're setting up family drama, and you're also setting up some team drama for that as well. Instead, tackle it like a professional, tackle it like it was somebody else that wasn't a family member, right?

How would you go about that? Make sure that you're keeping focus on the thing that's best for the business and its legacy as well as the next gen owner, right? So many times we think about one or the other.

Well, I really want my child to be successful, or, well, I really want this legacy. You know, the the thing that I put together to continue the way that it is. If you are not handling things in a very professional way, and if you're handling 'em in a very casual way, then it is a recipe for chaos.

Not just between you and the the child that you're transitioning to, but the whole team. Another thing you need to make sure you're not doing, do not smother your child.

Now again, this is a grown adult that's with you, that's taking over this business. Make sure that you give them room to breathe. Don't smother them, because now you're concerned or you're feeling like you've got to, you know, micromanage the living daylights out of them.

You don't need to do that. In fact, if you're going to micromanage them, what you're going to discover is there's a really good chance you're gonna push them away from wanting to have your input.

You may even push them far enough away that they don't want the business, right? So don't move into this phase of, oh good lord, I've gotta micromanage the living daylights out of my child to get them to a place where they can run this business really well.

If you've done, like I said in the first episode, and you've put plenty of time and plenty of strategy together, there should be zero need for micromanaging.

If you're rushing the daylights out of this, you probably feel like you have to micromanage the daylights out of it. That is going to create issues. It's gonna create fear. It's gonna definitely create fear of failure.

It's gonna create chaos inside of the team team. It may be the very thing that pulls down the whole transition altogether. So make sure that instead you're fostering a culture where they can find their own footing, right?

That you're, you're leading them in a way that they can make some of their own decisions or make a lot of their own calls. You know, allow them to make mistakes for the love. Allow them to make mistakes.

If you don't allow them to make mistakes and you're all over them, then guess what? They're gonna feel like all they're going to do is fail. They're gonna get to a place where they believe that they can't be the strong leader they need to be. So think about it this way:

If you encourage them on all the things that they're doing, well, I'm not saying baby them. I'm not saying overly compliment them. I'm talking about encouraging them.

If you'll promote the things they're doing well, then you can come behind and actually give them some correction on the things that they're not doing well. But instead of just correction, make sure that it's guidance and direction.

How should you do this? Not by telling them you're doing this wrong. Instead, a great leader would gain a ton of perspective and lead through perspective gathering.

So one of the things we teach all the time is don't just go in there and tell somebody they're doing something wrong. Instead, ask questions. Hey, I noticed, you know, this situation with this client over here, over here doesn't seem to be going a hundred percent.

Is that, would you agree with that? Do you, do you feel like that's going the best way it possibly could? Now, that's a very leading question. So probably not the best one to start with.

But hey, what's going on with this client? Well, this, this, and this. Oh, okay, what? Why do you think that is? What is there? What do you see that is probably causing this?

You ask perspective-gaining questions and lead them to learning how to get to the answer, how to gain quality perspective themselves. If you go in and micromanage the daylights out of it, and you don't teach them how to solve these problems, and maybe you did it in the past, but now you're freaking out.

So you feel like you have to ask them a ton of questions. If you do that, then what you're gonna do is most likely instill fear of failure. The more fear of failure that you're gonna instill into that child of yours, the less likely they're gonna wanna follow through.

So your whole deal may fall apart. But if they feel confident and they believe you are confident about their ability to take this business on, then guess what they're gonna want and desire to continue to run this thing on their own and build this thing up.

Doesn't mean that they're not gonna seek you for advice, but there's a really good chance that they're gonna spend a lot of time thinking, how can I grow this business? Instead of a ton of time thinking, how in the world am I gonna sink this business and disappoint my parent?

Next thing is don't neglect emotional intelligence. Now, think of emotional intelligence as being able to perceive and understand and be able to express your own emotions, but also being able to regulate yourself, right?

But also being empathetic of what other people might be experiencing. Being able to step into the shoes of other people. So with that being said, avoid letting personal, emotional or family dynamics, cloud judgment in decision making.

You've got to make sure that in these family dynamics that you're prioritizing emotional intelligence and empathy, right?

Especially in leadership interactions, because we're talking about a dynamic that most of the people inside the business don't have, because they're probably not family members.

Now, that could be, but you know, if we're talking about a owner, parent, father, mother, and a next gen owner, son, daughter, then there are family dynamics that could absolutely affect the decision making process of this next gen owner could absolutely affect the way that they are.

You know, maybe perhaps they're feeling like they need to go in a different direction of something because they don't want to do it the way that you did it.

Or maybe they're feeling the need for independence in certain areas, or maybe they're feeling like they don't wanna disappoint you, so they're gonna back off of taking some risks or something like that.

Try to spend time understanding and managing your emotions, your own emotions, while you're also empathizing with what they're experiencing.

