What’s Going to Happen to My Business?

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week J gos tells us that on second thought he did learn something important watching HBO's succession he still wants to work as long as he can even he's quick to volunteer if that means dying at his desk but he now realizes thanks in part to Logan Roy that he needs to put a plan in place in case something were to happen sooner than expected this realization was also furthered by hearing the sad story of a 51-year-old entrepreneur who died in his sleep recently leaving his wife to figure out how to keep their Bank from calling its loan now as part of his hit by a bus plan Jay says he's crossing streets very carefully but also considering creating a board of advisers that will be able to offer advice to his survivors but that's a little tricky because as you may have noticed Jay's not exactly a board of advisers kind of guy so this one's still a work in progress even in Good Times owning and running a business can be a lonely Pursuit our hope is that these weekly conversations brought to you by our principal sponsor the great game of business we'll let owners know they are not alone in facing challenges same thing with our daily newsletter the 21 hats Morning Report which Inc magazine named the best newsletter for business owners and which you can subscribe to for free at 21h hats.com where you can also find transcripts of our podcast episodes and lots of other articles and interviews joining me this week on the podcast is Jay goz who's CEO of the gos group and whose companies in Chicago include a picture frame business artist frame service and a home furnishing store Jason home the episode is titled what's going to happen to my [Music] business welcome Jay it's great to have you here it's just you and me today what a rare treat for me I would to take this opportunity to to get an update on where you're thinking about succession stands it's it's kind of funny because I brought it up kind of half joking recently when I asked you to talk about your reaction to watching the HBO series succession but I've realized in our conversation since then that your thinking has continued to evolve and that you're you're still figuring things out um so I thought maybe we could kind of review some of the things that have influenced your thinking and get a read on where you stand now so to start when when I asked you about watching succession I asked you if you had learned anything from watching it and you responded absolutely not but I gather from our talk since then that you've thought further about that yeah this is it would be like if you were enjoyed downhill skiing and you watched a TV series watching people get killed skiing every day I don't know how it couldn't affect your thinking about so it has affected it and that I realized wow um if I got run over by the you know the bus would everything fall in place and everyone no it'd be a mess and one thing that I've realized is there's really two completely I don't know if they're completely separate but they're separate issues one is long-term what are you going to do with the business and the second piece is what if there is no long term and you just you know get run over by the bus that's a whole another subject which I hadn't thought enough about I can't tell you that I've got everything in place well enough that you know I just got a book Harvard Business Review family business handbook how to build and sustain a successful enduring Enterprise I haven't read it yet but I recognize I need to do more to attempt to get things in place attempt is the key word being there this topic came up a couple years ago in a conversation we did on this podcast with William and Paul and as I recall neither you nor Paul really had a plan if if you got hit by that bus but William did he described a very thorough approach to a kind of a break in an emergency box that he has that lays out everything anyone would need to know uh and establishes you know a process what should happen you obviously didn't do anything after that conversation what changed well I do have a thing typed out about you know just some thoughts about it but I didn't actually put anything in place like here's a board here's I I I I could do more that's for sure so I haven't done anything with that and two is when we had that conversation I was 65 now I'm 67 and it makes a difference and I have to tell you on top of this on top of watching succession and on top of my son who gave me this book Dad we really need to do this okay I'm not arguing with that the third thing is I've got a longtime supplier that I've been buddies with since I was 22 years old and he took over his family business and he's 72 and much to my surprise he just sold it and now he's going to work for the guy and his kid's also working there he's going to work for the the person and it just shook me up a little bit just like wow um it just surprised me let me stop you there for a second do you know that that was not a good outcome no no not at all I just recognize he took over the family business and worked hard and did a good job and made a really good living for years and I'm an entrepreneur I went from zero my business is more than twice the size of his and he was I think working more in it than on it as they always say and and maybe this was the perfect solution for him I I just between that and another guy know who also took over the family business he told me he's got two kids in it they're in their 40s and he has announced to them I need to look out for myself the building is now worth more than the business and he might just sell the building and be done with it so the point is I'm having a hard time finding one