236: Jonathan Goldhill — A Business that Lasts Generations

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Hello and welcome again to the Scaling Up Business Podcast. Today's episode is particularly relevant if you're in a family business or if you work with family. So family business or work with family. If you're involved in any way with issues in that realm, you're gonna love today's show. Hello and welcome again to the Scaling Up Business Podcast. I'm your host and scaling coach Bill Gallagher. So on the show with me today is another coach who specializes in a particular area of business because of his background. So Jonathan Goldhill joins the show today. We'll talk to Jonathan. Just a minute. I want to remind everyone that we bring shows like this to you every week. We go live with them now when we can recording and we drop them on itunes and that kind of thing on Wednesday mornings. We've done over 230, so there's a pretty good chance that there's an episode on almost anything that you'd want to know@scalingcoach.com so go to scalingcoach.com, find an episode relevant to your interests or whatever, anything to do with people, strategy, execution, cash, or the fifth decision that I like to talk about, how to scale your own leadership style as you go through. So all the things related to all of that are leading authors, gurus, CEOs, success stories, other coaches, that kind of thing. A world of good stuff there@scalingcoach.com in addition, if you could use some help finding a coach right now, I know demand for coaches is an all time high, but we have 200 coaches around the world so we've got somebody who could help you, who'd fit your style, that kind of thing. If you're interested in getting some coaching now for you and your leadership team around, anything to do with the world of scaling up, getting started or Improving your execution of the scaling up framework. We've got somebody who could help you at kind of all levels of coaching investment. You know, there's a range of things that you can do with our coaches. So all that scalingcoach.com Jonathan, welcome to the show. Everyone. Jonathan is down Southern California, right?

You're like Southern California? That's correct. Area in between LA and Santa Barbara.

I'm up in the Oakland hills outside of San Francisco, but I'll be down there later this week. We've got a couple of sessions down south where we're going live with people.

Wow.

Live in person.

Right. Something I haven't done in a while, Bill.

Right. But mostly they're outside or well distanced and that kind of thing. So most people are pretty savvy and careful about it. I know that it's mindful or on top of mind. Folks, you should know that Jonathan, he's an experienced coach in the scaling up world. He's been a coach for, I don't know, 20 years or something now.

Yeah, 20, 30 if you include the consulting before that.

And so he's done economic development work, he's been a coo, he's done a range of things and he has background in this world. So I'm really glad to have you on the show today to talk about kind of the unique challenges of that. And you've got a book now?

I do. I have a copy of it on my bookshelf right here. Let me grab it. It's called Disruptive Successor, A guide to driving growth in your family's business. And I've got a beautiful endorsement from none other than Vern Harnish on the top. So very nice, very proud of it. Comes out, it comes October 27th. It'll drop on Amazon, be available.

That's awesome. So we're going to talk all about that and you'll share some stories and things like that from the background. Before we get quite into that, would you say a little bit more about your background? Sure. Kind of a picture of your life story so they know you're credible.

Gotcha. So, yeah. So my story is that I'm the product of a family business that was three generations. It was into the third generation and I would have been the fourth generation had it stayed around. But really not a lot of family members were interested in the business by the third generation. And it was a large apparel like clothing, men's suit manufacturing, business headquarters, corporate headquarters in New York city, large factory, 500,000 square foot factory in north Philadelphia. And this was a business that really defined our family. Like it wasn't. I would ask my mother, like, who was in this business? She was. Everyone in our family is in this business. But by the third generation, Bill, it had been so successful that I think the family members were no longer interested. And so I missed that opportunity to get into what was a very successful business. My family actually sold it in 1966, continued to operate it with lifetime employment contracts, which is like unheard of for a CEO and COO. So 20 years later, they closed the doors in 1986 and I was 20 when I decided to move to California and figure out what was my passion and find my dream. And I did some entrepreneurial stuff. I did a lot of nonprofit business ventures that I started was grassroots organizer back, you know, up in your area in Oakland and ended up going back to business school after having an art and clothing company that I thought was going to be very successful, only I didn't choose my partner very wisely and he was a pretty crazy artist. And so it sent me back to business school with an interest in studying entrepreneurship and consulting. And from there I basically spent the next 30 years. I ran a business for 10 years that did consulting, training and financing for small and medium sized businesses, most of whom were family companies. And that led me to just go on my own after running an Internet company for a little while. So I really like family businesses. It took me full circle back to my family's business and. And I just found myself working with so many families and I see like different dynamics that are going on that, you know, that are layered on top of the scaling up or growth dynamics that you talk about, which is that fifth. That fifth, whatever you want to call it, fifth angle or dimension. Yeah, yeah, huge, hugely important. You know, and that's basically what my book is about is how to grow your leadership skills in a family business in that context.

