What's Going To Happen To My Business?

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Loren Feldman:
Welcome, Jay. It’s great to have you here. It’s just you and me today.

Jay Goltz:
What a rare treat.

Loren Feldman:
For me. I wanted to take this opportunity to get an update on where your thinking about succession stands. It’s kind of funny because I brought it up half-joking recently when I asked you to talk about your reaction to watching the HBO series Succession, but I’ve realized in our conversations since then that your thinking has continued to evolve, and that you’re still figuring things out. So I thought maybe we could review some of the things that have influenced your thinking and get a read on where you stand now.

So to start, when I asked you about watching Succession, I asked you if you had learned anything from watching it, and you responded, “Absolutely not.” But I gather from our talk since then, that you’ve thought further about that.

Jay Goltz:
Yeah, it would be like, if you enjoyed downhill skiing, and you watched a TV series watching people get killed skiing every day. I don’t know how it couldn’t affect your thinking. So it has affected it, in that I realized, “Wow, if I got run over by the bus, would everything fall in place?” No, it’d be a mess. And one thing that I’ve realized is there are really two completely—I don’t know if they’re completely separate—but they’re separate issues. One is, long-term, what are you going to do with the business?

And the second piece is, what if there is no long-term and you just get run over by the bus? That’s a whole other subject, which I hadn’t thought enough about. I can’t tell you that I’ve got everything in place well enough that everyone. I just got a book: Harvard Business Review Family Business Handbook: How to Build and Sustain a Successful Enduring Enterprise. I haven’t read it yet, but I recognize I need to do more to attempt to get things in place. Attempt is the key word.

Loren Feldman:
This topic came up a couple years ago in a conversation we did on this podcast with William and Paul. And as I recall, neither you nor Paul really had a plan if you got hit by that bus. But William did. He described a very thorough approach to a kind of a break-in-an-emergency box that he has that lays out everything anyone would need to know and establishes a process—what should happen. You obviously didn’t do anything after that conversation. What changed?

Jay Goltz:
Well, I do have a thing typed out, just some thoughts about it. But I didn’t actually put anything in place, like, “Here’s the board.” I could do more. That’s for sure. So I haven’t done anything with that.

And two is, when we had that conversation, I was 65. Now I’m 67. And it makes a difference. And I have to tell you, on top of this, on top of watching Succession, and on top of my son, who gave me this book—”Dad, we really need to do this.” Okay, I’m not arguing with that.

The third thing is, I’ve got a longtime supplier who I’ve been buddies with since I was 22 years old, and he took over his family business. And he’s 72. And much to my surprise, he just sold it. And now he’s going to work for the guy and his kid’s also working there. He’s going to work for the person. And it just shook me up a little bit. Just like, “Wow.” It just surprised me.

Loren Feldman:
Let me stop you there for a second. Do you know that that was not a good outcome?

Jay Goltz:
No, not at all. I just recognize, he took over the family business and worked hard and did a good job and made a really good living for years. And I’m an entrepreneur. I went from zero. My business is more than twice the size of his. And he was, I think, working more in it than on it, as they always say. And maybe this was the perfect solution for him.

Between that and another guy who also took over the family business, he told me he’s got two kids in it. They’re in their 40s. And he has announced to them, “I need to look out for myself.” The building is now worth more than the business, and he might just sell the building and be done with it.

So the point is, I’m having a hard time finding one business that went from first-generation to second-generation, that they pulled it off. And It just has made me think that you’ve kind of got to work at this. And both of those stories, as you get older and your friends start to retire and stuff, in this case, how can you not say, “Wow, what’s gonna happen to my business?” So it’s making me think more.

Loren Feldman:
Let me ask you what you mean by that—finding one business that has pulled it off. Because I know you’ve talked a lot about being in peer groups where one of your concerns was that you were with a lot of second-generation owners. So obviously, it does happen. Are you saying that, just in your circle, you’ve seen some examples that didn’t go that way?

Jay Goltz:
Actually, that’s a fair question. I haven’t been in business groups for a while now. These are people who I was personally doing business with. So that’s different. But B), I look at some of those second-generation—not pretty. Lots of them were going broke while I was in the business group with them. Lots of them were miserable. Lots of them were fighting with their father, or fighting with their brother. So it wasn’t always pretty. Were there any examples? Sure, now that you mention it. Yes, I can think of a couple of them. But not many. I don’t know if the statistics are right, but they say only 20 percent of businesses get to the second generation.

