Good article! I would add, though, that "think[ing] generationally, not transactionally" doesn't necessarily mean keeping a family business within the family. Over the course of my career as a lawyer representing small businesses, I've seen too many examples to count of parents passing their businesses on to their children, only for the children to run the businesses straight into the ground, leaving customers upset and loyal, hard-working employees without jobs. I've also had the misfortune of working alongside colleagues whose main qualifications for their jobs were their parents' status as owners of the business (or something similar, like being the spouse or paramour of an owner).
Rather than selling out to private equity or a huge, faceless corporation based outside the locality, a good approach may be to train up a trustworthy, meritorious subordinate to succeed the owner and to purchase the owner's equity, perhaps on installments over time, when the owner is ready to move on. Another good option, if the company is too big to sell to a single buyer or to a small group of buyers, is to transfer it to the employees en masse via an employee stock option plan (ESOP).
We Americans are so obsessed with our supposed meritocracy that we're blind to a fact of life the rest of the world is well aware of, that nepotism is a real scourge.
Thankfully, there does seem to be a growing interest in alternate ownership structures that don't require going public, which can also bring many problems.
Behind what we are seeing was there a reality of owners, not apprenticing followers? Hence selling out to someone else is the only option. Is this the reality of developing a management class, but not a next generation of ownership class.
Perhaps, but I see the issue as more deeply rooted in economic structure. Private equity can vastly outspend the local aspiring “owner class” when acquiring a company. They benefit from greater access to cheap capital, along with regulatory and tax advantages, leaving locals unable to keep up.
A surprising number of young people are blaming capitalism, but as I have said before, the real enemy isn't capitalism but corporatism, favoring Wall Street over Main Street.
We still haven't confronted the problems laid bare by the Global Financial Crisis, in 2008. ☹️
Thanks for a helpful commentary, Aaron. I do see some young people launching businesses in Indy, such as Jefferson Electric, or Buck Westrick with landscaping. Or all these people selling subscriptions on substack.
FWIW -- a contact recently moved from Wall St. to down here in the South to launch a venture as a business broker / lower-mid market M&A investment banker, helping Boomers do exactly this: sell their small-to-mid-sized local businesses and retire.
He told me that initially he thought there would be some cultural resistance from the prospective sellers to what he's doing. Some skepticism that he would do right by the employees, customers, other stakeholders in the company. He was all geared up to convince these prospective sellers that everyone would be taken care of.
But so far, he tells me he has encountered virtually no questions of this sort. All anyone he talks to wants is the largest possible price tag before cashing out and moving on. Of course, the other part of this is the kids generally have no interest in taking over the family business, either.
Good observation. I will point out that we have had preached and observed here at our church is that nowhere in the Scripture is idea of retirement. Abraham, Moses, Joshua, Israel, the OT prophets and the Apostles didn't retire. We are called to serve until the Lord takes us home. After you have finished earning a living our calling as Christians still remains - to further His kingdom. There are myriads of ways to do so, but I don't think moving to Florida (or any other locality) to just lay around, play golf, shuffleboard, etc. is God-honoring.
but he that keepeth the law, happy is he." - Proverbs 29:18
I can hardly think of anything showing less vision than just lazing around a golf course with folks even older than yourself. Everyone deserves a break, but idleness is dangerous to one's observing the second half of that verse.
Sure, get your vacation, but then get back in the fight, no matter how old your are!!
Great article. I think about these sorts of things a lot, in particular how successful people nowadays tend to switch out their local friend group for a new group of bicoastal folks. The extreme example has been the nerdy tech billionaires hobnobbing in Hollywood, which still looks ridiculous to me.
It shows, also, how dangerous the notion of retirement can be. I'm not sure you can make an argument that retirement is unbiblical (for instance, Abraham moved away and remarried after Isaac married), but it's not prominent, certainly.
Also, gotta say that a classic case of checking out was our own Texas governor, Rick Perry, who after years of bashing California for its poor business climate, told an NYT interviewer how enamored he was with California, and thinking of moving there when he stepped down!!
I’ve heard of seniors snowbirding in Florida but not children abandoning their parents in the snow to go to Florida themselves, that’s cold…
I have to say, here in Austin we have more small, independently owned HVAC/plumbing/paving/roofing businesses than you can shake a stick at. (On the other hand, the medical practice I work at is the only one in the area that remains independent, all the others were taken over by big corporations during COVID, we only survived lockdown by sacrificing lots of salaries and roughing it out instead of selling out.)
Maybe the difference here is a regulatory one? Or is it that many entrepreneurial types had no choice but to flee to states like Florida during draconian lockdowns in their home states?
The parents have more money than their adult children, which is why the oldies are the ones snowbirding. Thought to point that out in relation to your first paragraph.