So I've coached multi generational family businesses before and I've been on advisory board for generational family business and they are complex. Plus I worked with my wife as the CEO of her company for 11 years and she was the founder and CEO of the company. I came in, took over as CEO and changed her role. And, and that was eye opening experience for like lots of dimensions. Right? From it was eye opening from how to run a business to that kind of a business, how to work with your spouse, the impacts on our relationships. Right. And then during the time I also employed some of my siblings and you know, when you fire or let go a sibling it can make your holiday dinners a little quiet for a little while.

Right. It can put a. I'm dealing with that right now. I have a very favorite client of mine who's up in the Santa Cruz area, always invites me to stay over. I'm part of the family. And there was a falling out with the stepson, and it, you know, it goes back. There's a lot of history that goes back there. And so I don't. I can't get into too much details about it, but there's, you know, it's been crickets between the two of them for nine months now, so.

So you shared a story about a landscape landscaping company.

Yes.

Maybe talk about that whole what went down there and how you manage that.

Sure. So, I mean, this was a. This was an interesting situation. So A young guy, millennial, 25, 26 years old, comes to me, and he's been basically like a production manager, vp, you know, commercial division of the landscape company. And he's like, I want to take over the family's business. And it was kind of already known that he was a pretty ambitious entrepreneur and that he didn't have necessarily the education or any kind of a roadmap as to how to build this company. It was not a very large company. It was doing a million and a half, $2 million a year, varying between vaccinating between 10 and 20 employees. And so when he came to me, he said, look, I really want to roadmap to scale this company to 5 million. And then I want to do that in, like, five years. And fast forward, we're now at, like, ten and a half million in five years. So we doubled that. But so in the process of doing this, mom and dad are splitting up, and I'm helping to transition the mom out of the bookkeeper role. She wasn't doing a very good job. It's so typical that you see this where the woman of, you know, I don't mean. I don't want to cast stereotypes here, but I see a lot of male contractors who use their wives as the person who does the books. And QuickBooks is such an easy program to learn that they go ahead and, you know, they're running with things, not realizing that the chart of accounts are getting very messy. There's no job costing. There's no real accuracy in the data. And so it took us a while before we got, you know, we went through a few different bookkeepers before we got the right person. But the mom ended up exiting the business, and we negotiated a buyout which was really based on that current valuation. And now we've, we've literally like had a 36% compounded annual growth rate over the last five years. And you know, she's missed out on that unfortunately. But it's been a really phenomenal success story. And I, I can keep going on and on in depth if you like. But you talking about how we use some of the things I'm sure your guests have heard about, like, you know, how we came up with a purpose, a new purpose, a different purpose, because the old purpose was just about putting food on the table, you know, feeding the kids and being able to have enough money to go skiing in Tahoe.

Survival based purpose.

Yeah, survival based purpose, exactly. And just like, you know, I know I can be a good landscaper. I was a pretty good chef. I know enough about green stuff, horticulture. So. But you know, when you're starting to build a business and, and you want to turn a mom and pop business into a corporate enterprise, it's a whole new ballgame and it takes a different mindset.

That transition is one big one. I heard. The other thing I heard that's applicable not just to family business, but also, well, and complicated ownership roles. So when you've got founders that are owners but no longer playing a key role, separating the job from the ownership, I think is a key thing. And one of the companies that I worked with really had, they had some siblings involved and they had to separate out the roles they played, what they actually did for the company, which they put a market rate on.