business that went from first generation to Second Generation that they pulled it off and it's just has made me think that you kind of got to work at this and uh both of those stories it's you know as you get older and you your friend start to retire and stuff in this case it's just how can you not say wow what's going to happen to my business so it's making me think more let me ask you what you mean by that finding one business that has pulled it off because I know you've talked a lot about being in uh peer groups where one of your concerns was that you were with a lot of second generation owners so obviously it does happen are you saying that just in your circle you're not you've seen some examples that didn't go the way um actually that's a fair question I haven't been in business groups for you know a while now these are people that I was personally doing business with so that's different but B I look at some of those second generation not pretty lots of them were going broke while I was in the business group with them lots of them were miserable lots of them were fighting with their father or fighting with their brother so it wasn't always pretty was there any examples in sure now that you mention it yes I can think of a couple of them but not many I don't know if the statistics right but they say only 20% of businesses get to the second generation it's a matter of what are your objectives maybe getting it to the next Generation isn't an important objective maybe you've made enough money and it's time to just hang it up I mean that is you know in many cases the way it goes sure it seems to me and this I'm only speaking for myself that's for sure number one money how important is it okay the money in my case is not going to make a difference for my family's lifestyle I've I own the real estate along the way and the real estate is actually more valuable in total than the business so this isn't about oh my God I got to squeeze every dollar out of this business or you know we're not going to retire my wife's not going to whatever so so to money's one two is family in some cases it's just how do you integrate your family into the business and have them take it over or maybe they want nothing to do with it so it's really figuring out in my case I just want my kids and my wife to be happy I if they don't want to be involved it's fine three your employees I certainly want to do everything I can to keep them gainfully de loyed and look out for them I'll do what I can I don't know that I can pull that off but I certainly am going to try and lastly my customers have been a loyal customer base for 45 years I most certainly would like to be able to continue to take care of their you know what they're buying and that would be a shame but again there's only so much control I over have over that so in my mind those are four completely different objectives and some peop would be completely in a different order and some people are hung up on Legacy or whatever and some some people absolutely need to get every dollar out of the business so it depends where your head's at so those are the objectives let me ask you about the employee one a little bit there because that's been part of our conversation you got real interested in possibly doing an ESOP uh at one point as you learned about how that works and the opportunity to not have to pay taxes uh the more you learned the more unsure you were and ultimately you decided it it wasn't right for you just to be clear I'm not sure at all anymore I know for me it makes no sense that that was my conclusion after thinking about it for six months and looking into it for sure doesn't make sense for me I'm sure it makes sense for other people and when you came to that conclusion you thought about other ways that you might be able to do well by your employees and part of what had kicked this off was your concern that not enough of them are saving for their own retirements you thought about doing something that you were calling for a while a 401j the idea being well maybe you can explain it you were going to no it's very simple I realized you could just go ahead and give them a certain percentage of their salary into their 401k plan you've checked the box for saving taxes and you check the box from them retiring and that's a good plan if in fact the business continues on and I I think that is something that is a is a viable thing for many companies so is that still something you're considering sure but that's assuming the business is going on and I'm healthy and I go to work you know I I'm not in a profession like a dentist or a lawyer or something there's some people that they need to retire at some point because it's either mentally or too physically demanding when you own a business and you're not actually doing the work every day I think you could work pretty much until however you want to or can't I might be coming to work on M82 I frankly I hope I'm going to work on M82 so I have no desire whatsoever to retire and go to Florida and go sit on a boat or do whatever it is they none zero we know your view of golf yes so no so I'm perfectly happy um I I talked to a guy who's who did an ESOP for Big Money real big money someone gave me his name and he was you know very open about it and he goes oh I've got two houses down here and two boats he goes you don't want to die at your desk and I go yeah I'm not sure that's true I don't know the dying your desk of the worst thing so we laughed and at the end of it he said yeah you shouldn't do an ESOP so in my particular case I want to go to work I at the moment as long as I can so that's probably an unusual piece of the puzzle I don't think I'm the only one though I know numerous people that feel the same