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Know when to hire an outsider for the family business

Henry Hutcheson
Henry Hutcheson is a nationally recognized family business speaker, author and consultant in Raleigh. He can be reached at Familybusinesscarolina.com.

The ultimate challenge facing the family business owner is figuring out how to get out of the business. But what if family members aren’t an option for taking over the company?

The obvious and most attractive solution is to pass the business on to the kids who are working in the business. They have chosen this industry as a career, they have worked hard to become competent, and the estate will pass to them anyhow. Nothing can be more satisfying than seeing your life’s work continue on to the next generation, especially if it is the third or fourth.

On the other hand, there are many business owners who simply will not allow their children to enter the business – they would just prefer to avoid the potential issues that can arise with working with a family member, figuring out if they are a good fit, and managing the transition. Why not just steer clear of the issue altogether?

Along the same lines, many family business owners choose to avoid addressing the questions that can come with transitioning the business to the next generation by simply deciding to sell the business. Are my kids ready and able to take over the business? Can they get ready? Will they be able to work together? How do I divide up the ownership? What about the kids not in the business? Can I avoid potential conflict? No wonder many family business owners just throw up their hands and decide to sell.

The choice seems stark: Either go through the gauntlet of transitioning the business, with no guarantees, or end the legacy, cash in the business, and everyone can go do something else.

But there is a third option that many family businesses have found highly successful – bring in an outside professional to run the business. This is actually what we did at Olan Mills, our family photography business.

My uncle Olan had reached a point where he needed to move from the day-to-day operations as president to the position of chairman of the board. His two kids, my cousins, were in the business, but it was undetermined whether they had sufficient interest in taking over the business. As such, we brought in an outside seasoned professional as president. This was an excellent solution for our family business for many years.

A family business client of mine in the jewelry industry arrived at the same solution. The kids were all bright and motivated but still not fully equipped to take over the business. The parents had burned out from birthing and raising a multimillion-dollar enterprise. It could have been very easy to simply put the business up on the chopping block, cash in, and slide into retirement.

The children were adamant that they wanted to be in and lead the business in the future, but there was a leadership gap. So they decided to bring in an outside professional manger to manage the business, and they even shored it up with some highly qualified functional managers.

If you are at a transition crossroad, maybe bringing in an outside manager would be a good solution for your family business. To be successful, be sure to have a family meeting to discuss the matter. Spend time outlining the type of person who would be a good fit for not just the business, but more importantly the family. Realize that it will be an additional salary to bring someone on, but if done right, not only will it buy you time to decide what the best ultimate answer is, but boost your business to the next level as well.

Henry Hutcheson is a speaker, author and president of the consulting firm Family Business Carolina. Email your questions about family business to Henry@familybusinesscarolina.com.

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