Right.

They paid themselves a market wage, but then they got a share of the proceeds based on not their work but their ownership. So I think those things get collapsed sometimes. I've got another team right now that's got that issue where one of them is doing a lot of work and ought to be paid a lot. The other is putting in some time but not as much and not playing as critical a role. So a different level role, but it's all collapsed.

The pay.

They haven't separated out the profit sharing with that other piece, but with the company that successfully navigated this, they did do that. Another one that I was on advisory board for had collapsed roles. Like you said, a mom who was involved with running some of the accounting side and a couple of siblings and a dad and then a younger kid who had come in and who was now playing the CEO role. And they couldn't agree amongst themselves and they couldn't acknowledge the role that he was playing at that point. Point.

Yeah. I think this is, you know, and I. The secret, I think, to running a family business successfully is to run it as a business the same way you would run any business and to try and take the family dynamics out of what's going on in the business. But this is where it gets challenging. And I think this is where my expertise has come into play very well. My mother was a therapist. I grew up in an environment where, you know, family therapy was not only like conducted, owned, it was expected. And so being able to have those conversations that are difficult conversations with family members about their roles and responsibilities. And when, think when the tensions get high, like, hey, we got to take this out of the boardroom and take it somewhere else. Like, you know, take it out in the field, go for a walk, like you guys go for a hike together or something. But it's. They've got to be looking at the business and the business roles. And I, I think it gets more complicated when it's a multi generational business and there's younger people. But look, there should be a compensation committee. Like boards have, probably compensation committees. Maybe not so much in privately held companies, but let's, let's set the comp challenges with profit sharing and equity distribution and how to. But these are the same problems that you have in companies where you're raising money and you're trying to put a value on what the investment capital's worth versus what your sweat is worth. So difficult stuff, but, you know, you got to have these conversations and got to separate them.

As a coach, I always feel like it makes a big difference if I'm willing to come in and say, hey guys, it's time for us to separate your jobs comp from your ownership comp and to work out an agreement and all that. Than it is for me to say, tell you the CEO, if I tell the key lead in the family or even a partnership, hey, it's time for you to do this. It's very hard for you to go do that. Even bringing it up. I find a lot of people really resist bringing it up and dealing with it. And I had one team where it took a couple of years before the guy finally found his opening. But I can say in a second, hey, listen, there's an issue here, right?

It's, it's, it's obvious to you and.

Me emotional attachment to it. I'm like, listen, you guys have got collapsed your ownership and your pay and your roles, and we need to separate out all those things so that we can manage this beast appropriately, right?

Yep. 100%.

I think if you're advising or coaching one of these companies, I know we have quite a few coach advisors. I would definitely speak that up rather than try to let the your lead contact do that.

Right. I have a good example. I'm trying. I've been coaching a CEO of a company out in New Mexico, and it's father, daughter with a cousin involved in the business. And the father's no longer active in the business, but he takes a lot of money out of the business on an annual basis. And, you know, to be able to scale the company, I mean, we got to true that up. We've got to figure out, like, what's a fair value. And someone's got to have that conversation. And I don't think that my client is going to have that conversation with her dad. It'll be much easier if I walk into the room and say, hey, this is the problem here. You know, we need growth capital to grow. You're taking too much money out of the business. You know, let's set a price if you want to sell it. And that was the reason why this. My client came in to run the business in the first place, was it couldn't sell the business, couldn't get the price tag that the owner wanted. So now we got to be realistic. What's it really worth? And let's figure out how we're going to transition the ownership to the next generation.

Well, I've seen that on two sides. I've seen one where people aren't paying themselves enough. They're like a really crappy pay rate. Hey, I'm only paying myself 75 grand a year. I was like, wow, how do you live on that? And, you know, knowing the area that they lived and that kind of thing, it seemed really like a significant challenge and knowing the costs of living their family. The other one that I've also seen, though, is they're paying themselves an exorbitant amount and running all kinds of extra personal expenses through the business. Right. Which does everybody get a car whose boat payments are somehow included?