way so that's part of the whole thing so yeah the 401K thing certainly could solve taking care of employees but as far as the long-term employment yeah it'd be best if you could figure out how to keep the company going for sure there's some irony in the fact that you actually worked with Bo Burlingham when he wrote his book on this on the topic of succession you came up with the title uh finish big well remember let's give me credit the reason it came to me is I gave him some all Giants so I'm his title got I'm very proud of that I did read the book it was a great book that was a while ago I think it didn't address the situation you just described uh which is I think the book is is more about helping business owners find exits it's less for someone who is open to the idea of dying at their desk or or or bringing the family in I mean um that's the point it's it's about exiting but not necessarily selling it incredibly coincidentally my banker calls me who I'm tied with and she tells me she's got a 51-year-old customer that she was moving from the old bank to the new bank and he died in his sleep and the Widow's calling her obviously extremely upset about not only her husband dying but she had to tell the Widow I have to tell you something that I don't want you to overreact or worry about but you are now in technical default with the bank which means they can call the loan they can call the loan and the woman's very upset and unfortunately she hadn't yet transferred it over to her bank it's still at the old bank and the woman had been calling for 2 days to the old Bank who was bought by the conglomerate the big bank she left messages now keep in mind her husband died on Sunday Monday she's calling the bank Tuesday with Urgent Message no one's called her back that's the reality of what goes on in the world I'm like I certainly don't want to put my wife in that situation nobody should want to leave their husband or wife or kids in that situation so I do think it's really prudent to go through and just have some kind of plan in place because um if not I believe that you could be making it 10 times worse for whoever's Left Behind have you put enough thought into this to know what the most important elements of a you know hit by the bus plan would be no but um I I believe it probably is going to include having some board you put together that you know the people well you've got relationships with them and you've had meetings with them you've had conversations so they are best equipped to assist in what to do with the business versus this is my nightmare and it was part of it was in succession what would dad want oh Dad's rolling that would that would just the worst thing oh Dad's turning in his grave oh this is this is pissing on Dad's leg I don't want any of that stuff I want them to be well equipped to be as well educated as possible and do what's best for them and I did put that in my my letter of do whatever feel is necessary the last thing I want to do is hang this on my wife or kids like you have to figure out how to keep this going like I I want to do as much as I can to try to make a smooth transition which is 180 degrees from what happened in succession could it have been a bigger show I don't think so I mean the siblings going after each other everybody thinks they should be left in charge well you mentioned the uh the idea of having a board that can provide some guide guidance and help to go through this transition and you mentioned that it would be essential for them to be familiar with the business and to you know know what's been going on you you've been running your company for quite a few years now you could have created a board at any point for other reasons to help you manage the company to have you know inside and outside directors and that doesn't sound like a Jay goz kind of thing you I have no it isn't I have absolutely no no I really I don't I you know what people say I I joined the the business group cuz you know they hold me accountable like that makes me want to vomit really you need someone to hold you accountable what what is that this is just me again I don't want to preach to anybody in my mind if you own your own business take responsibility for yourself and do what you need to do I I certainly don't need a business Budd to go hey Jay I thought you were that's not the only reason to have a board it's not just to have somebody uh hold you accountable it's also to get diverse opinions about decisions I guess I'm just thinking out loud here could I find some people and put them around the table I certainly talk to people and get you know and get input from people I I'm not trying to talk you into this J I just that's just not on my list of things to do like gee I wish I had a but actually it is you you you are saying now it is yeah if I'm not here right well but you can't have the board that ignites the moment you go is that what you're saying or are you going to have them prepared and involved in the business before you get hit by the bus that's an excellent question that's an excellent question I'm on that journey I think you have to have them in place yeah I can do that and and I will do that no no that makes sense I just I can't you know you get to to 67 it's like who knows what's happening and I I just I want to do whatever I can to avoid any potential nightmares you know you hear those radio ads all the time oh nobody wants to talk about life insurance I do I don't have a problem talking like let's be grown-ups and deal with reality and not leave our the woman I just talked about who whose husband died what a horrible story that is it is so I'm gonna do what I can but you're right I should I should put it together before you get hit by the