20. How to Leave a Millennial Your Business
Every good teacher wishes his student could experience the trials and tribulations which made him great. From a manufacturing plant in Pittsburgh, to an IT company in Silicon Valley, to a brokerage firm in Naples, the scenery may change but the characters do not. There you will find a company shaped by a father whose sleepless nights yearn for a success that can never be achieved. A business continued by a son whose soundless nights enjoy a success that can never be revoked. This disconnect has been and always will be one of the greatest threats to a multigenerational business.
However, today’s succession planning brings about a new host of concerns. Born between 1980-2000, Millennials are about 80 million strong, and we are on the brink of receiving over $30 trillion. Much of this wealth will come through the inheritance of small business. While taking the reins, we are typically staring at a smart phone, wearing faded jeans and flip flops to work, skipping the bank to transact money over the internet, liking Facebook and Instagram selfies, interacting with every race across the globe, perhaps wearing heals instead of loafers, working from home (or Starbucks), possibly gay or straight (and not afraid to talk about it at the water cooler), and constantly contemplating what overall good this daily rat race has on the world at large.
In addition to these new personality traits, Millennials carry some unique struggles. First and foremost, we are swamped in debt. We are recognized as the most educated generation (about 60% of us have gone to college), but we are also the most indebted. The U.S. Department of Education estimates that 2/3 of college students are getting by on loans. This dynamic is a major reason for the term “Delayed Onset Adulthood”, more commonly known as “Boomerang Kids”. We go to school for 4-6 years, spend $150k on education, only to end up back home searching for a job. Today a 30-year-old living in Mom and Dad’s basement is a common reality.
This trend affects other areas of life as well, which the economy must react to. After moving out, Millennials are prone to rent longer before settling down to become a first-time homebuyer. We are getting married and having kids much later than our predecessors. Unfortunately, we have witnessed divorce and are now contributing to the highest rate in history of around 50%. We’re watching our parents and grandparents enter or live through retirement on Pensions and Social Security, which we are told will never exist when we get there.
So what affect does all this have on the transition of your hard-earned business? Here are a few key pointers to remember in your exit strategy:
· Partners of a successful company can’t just expect to sell for an agreed upon share price and sail off into the sunset. A prolonged exit strategy that includes a mentorship component is critical to sustained success. We require hand holding. Also remember that we are starting out later in life and often climbing out of a hole of debt. This is why sweat equity or a staggered buy-out can be just as important as current day salary.
· Clearly identify the social impact your organization creates. Millennials are easily swayed by public opinion (i.e. Occupy Wall Street), and we’re liable to scrap three generations of work if it can’t be considered “Green”. If there’s no apparent righteous effort, consider aligning the business with a charity or other local mission.
· Do NOT fight technology. We love the latest innovations and are totally comfortable with change. We don’t need to see you to conduct business, we’re just as content to see you on our iPad.
· Recognize the looming competition. 67% of Millennials want to be an entrepreneur, that means you can be easily replaced. It’s ok if your son or daughter doesn’t love your job, you might have to groom a rising star or sell to a competitor.
· Prep your customers and vendors long in advance for the upcoming management regime.
· Become open-minded. It seems near impossible for a successful business owner to take advice from a 23-year-old rookie. At least hear us out before dismissing our ideas. Don’t be so fixated on how we get the job done, so long as it gets done.
· Pick your traditions, you can’t keep them all. I’d consider myself a company man, but I hate arguing with my mentor about not having a tie on every day when it’s 100 degrees in August.
· Don’t leave the barn to your kids without strings attached, we need multiple chances to fail. This is where Trusts in Estate Planning and a slow transition can be so effective.
· Get to know your son or daughter-in-law. I have seen too many longstanding businesses be gutted by an ugly divorce.
Millennials are expected to represent over 75% of the workforce by 2025. It’s time to future proof your business for the next generation of talent. We are different than your generation, but that doesn’t mean it is right or wrong. Millennials do not want to live to work, but rather work to live. We can be just as successful as generations past, but do not fear redefining success.
Bryan M. Kuderna is a Certified Financial Planner™ at Kuderna Financial Team. He is the author of “Millennial Millionaire- A Guide to Become a Millionaire by 30”.