Right. Yeah. Well, in this case, it's a few house payments, you know, a few different homes. Yeah. It becomes real problem. And, you know, what's the first thing that we tell all of our clients? Like, you know, you got to confront the brutal facts. Jim Collins said, right. You've got to face reality, and you're not being honest with yourself if you think that your business is worth millions of dollars or more and you're bleeding cash out of the company. So this is, these are not easy conversations for any coach with any client where you have to have a let's come to reality conversation. And you know, we see it, but.

We also hear that same idea in the ideas of Profit first which is really useful for founder run and closely held companies to help you learn to manage the business. We've had Mike McCall, we've done one or two shows in the past with Mike McCallo. It's including covering Profit First. So the idea of paying market rates for things and optimizing the profit in the business instead of trying to keep the profit at zero and cram everything through it to minimize your taxes, let's be smart about this thing. It makes the business saleable, investable. It lets you borrow money more easily when you need to do that. These ideas actually make, but we also make the business healthier. We also see that running through the power of one tool. We're talking about optimizing the business for profit and cash and we can bring industry norms to that kind of thing. So it's just good business, period. Right?

100%. Yep. Totally makes sense. And you know, sometimes dealing with. Just had a get out of a board meeting last week with a client who's using Profit first and they're looking at the decision of do we take 50% and move it into our rainy day account or do we distribute out 90% and protect ourselves against what maybe looks like a contingent liability, a pending lawsuit, sort of one of those nasty wage an hour lawsuits that comes from an employee focused law firm. And we move 90% off the balance sheet out of the company and then know that hey, there may be a capital call at some point. So these are, these are good practices. They're not easily managed if you don't have a controller who can handle all those different bank accounts. It's, you know, you're moving a lot of moving parts, but it's good stuff.

So tell us more family stories. Okay, so or, or whatever.

Right, yeah. So you know, so one of my clients is an interest. Let me a couple of stories come to mind. So one of them is a client that's up in Oregon and it was started by the father and the father is, you know, this, what I would call this typical entrepreneur type. And the entrepreneur type is someone who loves to start things and he's a, he's a great salesman. He can sell anything. But when it comes to putting processes and putting make sure he's got the right people in the right seats, it's kind of like it's not that well organized. And so the son became the successor in this business and decided that the son wanted to live in a different part, wanted to live in Southern California, down in San Diego. And so he spun off a marketing firm that he's running out of San Diego. And meanwhile he's got the title of the CEO of the Oregon firm, which is more of a software as a service type of business. And so he's running two different businesses. The challenge is that the father who is the founder is not local anymore. He's living in Arizona, like on the golf course. And the son is trying to run the company from San Diego. So how successful is that Oregon company going to be in terms of driving, leadership and vision? And it could be, but the boots just aren't on the ground there. And so we brought in an outside president who is shaping things up. But I think it's really difficult when you have a father, founder and a son successor who both have some of those same entrepreneurial strengths. They're really good at sales, they're really good at relationships, but they've got too many other things going on to really run and treat this baby as a, you know, as a business that needs to be grown and you know, the teenager needs to grow up. So that was an interesting challenge. The same stuff we cover the same lessons, you know, people, strategy, execution, cash and leadership development. We're, we're dealing with those same things. But I think it's again about taking stock. They ran for too many years without having that president and that per. That present person on the ground really driving the leadership. And they put a CFO in who did a nice job with the books, great. But he didn't drive any vision or leadership there. So, you know, another one of my clients is in the 3 PL, so third party logistics, warehousing, distribution. And this was really like a business that was started out of the guy's garage and went and got a warehouse and started by what is, you know, probably guys in his 70s at this point. And he, his son came into the business at a young age, but he brought me in years ago to say, you know, I need you to coach my son to get, level him up. And it wasn't that easy, I have to say. You know, so I really think that the entrepreneurial aptitude is, I think it exists within all of us, but I don't think the synapses and the wires are connected for everyone. Not, not everyone has that drive. And so figuring out is like, I'm looking for that guy who's got that drive and is either going to be what is now called a transgenerational entrepreneur. So that's your father was an entrepreneur, you're an entrepreneur but you're not going into that unsexy, tired looking business that your dad started. Like that's old school, you're going to start something else or that next generation leader who's going to work with the father to get the father. And I'm stereotyping, sorry that it's a father. It might be any kind of a founder, certainly could be, you know, but that's just the statistically, you know, it's mostly a father. So is to work with that father to help him transition out of the way so that you can drive the future. So you know, it's these dynamics show up in and you know, you just don't know who's going to be the who who's going to show up. But you've got to deal with what's present and work from there.

