I have a confession to make. In last week’s Family Legacy Planning email, I identified “business succession planning” as the most neglected area of estate planning. I grew up in a family business. Here’s my confession: our family also neglected business succession planning. There, I said it. Sometime the cobbler’s own shoes need attention.
As it turns out, in failing to plan for the transition of our family business, we are in the company of millions of others. Consider these statistics: 90% of American businesses are family-owned or controlled, yet less than one-third of those businesses have a succession plan. The family is left unprepared when an unexpected event occurs, such as the death of the owner. That’s what happened when my brother Irwin died. Irwin ran our family business, and when he died only two weeks after his cancer diagnosis, we were caught off guard. Fortunately, we had a savior—my 86-year-old mother Elsie emerged from retirement and, over the course of a year, single-handedly shepherded the business through to a successful conclusion. We were fortunate she had the skills and strength to rescue us. There was no one else besides her who knew the business and could have done what she did. Had it not been for my mother, we’d have been in desperate shape.
But not every family has an Elsie. I urge all business owners to learn from our story and have a succession plan in place. That way, if you’re caught off guard and don’t have an Elsie, your family will know what to do.
Here’s the story of our family business. When I was an infant, my father Julius started our family business. It wasn’t glamorous. It was an industrial café in Fort Worth’s meat packing district. We opened before 5:00 a.m. and served meals to the packing house employees. It wasn’t air conditioned, and our customers came straight from the area killing floors, boning rooms, and rendering plants—covered in blood-stained work clothes. The sight was one thing; the smell was even harder to imagine. I grew up working alongside my parents and brother from the time I was a mere toddler—clearing tables, washing dishes, cooking, and (as soon as I could add) working the cash register. That business gave me an education unlike anything my friends and I learned at school. It was hard work, but it provided us an honest living. My father used to say: “If you take care of your business, it will take care of you.” Indeed, that was true.
As I said in last week’s email, like so many business owners, my parents lived and breathed their business as if was like another child in the family. That day’s business was the topic of conversation at dinner every night. I understand and respect how people become so attached to their businesses, all the more reason to plan for the continuity of that business when the day comes the founders are no longer there to run it.
Over the years, Blum’s Café gradually morphed into J. Blum Co. Meat Packing Supplies. We started selling the workers knives, gloves, rubber boots, hard hats, frock coats, and all the other things meat packers use in their trade. Then we expanded into selling those supplies to meat packing businesses. I continued working in the business throughout my school years. Motivated by that school of hard knocks, I went full force into my studies and opted to become a CPA/tax lawyer. But my brother Irwin stayed on in the family business. When my father died and my mother retired, Irwin ran the business. Irwin was a dynamo—working like a machine, running every aspect of the business and keeping most it in his head. When he died, the only one who knew what was in Irwin’s head was my mother. In her mid-80’s, Elsie jumped right in with full force and took over. She’s a miracle woman.
Here’s the moral: Don’t depend on an Elsie to appear out of the blue and rescue your family business if the owner is suddenly gone. In the coming weeks, I’ll cover the steps to take in creating a business succession plan. And in the spirit of my confession, I’ll close with the adage: Do as I say, and not as I did.
Marvin E. Blum
The Blum family matriarch, Elsie Blum, surrounded by loving family. A business dynamo in her 80’s, Elsie single-handedly managed the family business transition.