What can the Great Pumpkin and Charlie Brown teach you about succession planning?
For old time’s sake, we watched It’s the Great Pumpkin, Charlie Brown this weekend. It brought back memories of the fun of Halloween and trick-or-treating. You never knew what you were going to get, but it was sure to be good, right? It was candy, free candy! When my kids were little, it was like a national holiday. So much so that my son dressed up his “brother” — a favorite stuffed animal named Wolfie — and took him trick or treating, too, so he could haul in twice the loot! (It worked because his sister was sick and couldn’t go.)
But not all Halloween candy is the same. Sometimes it’s a Snickers or a Butterfinger. Other times it might be a piece of bubble gum or jawbreaker. Or if you’re Charlie Brown, it’s a rock. (Aaarrrg!)
So, you may be thinking, what does It’s the Great Pumpkin, Charlie Brown and succession planning have to do with one another. If you are the next generation, a lot.
For the next generation in the business, knowing you are someday going to own all this may feel a lot like trick-or-treating. You may not know exactly what you’re going to get but it’s exciting to think about. Could it be Godiva chocolate? It might be Twizzlers. But what if it’s a popcorn ball? (I love popcorn balls but we throw them out. They’re too risky.) What if it is a rock?
For example, what if your family owned a series of successful Blockbuster Video stores in 2007. Mom and dad were transitioning the business to you for an agreed-upon price, which is financed by a combination of traditional lending and the Bank of Mom and Dad. Business appears to be booming and growing, with prospects for a long future. Servicing the bank loan, as well as mom and dad’s nest egg, over 10 years should be a snap.
But wait. As the next generation, do you know how the business makes money? Do you know if the business makes money? Are elements in place for the business to thrive and grow in value? Are mom and dad going to let you run the business or still treat you like their child instead of their peer? Are systems in place or is all the know-how still with dad? What’s going on with competition, technology, and trends? Are there changes coming at us? How serious is this Netflix thing? (Are people really going to purchase their movies through the mail, let alone online? Come on!) Do you even like the retail-movie business?
By 2010, Blockbuster hit the skids and filed for bankruptcy. The company’s 9,000 stores were down to 1,700, which Dish Network bought at auction in 2011 and then promptly shut down all but 50 of them by 2015.
It sunk like a rock.
What if our fictitious Blockbuster franchisee had read the tealeaves and instead sold his or her stores in early 2008 at the first sign of Netflix gaining traction? The family could have converted their illiquid assets into cash. True, the original dream of the legacy would’ve changed into a different legacy. However, cash is cash and the proceeds could’ve underwritten new adventures for either mom and dad or the next generation.
How do you know if your business is a really a rock in disguise? The sooner you figure this out, the better. Especially if there is work to be done to strengthen things well before a transition.
The best way I know is by obtaining an objective assessment of the business to identify the characteristics that are its strengths and those that are weaknesses. The assessment should also include researching and understanding the company’s external opportunities and threats. Armed with such insights, you understand where the business stands, what value drivers are in place to propel it forward, where the most risk is, and what actions to take so you can grow.
Many companies use a facilitated strategic planning process to accomplish this assessment while others may have an advisor perform a value enhancement analysis or an operational review. Either way, the driving force is the willingness on the part of the owners and management to look critically at the business, be as objective as possible, and commit to acting. Goals and action plans are set in motion after the assessment. The collective knowledge and focus becomes powerful and energizing. The business has renewed direction. The current and next generations know which houses to go trick-or-treating at to maximize their haul of Snickers and Jolly Ranchers, lowering the risk of ending up with a rock.
If by chance you do get Charlie Brown’s rock, you could try trading with your little sister. But be careful — it could be a wolf in disguise.
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