In The Blum Firm’s Family Legacy Planning series, last week’s focus was on endowed family travel, a surprising key tip from Mitzi Perdue on how to sustain a family business. This week, we address another tip on how to build a strong family culture.
As mentioned last week, Perdue is a first-hand expert and author on this topic, daughter of Sheraton Hotels founder and wife of Perdue Farms chicken entrepreneur. Per a Dennis Jaffe study, the odds are 1 in 1,000 that a family business will last 100 years. Perdue credits her family’s success in beating these odds with the fact that her family enjoys a rock-solid family culture. That culture is instilled in kids from a young age.
In a presentation I attended, Perdue shared a number of best practices on how to create such a culture. The first tip is to teach kids the lesson of stewardship. Each generation borrows a family business from the prior generation. The founding generation (Generation 1 or “G-1”) passes the business down to G-2. G-2’s job is to steward it and pass it down to G-3, and so on. Heirs are taught early on not to spend it all. Perdue’s family lives a very comfortable life, but they frown upon extravagance and ostentation.
Warren Buffett emphasizes this same concept. When asked for tips on how to raise kids in affluence, Buffett urges G-1 to be role models for living responsibly. He stresses that our kids are watching us more than listening to us, so it’s our job as parents to live in such a way that we set an example.
To put an exclamation point on the importance of stewardship, I recall a story told to me by David Green, founder of Hobby Lobby. Green likened the Hobby Lobby business to a tree. He trained his kids that “no one owns the tree.” Each generation has the responsibility to work hard and nourish the tree, so that the tree can bear fruit. You can enjoy the fruit, but don’t harm the tree. Steward the tree so it will continue to grow and bear more fruit for future generations.
Green’s advice ties in perfectly with the use of trusts in estate planning. By transferring ownership of the “tree” into carefully crafted trusts, future generations can enjoy the fruit while preserving the tree as a long-term family legacy.
Marvin E. Blum
Marvin Blum highlights the Hobby Lobby legacy: “No one owns the tree.”