bus yes yes and I'm very careful when I cross the street I want to mention because I don't want to get hit by the bus let's take a step back for a second there are lots of people leaving businesses right now they many of them want to sell them and are finding out that they just can't do it in part because they didn't prepare to do it they didn't do the things they would have needed to do to get the business in shape to be sellable let me tell you one that's just interesting my son does Real Estate development and he's bought several legendary businesses mostly restaurants that ended up getting bulldozed why what happened was they stopped paying rent to themselves because the building was paid for and frankly their prices were too cheap I went to dinner at one of these legendary places everything on the menu was at least 10% under what you would have thought it would have been all they would have needed to do is treat the building as a business and treat the business as a business and instead they were subsidizing the business with the building that they weren't paying a mortgage on and it made the business unsalable what a shame all they would have had to do was raise prices they would have made money and someone could have bought the existing business so that happens all the time so the question is we've got this whole infrastructure of consultants and Specialists out there waiting to help businesses and yet we have all these businesses that are struggling to figure out a way to exit you've been on this journey can you explain that absolutely as we all know I'm a business junkie I love figuring stuff out and trying to figure out how to do things right and I can tell you I spent all morning looking for the family business advisor that would be the right one I talked to some people I know they gave me a list of people I should talk to and on the list I went to about four websites three of them don't have phone numbers you should just email them and like I don't call that really customer driven did you enter an email no I just I want to deal with customer driven people I find that insulting I really do and then I found one a major university that is a well-known a family business thing I called them I left a message on Tuesday and I never got a call back and then there's another University that has wait it's Thursday so that's two days okay really that it should take them a week to call a prospective customer I mean really I I just so maybe they'll call me tomorrow maybe they're calling right now I don't know all I know is it's not like they've done a good job of marketing and going out there and getting to people like me and saying Hey listen we've got some Services they don't do a great outbound marketing thing they're not making it easy to find them and my guess is they get their businesses when it's already in distress I can just tell you from being a consumer and owning a business I don't see ads for these things I I get emails for all kinds of stupid stuff I can't think of the last time I got an email from someone saying hey we're with the blankety blank family business center we'd love to invite you to us I haven't seen it so just like the ESOP experience I went through I don't think these companies are great at reaching out and finding entrepreneurs I could I'm not exaggerating when I tell you this I get three emails or phone calls a week for that ERC credit it's like never ends you know the employment ertc the employee retention tax credit yeah I'm telling you not exagger I was at the I was at the cleaners yesterday wait the guy was helping me the owner picks up the phone I can hear he's talking to someone calling him like there's a whole Army of these comp the radio a lot of money to be made on that tax CR I can't think of one Outreach that I've seen for a family business um company that helps you with the these transitions I don't think they're marketing right and as a result I think a lot of these businesses could have been saved salvaged whatever do you think it's mostly a marketing problem or an expertise problem do people just not know what the answer is oh I think it's both I have a friend he's an electrician he's going to retire one of these days I go well well clearly your business no it's not worth anything I go you got a phone number you got a 40-year history he's convinced that his business is worthless and I've talked to more than once I gave up on it I'm confident that somebody would pay him something for his business so I think people just don't understand how to sell their business and don't put a lot of energy into it and they just go out of business it happens all the time do you know with your friend what the key issue is what could he have done that he didn't do to prepare for this day a he apparently has enough money that he need to sell it um which is I believe the case that's a good thing yeah I think he um I don't know I just think that he I I don't know he just never focused on it maybe I know it's just like you think it would make sense to him when I go wait a second you have a phone number you do this is the same convers I'll tell you it's the end of the same movie all of the people that I'm talking about like that they don't have great-looking websites they don't have any marketing to speak of they built a business by Word of Mouth they've made a really good living for years they're good at what they do but they don't turn all the dials and in my case turning all the dials means when you're done figure out how to sell your business for some something and keep your employees working and I just don't think people are thinking about it or how about this one they just dropped dead game I mean they didn't have a choice to do it you know