It’s a matter of: What are your objectives? Maybe getting it to the next generation isn’t an important objective. Maybe you made enough money and it’s time to just hang it up. I mean, that is, in many cases, the way it goes. It seems to me—and I’m only speaking for myself, that’s for sure—number one: money. How important is it?

Okay, the money in my case is not going to make a difference for my family’s lifestyle. I own the real estate along the way, and the real estate is actually more valuable in total than the business. So this isn’t about, “Oh my God, I’ve gotta squeeze every dollar out of this business, or we’re not going to retire, and my wife’s not going to whatever.” So the money’s one.

Two is: family. In some cases, it’s just, how do you integrate your family into the business and have them take it over? Or maybe they want nothing to do with it. So it’s really figuring out, in my case, I just want my kids and my wife to be happy. If they don’t want to be involved, it’s fine.

Three: your employees. I certainly want to do everything I can to keep them gainfully employed and look out for them. I’ll do what I can. I don’t know that I can pull that off. But I certainly am going to try.

And lastly: My customers have been a loyal customer base for 45 years. I most certainly would like to be able to continue to take care of what they’re buying. And that would be a shame, but again, there’s only so much control I have over that.

So, in my mind, those are four completely different objectives. And some people’s would be completely in a different order. And some people are hung up on legacy, or whatever. And some people absolutely need to get every dollar out of the business. So it depends where your head’s at. So those are the objectives.

Loren Feldman:
Let me ask you about the employee one a little bit there, because that’s been part of our conversation. You got real interested in possibly doing an ESOP at one point, as you learned about how that works, and the opportunity to not have to pay taxes. The more you learned, the more unsure you were, and ultimately, you decided it wasn’t right for you.

Jay Goltz:
Just to be clear, I’m not unsure at all anymore. I know, for me, it makes no sense. That was my conclusion after thinking about it for six months and looking into it. For sure, it doesn’t make sense for me. I’m sure it makes sense for other people.

Loren Feldman:
And when you came to that conclusion, you thought about other ways that you might be able to do well by your employees. And part of what kicked this off was your concern that not enough of them are saving for their own retirements. You thought about doing something that you were calling for a while a “401(J)”—the idea being, well, maybe you can explain it.

Jay Goltz:
No, it’s very simple. I realized you could just go ahead and give them a certain percentage of their salary into their 401(k) plan. You’ve checked the box for saving taxes, and you checked the box for them retiring, and that’s a good plan—if in fact the business continues on. And I think that is something that is a viable thing for many companies.

Loren Feldman:
Is that still something you’re considering?

Jay Goltz:
Sure. But that’s assuming the business is going on, and I’m healthy, and I go to work. I’m not in a profession like a dentist or a lawyer or something. There are some people who need to retire at some point, because it’s either mentally or too physically demanding.

When you own a business, and you’re not actually doing the work every day, I think you could work pretty much until whenever you want to or can. I might be coming to work when I’m 82. Frankly, I hope I’m going to work when I’m 82. So I have no desire whatsoever to retire and go to Florida and go sit on a boat or do whatever it is they do. None, zero.

Loren Feldman:
We know your view of golf.

Jay Goltz:
No. So I’m perfectly happy. I talked to a guy who did an ESOP for big money, real big money. Someone gave me his name. And he was very open about it. And he goes, “Oh, I’ve got two houses down here and two boats.” He goes, “You don’t want to die at your desk.” And I go, “Yeah, I’m not sure that’s true. I don’t know that dying at your desk is the worst thing.” So we laughed. And at the end of it, he said, “Yeah, you shouldn’t do an ESOP.”

So in my particular case, I want to go to work, at the moment, as long as I can. So that’s probably an unusual piece of the puzzle. I don’t think I’m the only one though. I know numerous people who feel the same way. So that’s part of the whole thing. So, yeah, the 401(k) thing certainly could solve taking care of employees. But as far as the long-term employment, yeah, it’d be best if you could figure out how to keep the company going. For sure.