Good article! I would add, though, that "think[ing] generationally, not transactionally" doesn't necessarily mean keeping a family business within the family. Over the course of my career as a lawyer representing small businesses, I've seen too many examples to count of parents passing their businesses on to their children, only for the children to run the businesses straight into the ground, leaving customers upset and loyal, hard-working employees without jobs. I've also had the misfortune of working alongside colleagues whose main qualifications for their jobs were their parents' status as owners of the business (or something similar, like being the spouse or paramour of an owner).
Rather than selling out to private equity or a huge, faceless corporation based outside the locality, a good approach may be to train up a trustworthy, meritorious subordinate to succeed the owner and to purchase the owner's equity, perhaps on installments over time, when the owner is ready to move on. Another good option, if the company is too big to sell to a single buyer or to a small group of buyers, is to transfer it to the employees en masse via an employee stock option plan (ESOP).
We Americans are so obsessed with our supposed meritocracy that we're blind to a fact of life the rest of the world is well aware of, that nepotism is a real scourge.
Thankfully, there does seem to be a growing interest in alternate ownership structures that don't require going public, which can also bring many problems.
This is ironically reminiscent of Atlas Shrugged.
Thoughtful article.
Behind what we are seeing was there a reality of owners, not apprenticing followers? Hence selling out to someone else is the only option. Is this the reality of developing a management class, but not a next generation of ownership class.
Perhaps, but I see the issue as more deeply rooted in economic structure. Private equity can vastly outspend the local aspiring “owner class” when acquiring a company. They benefit from greater access to cheap capital, along with regulatory and tax advantages, leaving locals unable to keep up.
A surprising number of young people are blaming capitalism, but as I have said before, the real enemy isn't capitalism but corporatism, favoring Wall Street over Main Street.
We still haven't confronted the problems laid bare by the Global Financial Crisis, in 2008. ☹️
Powerful piece. Perhaps one or two months in Florida, rather than six months in Florida, would be just the ticket. Two months is a lot of vacation!
Thanks for a helpful commentary, Aaron. I do see some young people launching businesses in Indy, such as Jefferson Electric, or Buck Westrick with landscaping. Or all these people selling subscriptions on substack.
FWIW -- a contact recently moved from Wall St. to down here in the South to launch a venture as a business broker / lower-mid market M&A investment banker, helping Boomers do exactly this: sell their small-to-mid-sized local businesses and retire.
He told me that initially he thought there would be some cultural resistance from the prospective sellers to what he's doing. Some skepticism that he would do right by the employees, customers, other stakeholders in the company. He was all geared up to convince these prospective sellers that everyone would be taken care of.
But so far, he tells me he has encountered virtually no questions of this sort. All anyone he talks to wants is the largest possible price tag before cashing out and moving on. Of course, the other part of this is the kids generally have no interest in taking over the family business, either.
Wow, that's really sad.
Good observation. I will point out that we have had preached and observed here at our church is that nowhere in the Scripture is idea of retirement. Abraham, Moses, Joshua, Israel, the OT prophets and the Apostles didn't retire. We are called to serve until the Lord takes us home. After you have finished earning a living our calling as Christians still remains - to further His kingdom. There are myriads of ways to do so, but I don't think moving to Florida (or any other locality) to just lay around, play golf, shuffleboard, etc. is God-honoring.
"Where there is no vision, the people perish:
but he that keepeth the law, happy is he." - Proverbs 29:18
I can hardly think of anything showing less vision than just lazing around a golf course with folks even older than yourself. Everyone deserves a break, but idleness is dangerous to one's observing the second half of that verse.
Sure, get your vacation, but then get back in the fight, no matter how old your are!!
“All right. Saddle up. Let’s get back into the war.” PFC Conway, Sands of Iwo Jima,
Great article. I think about these sorts of things a lot, in particular how successful people nowadays tend to switch out their local friend group for a new group of bicoastal folks. The extreme example has been the nerdy tech billionaires hobnobbing in Hollywood, which still looks ridiculous to me.
It shows, also, how dangerous the notion of retirement can be. I'm not sure you can make an argument that retirement is unbiblical (for instance, Abraham moved away and remarried after Isaac married), but it's not prominent, certainly.
Also, gotta say that a classic case of checking out was our own Texas governor, Rick Perry, who after years of bashing California for its poor business climate, told an NYT interviewer how enamored he was with California, and thinking of moving there when he stepped down!!
I’ve heard of seniors snowbirding in Florida but not children abandoning their parents in the snow to go to Florida themselves, that’s cold…
I have to say, here in Austin we have more small, independently owned HVAC/plumbing/paving/roofing businesses than you can shake a stick at. (On the other hand, the medical practice I work at is the only one in the area that remains independent, all the others were taken over by big corporations during COVID, we only survived lockdown by sacrificing lots of salaries and roughing it out instead of selling out.)
Maybe the difference here is a regulatory one? Or is it that many entrepreneurial types had no choice but to flee to states like Florida during draconian lockdowns in their home states?
The parents have more money than their adult children, which is why the oldies are the ones snowbirding. Thought to point that out in relation to your first paragraph.