And also the understanding the types. Right. So I have a friend who I know this guy and he's really great at making friends, at opening doors, at making phone calls, at things like that. But planning is a real push for him. Right. So I wouldn't put him in a CEO role or a COO role, but I wouldn't hesitate to put him in a key sales role. Right. But also maybe not even a sales management role. Right. And then I think about our family business and so my wife started the thing. It's very female centric. She led it, always had that kind of vibe. And our daughter has often wanted to do something with her not necessarily associated with the old brand or sometimes going in and out of wanting to be with the old brand. But. And what does she bring? Well, you know, she's very young, so at this stage she hasn't developed all of those things. But she's unbelievably creative. Right. So where they collaborate on a creative idea, things go really, really well.

Right.

Understanding the dynamics of each one. I always know that I've been great with strategy and with kind of the sales side of things and the communication. But relationship management and execution. Well, in the world of execution, I always had to use and lean on the hab, right. The framework and key people. But like anything, it seems like there's, there's the family dynamic which complicates the already important personal dynamic.

Right.

Who are you? Do you know who you are? And are you willing for someone to relate to you as what you're good at and not good at.

Yeah. And so, like, one of the things that I would always recommend to someone who's looking at bringing their son or daughter into the businesses at a young age, like maybe your daughter's age, you know, is, hey, I want you to like, work all the different positions. Bill, I don't know if you've ever worked in a restaurant. I know I have. And you know, you started, right? You started like, okay, that's such great.

Boot camp for operations.

It is. You know, I remember my first restaurant job at 16. It was like, you know, I came in as a busboy and, and next thing I knew, I was like sweeping the front, you know, patio and, and I was sweeping the back. And then, oh, you need his dishwasher. Oh, oh, you need it as like, you know, a short order cook here. So, you know, you played a lot of roles and it's, you don't really understand how to work the front of the house in a restaurant until you've worked all the positions in the back of the house. And so the same thing applies to the business. Like, go and try all these different roles and try them and let's see which ones you like, let's see which ones you're good at. And, and let's start to understand what your strengths, your unique abilities are. And you know, and the other thing is that if you've, once you've already done that, matured some, then send the child out to go work for a real company like a, like a successful middle market or larger company that's got great systems and processes. Let them go learn on that company's dime and then have them come back and bring all the wisdom and intelligence that they learned after a couple of years there. You know, that's how you school someone.

There's enormous value in that.

Right.

Of getting a broad perspective and getting outside the business. So if you've grown up in the family business and only ever worked in the family business and you didn't ever go get any corporate or other business, you probably have a very narrow view of what's possible. And it's so important to go out and do some of that other stuff to broaden the perspective. I think about a couple of corporate jobs that I had that was really, really useful in learning how things operate at very, very different scale, how to work through people, how to work when you don't own the business, when you're or are really closely related to the owner.

Yep. And you know, there's a lot of unfair advantage that family members Have. And so, you know, that's one of the things I school my clients on, like, do not overcompensate family members just because they're family. You want to pay them 5%, maybe 10% over what that market wage would be. Okay. But their benefit should come from equity ownership. Let them get their, you know, their dividend distributions from that, not from, you know, paying them an unfair wage. And because everyone's going to see, like, people, people talk, especially in small companies, and people know what you're making. And you know, if you're being paid $150,000 for what is a $60,000 or $90,000 job or even $120,000 jobs, you know, it's not, it does not create good culture in the organization.

Well, and, and even if you're trying to be discreet about it and finesse something, right. People are going to see you roll up in the Jag and everybody else still driving a Toyota.