Loren Feldman:
There’s some irony in the fact that you actually worked with Bo Burlingham, when he wrote his book on the topic of succession. You came up with the title, Finish Big.

Jay Goltz:
Remember, let’s give me credit. The reason he came to me is, I gave him Small Giants. So I’m his title guy. I’m very proud of that. I did read the book. It was a great book. That was a while ago.

Loren Feldman:
I think it didn’t address the situation you just described, which is, I think the book is more about helping business owners find the exits. It’s less for someone who is open to the idea of dying at their desk.

Jay Goltz:
Or bringing the family in. I mean, that’s the point. It’s about exiting, but not necessarily selling it. Incredibly coincidentally, my banker calls me, who I’m tight with. And she tells me she’s got a 51-year-old customer who she was moving from the old bank to the new bank, and he died in his sleep. And the widow is calling her, obviously extremely upset about not only her husband dying, but she had to tell the widow, “I have to tell you something that I don’t want you to overreact or worry about, but you are now in technical default with the bank.”

Loren Feldman:
Which means they can call the loan.

Jay Goltz:
They can call the loan. And the woman’s very upset, and unfortunately, she hadn’t yet transferred it over to her bank. It’s still at the old bank. And the woman had been calling for two days to the old bank that was bought by the conglomerate, the big bank. She left messages.

Now, keep in mind, her husband died on Sunday. Monday, she’s calling the bank with urgent messages. No one’s called her back. That’s the reality of what goes on in the world. And I certainly don’t want to put my wife in that situation. Nobody should want to leave their husband or wife or kids in that situation. So I do think it’s really prudent to go through and have some kind of plan in place. Because if not, I believe that you could be making it 10 times worse for whoever’s left behind.

Loren Feldman:
Have you put enough thought into this to know what the most important elements of a hit-by-the-bus plan would be?

Jay Goltz:
No, but I believe it probably is going to include having some board you put together where you know the people well, you’ve got relationships with them, and you’ve had meetings with them. You’ve had conversations so they are best equipped to assist in what to do with the business. Versus—this is my nightmare—and part of it was in Succession: “What would dad want?” The worst thing: “Oh, Dad’s turning in his grave. Oh, this is pissing on dad’s legacy.” I don’t want any of that stuff. I want them to be well-equipped, to be as well-educated as possible, and to do what’s best for them.

And I did put that in my letter, “Do whatever you feel is necessary.” The last thing I want to do is hang this on my wife or kids—like, you have to figure out how to keep this going. I want to do as much as I can to try to make a smooth transition, which is 180 degrees from what happened in Succession. Could it have been a bigger shitshow? I don’t think so. I mean, the siblings going after each other… Everybody thinks they should be left in charge.

Loren Feldman:
You mentioned the idea of having a board that can provide some guidance and help to go through this transition. And you mentioned that it would be essential for them to be familiar with the business and to know what’s been going on. You’ve been running your company for quite a few years now. You could have created a board at any point for other reasons to help you manage the company, to have inside and outside directors. And that doesn’t sound like a Jay Goltz kind of thing.

Jay Goltz:
No, it isn’t. You know what people say, “Oh, I joined the business group because they hold me accountable.” Like, that makes me want to vomit. Really? You need someone to hold you accountable? What is that? This is just me. Again, I don’t want to preach to anybody. In my mind, if you own your own business, take responsibility for yourself, and do what you need to do. I certainly don’t need a business buddy to go, “Hey, Jay”—

Loren Feldman:
Well, that’s not the only reason to have a board. It’s not just to have somebody hold you accountable. It’s also to get diverse opinions about decisions.

Jay Goltz:
I guess. I’m just thinking out loud here. Could I find some people and put them around the table? I certainly talk to people and get input from people.

Loren Feldman:
I’m not trying to talk you into it.

Jay Goltz:
That’s just not on my list of things to do. Like, “Gee, I wish I had more”—

Loren Feldman:
Actually, it is.

Jay Goltz:
Well, now it is. Simply if I’m not here.

Loren Feldman:
But you can’t have a board that ignites the moment you go. Is that what you’re saying? Or are you going to have them prepared and involved in the business before you get hit by the bus?

Jay Goltz:
Excellent question. That’s an excellent question. I’m on that journey.

Loren Feldman:
I think you have to have them in place.

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