Now, why is that important? Because as you see some of these emotional situations that they may be taking you family dynamic decision making aspects of this business, you might get fired up or triggered because you're seeing them do something that you don't agree with.

Maybe you're seeing them do something that you don't truly understand. So what you need to do is be incredibly empathetic for that next gen owner, right?

Why are they experiencing this? Why is this a struggle they're having? Why is this a decision that they're making?

Try and put yourself in their shoes and then instead of responding emotionally to the thing you don't like, you disagree with, you're disappointed in.

Instead, try to with great emotional intelligence, understand what they're experiencing, but understand what you are going through. You should be able to recognize your own feelings and your own emotional experiences at the moment, and recognize those and be able to walk yourself through those.

Then try to focus on being empathetic to your child. What could they possibly be feeling? Put yourself in their shoes. Maybe go back to when you were their age.

Maybe go back to when you were a young entrepreneur and try and, you know, wrestle with, what are they going through? Focus on perspective gathering.

Instead of using your emotions to possibly attack your child, set their reality, show disappointment. Show disapproval instead. What if you spent time trying to understand what they're experiencing?

If you could, because keep in mind guys, it's not the same situation with a leader who is not a family member. You know this family member well, and you also have a set of responses that you already have with this family member.

Now, hopefully they're all great, but what if they're not right? So make sure that you're not neglecting emotional intelligence for you, for them. Make sure that you're expressing well.

Make sure that you're empathetic for what they're experiencing. All of that. If the more you do that, the, the stronger this, the transition, the communication, the productivity, the accountability will be.

Next thing is make sure that you're not micromanaging or undermining team members. Now, we talked about don't do that with the next gen owner, your child in this process, but make sure that you're not micromanaging team members, members undermining their autonomy, that you're continuing to trust in their abilities and empowering them to contribute meaningfully to the business success.

So, what am I saying? These people have been on your team most likely for quite a while before you started this transition.

They've probably done, hopefully, if they're still on your team, they've done a great job, you've not fired them yet. So hopefully it's going really well.

So, what should you do now that you have a, you know, a child transitioning into ownership, or CEO role, or president role, whatever it is, make sure that you don't freak out and start undermining the roles of the team.

Make sure that you don't focus heavily so much on this one child that the rest of the team is neglected, right? Make sure that you're setting everybody up for success. Make sure that you're teaching the next gen owner how to set people up for success.

Again, make sure mentorship is a massive aspect of this process, whether it be not, whether being from you, being from professional mentorship. Make sure that this transition goes really well with great input, right?

Make sure that you're delegating tasks and responsibilities effectively, and that you're also providing support, providing guidance, you know, while allowing those individuals some freedom to excel as well.

It's not just about making one person who's taking over the business successful. The more you can make the team successful, the more they will, by default make the next gen owner successful. Think about that.

You hear me say that all the time. It's, it's your job as a leader to make your team successful, not the other way around, right?

If you make them successful, then by default you'll become successful. Well, it's the same situation here. Don't just focus so heavily on the, the person taking over the business.

Focus on making everybody successful by and delegating properly. Getting things off of this person's, you know, plate as they're taking over, running the business so that they can focus on the more important things about the business.

Delegate those tasks properly, effectively, and make those team members successful. By default, they will make that new owner successful as well. So, important thing to do.

Also, whatever you do, don't dismiss innovation and change. Now, you're probably gonna hear some ideas that you think are ridiculous and, and silly. Resist the temptation to clinging solely to your traditional practices.

Resist the concept of only focusing on necessary changes and innovations. Instead, keep an open mind. Stay open-minded. Stay adaptable. Try to seize some moments of new opportunity and growth, and lean into it.

Teach into it, speak into it. Gain quality, perspective, guide and direct. You're probably gonna see some things and go, I really don't think that is necessary because of your current position.

You've run this business, you've owned this business, you've made these types of decisions, but instead of shutting it down, instead of saying, you know, we don't need that kind of stuff, we only need to stick to our traditional ways.

If you do that once again, then you're yanking out that aspect of the rug from this new owner. You can't make new decisions, you can't make new traditions, you can't focus on innovation, right?

So instead, embrace the concept of perspective gathering in the process so that you can guide, direct, speak into it as much as you possibly can, but also make sure that if you're not 100% there, that maybe you allow them to move in this direction.

Maybe they can make some mistakes, but here's the great thing. Maybe you're wrong. Maybe there's things that they can do better.

I will tell you, while I, somebody who is very much focused on, and innovation and all that kind of stuff, there are certain aspects that I'm still old school. I still love Excel. It is, you know, I came from Lotus back in the days.

I, I enjoy keeping spreadsheets in Excel, and my team, especially Aaron West, comes to me and goes, dude, here's a better way and a different process.

And here's something how, you know, we can, if we do this in Google Sheets or whatever the heck it's called Google Docs, then we have other people that can be a part of this and yada, yada, yada. I mean, it's just stuff that I'm like, okay.