Right? Exactly. Not cool. Definitely not cool.

So it's gonna be revealed. You know, it's interesting. I, I, so I worked with, I noticed in your stories, I worked with a husband and wife a couple years back who were very interested, like they were thinking about succession. And our work went well initially, but we ran into a stumbling block and that was they couldn't agree on the bhag and they wavered on the bhag. And I feel like if you waver on the long term goal, the whole point of the coaching and succession is somewhat obviated. Right. Like, what are we even working on? And then you don't want to spend the money or the time to do the kind of work to clarify things. If you can agree on some of that, which is Rockefeller habit number one. Right?

Yep, yep. Yeah. I'm dealing with that situation right now with a client where we set a BHAG a few years ago and it, it was pretty clear and it was 30 million by 2030. But now the, the founder who is the majority shareholder, who is in his middle 50s, is saying to himself, you know, I don't need this to be a $30 million company. Like, I'm, I'm good with the way things are right now. Like, and you know, we all, like a 30 year old can bet the farm because they got 30 years ahead of them. A 60 year old is not betting the farm because it's like they don't want to take that kind of risk. So we may be at a crossroads and I think honestly that it comes down to really good execution. Right, Bill, if you Know if guys like us who are in their back pocket can help engineer consistent profitability, consistent growth, not, you know, wild crazy scale up, you know, blitz scale kind of approach. But like we're talking maybe 10 to 20% top line growth with, you know, significant improvements in their bottom line, maintaining a 15 or 10 to 20%, you know, profitability at all times. I mean, then that kind of, let's call it conservative approach can look attractive because you feel like it starts to become consistent.

Yeah. So you've got a job, you've got income, which is really important to a lot of folks, not necessarily important to somebody wanting to grow and sell at an earlier stage in life. My wife and I disagreed about this for a long time. I'm like, I want to go to 250 and beyond. And she's like, yeah, I don't really like, does the world need that? I don't know if I want that. I don't know if I want to play at that level. And we really had, so we worked on some approaches to it, but fundamentally I wanted to grow a lot and she did not. Now we did some things well and some things not so well along that process. But it was really interesting how that dynamic was further complicated by the family relationship. So if we had just been partners, we might have either worked just subconsciously at cross purposes or we might have split up. One or the other would have left the business because of a different direction. But because we're married, that would mean like a whole bunch of other things until we, we actually did change and she, she actually took the business in a different direction and I went and became a full time coach. Right.

So yeah, I think otherwise compromise is in order. If you want to keep the family unit together, you got to make a compromise and it's going to be either, you know, her way, your way, or the highway, as we say. Correct.

So talk some more about the development and the succession plan. So planning the succession and then going to work on it. Tell us about that.

Yeah, so I think that it's really important that just like you're looking at any leader, you're, you need to look at the skill sets of the, of the person. What do they need to learn, to grow, to develop and you know, do they have that leadership capability? And so, you know, by the way, some in many businesses that I'm working with now increasingly. So there's multiple family members in the next generation. So you're now having to choose who is the, you know, the successor heir that's going to Be the CEO. And so that is the first part of the work is really evaluating the leadership capability and potential of that person. And do they have what it takes and what do they need to learn? And so I know that my clients are involved in things like coaching, they're involved in a CEO peer group, they're maybe involved in their industry association where they're learning from their peers. So that's really important. And then there's this whole other dynamic that's got to go on where we put together a board of advisors. And this is typically, I call this your boat, your business ownership advisory team. And this is your wealth manager, your insurance agent, who's maybe a trusted advisor, your lawyer, your cpa. It's the trusted advisors that are going to help you to transition the equity from one generation to the next. How is it going to be done? Is it going to be done through a lifetime gifting exemption? Is it going to be done through a purchase? Is it going to be financed? So all of this has to be discussed and figured out. And this takes, I think, a few years, a lot of times, because these are the conversations that people don't want to have and that people are slow to dealing with conflict in this area. So that's a couple of the dimensions that come to mind immediately. But there's a lot of work in that succession planning dynamic. And I wouldn't say that I'm an absolute expert in it, but I know who the right people are to bring to the table. So we can start facilitating that conversation because, you know, you need to bring. Right, an appraiser who's going to evaluate the business. You've got to decide on. Is this an appraisal method that we're going to use year in, year out, or you know, to as new family members come in, you know, what's the process to distribute stock. So bringing the people to the table and acting as the general contractor, if you will, is one of the roles that I relish doing more in the future.