and then what that the kids are supposed to figure it out the husband the wife's supposed to figure it out it's a shame it's it's absolutely a shame think about it you got to think there's a competitor out there that could make good use out of your mailing list out of your phone number and I see I've seen it with frame shops um they just close I mean they're worth something even if you can't sell it clearly the phone number the mailing list a letter from the ex-owner saying hey here's who I re that's got to be worth something even if it's $20,000 why wouldn't you they don't do it I mean that's just the way it is you've talked to us a lot about starting your business at a time when you know that infrastructure we've been talking about didn't exist you didn't have a mentor uh there weren't lots of programs that you could turn to for for help for advice and it's kind of here we are 40 years later it almost sounds like you're still on the the same Journey figuring it out for yourself so do I think it's better now marginally do I think the universities are doing a great job of Preparing People to start their own business from what I've seen or to sell their own business yeah right um no absolutely not I I've talked to enough students I've spoken at these classes I've seen what their outlines are and it gets down to this in my mind is why small business is difficult if you went into accounting you'd get a degree you'd work in an accounting firm you'd be mentored you'd figure how to do it law same thing medicine same thing advertising same thing car mechanic same thing you go in business for yourself the degree is certainly it's worth having accounting class no question about it but the marketing the management piece from what I can see they're still not who's teaching these classes academics teachers that have never been out there running businesses a medical schools the person teaching you is a doctor it's the Doctor Who's looked into people's eyes that said listen I'm sorry to tell you but you've got fourth I mean they they they' they've been doctors they can relate there are people whove filt and run businesses who do some form of teaching I mean you you can a lot maybe not and maybe not enough okay so you've got that piece that it's not as teachable as these other professions and then secondly you're on your own I mean that's why we do 21 hits I I don't know where they supposed to be mentored from you're in business for yourself and unfortunately I had to learn the same lessons that the person had to learn in 1843 I mean it's not like there was a book out there that you could read oh here's how you run now we get to the end of the road to selling your business it shouldn't be a surprise to any of us that people aren't prepared to sell their business and like I said I'm I read things I listen to things I haven't heard any of them reaching out to business owners and reaching out to get people to to get educated on what all the possibilities are and all the things to think about because what I figured out in just the last few days this is more complicated than it appears it just is you got the family piece the employee piece the money piece the customer piece the legal piece there's just a lot of things here and I am confident if somebody had some good Council they could do much better than what's happening now which is in most cases I think that's a fair statement in most cases the business just closes one day so back to your situation as we've discussed many times since we first started talking about these kinds of issues you have two kids that work in the business you at various points haven't been entirely sure whether they wanted to take over the business ultimately uh or or not where does that stand today two of them work here one's in charge of the you know the it stuff and the other one is is taking care of real estate and dealing with some Financial stuff and is taking care of some projects that we need to be working on they both are here they both seem to be want to be here will they want to be here in 10 years will they want to be here in 10 week I don't know and I keep telling them if you don't want to be here you know it's okay I don't I don't want to hang it on them but it sounds like you may need to prepare for the possibility that they don't want to take over the business yeah absolutely I don't want to hang that on them I I it's not like either of them have said no I'm 100% sure I want to be running this company in 20 years I don't want to force them into doing that and and the other issue is if I stay healthy could I be going to work at 82 yeah I could I I know people to go to work at 82 it's not yeah so the point is I got to have some contingency plans and I want to put something in place that is flexible and my number one priority there's no question I'm not going to call this a balancing act my number one priority is that my family is happy and no one feels cornered with anything and they're doing what they want to do and my number two priorities I want to try to do the best I can with my employees and my number three thing is is money I luckily because I own the real estate I don't have to depend on this to be my retirement egg so but like I said it's far trickier than I used to think about and I wasn't thinking about it that much why would somebody um but succession certainly helped that along cuz uh watching that was just painful I just I've just realized yeah I need to work harder on this and I am do you have a guess as to what your ultimate plan might be uh in terms of the contingency plan if your kids don't take over at the moment my guess is if I sold it to a third party they would screw it up I'm pretty pretty confident of that and I got a weird