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I recently read a wonderful blog post by Barbara Taylor at the You’re the Boss Blog on the New York Times Site.  She was talking about a book that was recently written where the author strongly thinks that children should buy the business from their parents.  I don’t totally disagree with this idea, but I also like to leave room for other transfer methods of a family business.

I purchased a family business from my father.  There were rocky times where I had to pay interest only and there were times where I didn’t pay anything.  But, at the end of the day I purchased the business and I’m sure this was a better way of taking the business over than having the business given to me.

I was also lucky.  I was lucky because I had enough curiosity to learn enough business skills to be a moderately successful food service operator.  As a result of my experience of joining the family business I developed a set of rules that I think is important to follow when you have a child join the family business. 

Part of the reason I think these rules are important is because I didn’t follow any of them.  If I had, I believe I would have been a much better business owner and manager.

You must be employed at a company other than the family business and have gotten at least one promotion.  If you’re a parent, you absolutely do not want to have an incompetent child join your business.  If your child isn’t up to the task of being a contributing employee you don’t want them to hurt the business and more importantly, you don’t want to have to fire them.

Your child needs to have reached a certain level of education successfully.  I’m not a huge fan of business schools, but I think education is extremely important.  There is a certain amount of discipline that is necessary to be successful at school.  Setting a minimum level of performance and education allows you to know your child has enough discipline to hit this goal.

Your child can’t come into the business at any level that is higher than where they are presently working.  Many times a child might work someplace else before joining the family business.  When they are allowed to join the family business at a much higher job level than one they were doing at their former employer, there often is skill level deficit. 

It’s important that your children learn how to be a good manager and one of those lessons is that the family business is not a place for easy promotions.  Having your children earn the level they work at is very important.

Your child should not directly report to any family member.  There should always be a non-family employer who is responsible for supervising the work of a family member.  At some point your child might become the CEO of the company, but until that day comes, you should make sure that their direct supervisor is not a family member.

Having clear rules of what it takes to join the family business will help you know if your children are competent before they join the business.  In many families, the business is the golden goose.  We don’t want to kill that goose by allowing children into the business when they aren’t ready to not only work there, but be stars.

I’m always anxious to hear your thoughts on joining the family business.  Let me know what you think.

Josh Patrick

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Topics: Family Business, enterprise value, family business transition

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