Well, it seems like one. You've got to have some interest from someone. My dad wanted me to work with him forever and I just didn't want to do it. I didn't want to do it. Whole father son dynamic, like I don't want to go there, but a little bit of broke his heart like that. I didn't want to do that. And I know that not only did he love me, but he also thought that I would bring a different perspective to growing the business, which he probably hoped would take it in a Different direction, but I was. So you got to have interest and then you got to have some skills. Right. And some self awareness, some experience to apply the skills. Right. And then there's the whole plan that you point to the valuation, the transfer, who's going to get what? I've seen where that can get really ugly between a family who's gotten very used to taking, getting a certain amount of income and, and then wants somebody else to take a higher role, but doesn't want to give up anything.

Yeah, I mean, fortunately, I guess so far the clients that I've been working with, this transition has been pretty smooth because people recognize, you know, a lot of them have already taken, you know, built up a lifestyle that is already paid for and they're not looking for a lot more. They've already got the second home, they've already got the nice cars. They've already, you know, put money into their houses and fix them up. So, you know, fortunately, that's been a manageable situation, but it becomes unmanageable where the one who's owning and controlling most of the stock wants to continue to use it as a piggy bank or you know, their personal atm. It just, look, it doesn't, it doesn't work that well that way.

Yeah, well, when you're the only one involved, it can work. Right, right, right. When you're the only one involved. Now, it creates other kinds of issues with resentment among the, the regular staff. It creates potential issues if you are, if you push the boundaries of what's kosher from a tax law standpoint. There are lots of places where that can get you in some trouble. It can certainly create mischief with lenders.

I think it's a problem with other family members who choose not to go into the business.

Yes.

Because now you've got. So what do you do? I mean, I have one, a client who's got five sons. Two were in the business, one exited. So one is. And they were all given some ownership in the business. But how do you divvy that up? Like, do you say, okay, I'm going to give 20% to each of the five family members? I mean, the math makes sense, but that makes no sense to the one family member who's been running it for the last 10 or 15 years and feels like, hey, all of a sudden I have minority control in a company that I've grown and my siblings are benefiting from all my hard work. I mean, that's not fair and it's not right. But then on the other hand, so you Give most of the ownership and equity to the son who's running the business. And the other ones, maybe, you know, what else is there to give to them? Like, you know, you'd only have maybe a house, a couple of, you know, you know, that's where most of your, like most of your ownership, your equity, you know, your money is tied up in your business. Simply. It's, you know, how do you divvy that up? It's so.

Well though, I've seen it where they did exactly what you said. They divvied up equally among the siblings, but they didn't give like an executive kicker for the guy who was running the thing. And the others had minor roles. They had some role, but they had minor roles. And then one was doing the bulk of the work and he should have had a bigger equity bump as well. Just as you would give. So you would give some equity kicker to a CEO, a C level person in the company and you wouldn't give that same thing to everyone else. So as a family member I might get something. As the CEO family member, I'd get a little bit more and I'd get a different pay level as well. But I'd have some ability to control. Then the other thing would be like total equity versus could you alter the control of the company?

Right.

The voting rights and so on. Or do you want, maybe you want it right now?

I have not worked a lot with family councils. I don't know if you have, but multi generational businesses that have family councils.

That'S one or two.

Yeah. So that's where you, you can give more control and authority to an outside group and let some of the people who are there in the family council, but there's professional advisory folks that are there to guide the, these difficult decisions. And I think that's got to be the answer where you have family members that are not in the business. So there's seven different potential stakeholder groups in family businesses. You just like do the diagrams, do three Venn diagrams. You know, one is owners, one is employees and one is family members. And you'll see there's seven different stakeholder groups. They, they overlap and it's not easy to please all of them. And this is where I think having some outside people who are part of this business owner advisory team can bring some independence and hopefully they're not biased.