And so we've moved in the directions in many things that for me, traditionally work really well. I enjoy them. They're certainly, keep in mind, I am an 88 S.

Sometimes I don't like change, although I'm somebody who really focuses on a lot of change and because of doing the stuff that we teach, change is not a problem for me most of the time.

But some things that I'm like, Ooh, but I don't wanna learn a new program. Yes, but it's what's best for the team. Fine. Alright, let's switch to this. And funny thing is, is we've shifted most everything.

I'm only using one silly example of, of Excel, but it's the first one that came to mind. We've shifted most of it, and yet there's some things, believe it or not, we can't shift over.

So probably 98% of it has been moved over to easier, better processes. And 2% has stayed where it is because it operates better in that the old ways.

So guess what, as you lean in this direction of innovation and you gain perspective, and you got and direct, what you may find is the new ways are better.

And you even might find that the new ways aren't fully better. They're not, they don't handle everything the best way that they possibly should.

Last thing, do not, do not, do not, do not. Whatever you do in this process, even after this process, do not isolate yourself. Now, there is an incredible number of reasons to isolate yourself.

You've gotta guard against this. You've gotta make sure that you're not siloing you in decision making. You gotta make sure you're not siloing the child in the, the next gen owner in decision making.

You need to make sure that you're actively seeking input, that you're actively giving input, that you're actively seeking feedback and giving feedback, that you're actively looking for collaboration, that you're looking for different perspectives, that you're looking to focus on.

Strategy, which by the way, this is a great thing to be learning and teaching is, is strategy. Because it's such an important part of running a successful business. Make sure that you're focusing on healthy decision making processes.

Make sure that you're focusing on the, the, the things that drive the organizational success. If you isolate, it could be because you're struggling with pride.

It could be because you're struggling with worth issues. It could be you're struggling with thinking that struggling, you're no longer needed. It could be, there's so many different things that are ridiculous lies and silliness.

It could be because you feel like your heart's leaving and you're wanting to pass this on, and you know, I'll let them deal with everything. All of those are bad ideas.

Remember, you are vitally important to the future. So the current success and the future success of this business, do not isolate. Do not unplug. Do not make decisions solely by you.

Make sure that you're teaching quality decision making. Make sure that you're pointing out some of the family aspects that jump in and jump out of the business and how to handle those and what to do with those.

Do not isolate yourself. Instead, foster a culture of inclusivity, a culture of teamwork, right? Make sure that you're leveraging the, the, the collective wisdom, what we call taxing, the collective intelligence.

You know, make sure that you're leveraging the expertise of the team members to achieve shared goals, right? These are things that must happen if we want future success, right?

So don't isolate yourself in your running everything. Don't isolate yourself, and you've passed off everything, and we don't have all the phenomenal dues that we've talked about, the trainings, the, the mentorship, all that kind of stuff, right?

Isolation is going to be terrible. And by the way, when you isolate, you're stuck with your own thoughts. Those kind of suck, right?

Because then you start coming up with all kinds of negative stuff and negative self-talk. Just don't do it. If you isolate, it will affect this whole process dramatically.

So, as successors step into leadership roles within family businesses, and again, we've, we've talked about this mainly as one child, but you know, it might be other family members as well.

The journey is both challenging. You already know that. But it's also rewarding. It is going to be a challenge. But for the love, if we do this well, it is gonna be incredibly rewarding by everybody involved, right?

So if you'll stick to these dos and don'ts that we've talked about in both episodes that we've outlined in both episodes, then successors can navigate second generation transitions with confidence.

They can navigate it with integrity. They can definitely navigate it with resilience. The more that you help them to become successful, they're gonna take some knocks.

They're gonna get knocked down. They're gonna make some bad decisions. They're gonna, they're gonna handle things incorrectly. The more that you handle this well, the more resilient your child will become.

The more resilient they are, the more they can handle the better decision making that they can make by doing this, guess what folks? You're ensuring the continued success and legacy of that family enterprise.

So let's be smart. Let's make really good decisions on how much time, how much energy, how much mentorship, the things we should be doing, the things we should not be doing. And let's make not only the next gen owner successful, but let's continue to make this a very thriving and successful business end team.

Well, folks, that's all the time we have for today. I hope this has helped you out. Again, ask us questions, send us questions, send us things that you've experienced [email protected].

Even though this has been two episodes, they're still a scratch in the surface. But this is a lot of good information for you. If you're thinking of transitioning or or considering transitioning the family business in the future.

And maybe for some of you, this may have just sparked the idea that maybe you're ready to start walking in this direction. So hopefully we can help you. We would love to. We would love to be able to help in any way that we can.

Folks, that's all the time we have for today. As always, take this information, change your leadership, change your business, change your life, change the legacy of your family's life, and join us on the next episode.