business I got four different five different businesses you know I've got two different art business but you know I think they would screw it up two I think my employees would pay the price for it so at the moment my best options I believe are either my kids oversee it to some degree and stick with it or I figure out some kind of weop and work it out a weap where you sell it to a key or a couple of key employees yeah now the pro but but that's got a problem also if I'm working in 15 years my key employees are going to be in their 60s so that's that's not going to work either it would actually have to be with other people that have come in since so I it's it depends when that event happens um it could be in a month it could be in 15 years so that's why I say I can't tell you that I'm going to have the perfect plan but I certainly can do something to at least have some options most of the advice that I do hear given to business owners is here's how you exit here's how you sell the business you here's how you get out of it you don't hear a lot of discussion about what here's how you continue to run it as long as you are enjoying getting something out of uh running it well that's easy no one's making money on that one no one's making money by convincing you keep running your business where oh you want to let me do a valuation for you and let me do some training for you and like it's a whole industry and like I can't blame them that's fine but there's no incentive for anybody promoting hey why don't you just keep running your business and don't worry about it no one's going to make any money on that that's related to the issue lots of people I know have said to you you need to hire a number two and it's a lot trickier to hire a number two when you're planning on running the business as long as you can no absolutely I mean it to go hire somebody oh Jay when are you gonna retire yeah maybe 15 years from now maybe next month I don't know I I just don't know how at this stage I don't know what the person would be doing I right sit at my desk and you know watch what I do go on the podcast Lauren's calling here will you do the podcast today Lauren I got somebody to take my place today I you know I it's that's why I say anyone who goes oh no you should have a succession okay you can try to have a succession plan I'm all for that I just don't know that it can be Ironclad if you were in my mindset which is I want to work as long as I can that's and you're right you don't hear about it anywhere I haven't that was Logan Roy's plan on succession that's exactly what plan was yeah and you know is his age in the show he was 80 I mean rert Murdoch who you got a the show was he's 92 he's going to work every day right I mean so you know I don't know I'm certainly not I don't I I mean I don't want to there was a for those of you old enough to remember La law I'll never forget this because it what was that 30 years ago maybe at least they've got the father and the son in a lawsuit the son is H 50 something the father's 80 something and they're suing each other for control and finally the lawyer who's friends with both of them says to the guy he goes Benny whatever his name was Benny why are you suing what's the why are you why are you in this lawsuit and the old man just wistfully looks away and he says I don't want to be the old man just sitting in the corner and the son gets very emotional oh Dad you and they hugged each other and it solved the whole problem but like I don't want to hang on too long either I mean if I'm not providing any value and I've just turned into the cranky old man I set you up for that one you can say J you're already there there you go uh I don't want to just be the cranky old man who's picking up nails or you know there there might come a time where you're no longer serving a purpose I'm not sure I want to work till the the day I die I probably don't but there's clearly a a place in between and um so one of the options would be my kids lose trust don't want to do it I bring somebody else in yeah maybe that's why I say there's lots of options I just want to be as prepared as I can be and I know I'm not alone in this as much as you say unusual okay maybe it's not 50% but I'll bet you it's 20 30% of people like to work into their 80s I think I know some of them I think most of the business owners that I've spoken with do imagine an exit at some point and and then looking for something else to do um you know maybe no I'll tell you what a lot of people are listening send Lauren an email Let's do an informal thing let's see if we can get 100 responses are you planning on retiring or do you want to work as long as you can um and be productive that would be Lauren l n at 21 the number two the number one hats.com I'd love to hear from you I'd love to get those 100 responses my thanks to Jay goz and to our sponsor the great game of business which helps businesses use an open book management system to build healthier companies you can learn more at Great game.com and please do send me that email Lauren 21h hats.com wait wait don't leave yet if you have a question or a comment that you'd like the 21 hats owners to address send it to me by replying to your Morning Report or by email at Lauren 21h hats.com that's l r n21 hats.com do it now before you forget and don't be afraid to tell Jay what you really think he can take it and if you got something out of this conversation help us reach more business owners tell a friend subscribe and review us wherever you get your podcasts follow us on Twitter subscribe to the morning report at 21h hats.com this episode was produced by Jess dubron founder of blank word Productions okay now you can leave thanks for listening everyone [Music]