So before we move on to some of the key takeaways from this and your resources, I want to remind folks of a couple of things. First of all, if you're watching this live or the video recording today or tomorrow before it hits itunes, we want to let you know that there's a well, even if you watch later, you could get the date, the free download of this. So there's a free webinar tomorrow as I'm speaking live with Vern Harnish and Daniel Marcos about the four secrets to doubling the cash flow and 10xing the value going through. This time, they're going to do a quick intro webinar and give you guys it's 90 minutes long, it's totally free and you can get started with a few key moves that are really relevant to this time. Of course, they've got other things that you can can buy and you can do the whole scaling up thing and buy into that after the fact. But they'll be doing this on Tuesday the 13th or you can watch the replay later. We've got the a link to to that in both the notes here as well as in on the crawl on the screen right now if you're watching on video. So that's tomorrow and then a couple thanks to people for for some of the other stuff. So if our show helped you, the thing that you could do for us that would be most appreciated would be to give us a review, give us a rating and a review wherever you get it. So on itunes or wherever else you're watching, your full rating there really helps us to get discovered and seen by more folks. You can also share the show, pass it along with people and that helps us and of course helps your friends, whoever you give the show to. If you think that they've got a family business or are working on scaling up. We do a new show like this every week. So you can subscribe right in itunes or Spotify or wherever you're getting the show or you can go to our website, scalingcoach.com and find not only this show, but all the shows and subscribe to get a notice every week when we put out a new show. So all that@scalingcoach.com, as well as if you'd like some help finding a coach or you want to give us some feedback on the show, drop us a note, ask us a question. The email is info scalingcoach.com that'll get somebody on our team who will reply to you info scalingcoach.com I want to give special thanks to Lucy Summers, our show producer who's in the background working things, gets things ready before and after and helps promote the show and to Vern Harnish the author and creator of the Scaling Up Framework, the original Rockefeller Habits, and then to some of the others on the team. Our audio is edited by Albert Burge at podfly Productions. The show notes are written by Ayn Codena and then proofread by Tim McGowan. So let's go to some of your stuff. I want to remind folks where they can get what they can. So here's what I'm hearing so far. If you want to run a family business, well, you want to treat it like a regular business and you want to treat the family members like executive leaders within the business and or owners and deal with those different parts. You got to have a plan, you got to run it the way that you would any kind of business and not let the informality of the family situation degrade the running of the business. Right.

You nailed it.

And then I kind of hear the desire to grow balanced with and finding that, that path that the family can align around the people who, so somebody who wants to lead and continue to lead and then develop that path of leadership against a common vision. I think those are the key things that I heard. Did I miss something?

No, I think you got it right. And you know, like any business, you need to have like a framework or a playbook, whether it's the Rockefeller habits or in my book I put together a 7Ps playbook that's much simpler. But yeah, I think once you have this playbook that you're going to implement into your business, then you move the family dynamics, the personal conversations, the stuff that doesn't belong in the business room and moves outside, you move it elsewhere. And so let's just take for instance, I get into the book a little bit about decision making and the types of decisions that need to be made. And I get into the book also a little bit about communication and how to communicate effectively with one another. So you've got to really separate family psychological rivalry type stuff from where are we taking this business? And they get convoluted and you, you need to, you know, unconfabulate them, if that is a word.

So, so everyone, thanks to Jonathan Goldhill, author of the Disruptive Successor. You'll find information about the book@disruptivesuccessor.com of course, we'll put that on the scroll here on the screen as well as in the show notes. Jonathan is from the Gold Hill Group. Thegoldhillgroup.com Jonathan, thanks so much for talking with our listeners and sharing a little bit of your wisdom in the new book. With the scaling up audience today.

Bill, thanks for having me on the show. Doing a great job.

Yeah, thanks so much everyone. We'll talk to you guys again next week. In the meantime, keep scaling up.

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