Patrick Woock’s Guide to Avoiding 5 Crucial Mistakes in Family Business Succession

Are you the founder or current custodian of a family owned business? If so, you’ll be interested in this episode where I’m talking to Patrick Woock. And Patrick specialises in supporting family members and the founders, especially through the transition stages of succession. In family owned businesses, we talk about the differences and what extra considerations need to be considered when planning succession planning in these circumstances. Hope you enjoy it, and as always, we enjoy sharing exit insights with you.

Welcome to the podcast that’s dedicated to helping business owners to prepare for exit so you can maximise value and exit on your terms. This is the Exit Insights podcast presented by Succession Plus. I’m Darryl Bates-Brownsword, and today I’m joined by Patrick Woock. And I’m really looking forward to today’s conversation because after, well, more than 100, maybe nearly 150 episodes, I think I’ve only ever spoken to one other person about family businesses and we didn’t really get into much depth from memory. So Patrick is, well, he specialises in this area.

Welcome, Patrick. And I’m looking forward to our chat about the differences between family owned businesses and other SME type businesses.

Darryl, thank you very much for having me. I really appreciate the opportunity to be here and be able to speak to your audience. I think what you’re doing is amazing work. I think dealing with the exit, the part when we’re all trying to get out or move on to our next phase of our life, is a very interesting, difficult and challenging part of our lives. And it’s great to have a resource like your own that’s out there helping people, really, in a fundamental and important. So thank you very much for having me today. Darryl.

Spoken by a man who clearly knows that flattery will get you everywhere.

No, go ahead. I’m sorry, Darryl.

No, that’s fine, Patrick. I appreciate those kind words. Let’s dig in, shall we? Like you’ve been working with family type businesses as opposed to normal, I don’t know if that’s the right term, SME business owners or not necessarily with the family focus. Can you just give us a bit of background on how you got involved in that? And then the very next question that I’m going to ask you that you can, I guess, flow into, is what’s the difference? Basically, what’s the fundamental difference between a family owned business and one that doesn’t consider itself family owned?

That’s a great question. Well, I got involved in it by running my by being involved in my own family owned business. So I took over business when I was 25 years old. I was very young at the time. And like anyone who’s young, you think you know what you’re doing.

Well, we all do at 25.

Oh, yes, we’re all brilliant at 25.

Exactly.

And, you know, many of the hardships and challenges I went through, really having to go about dealing with my father and mother who were involved, directly involved with the business and in regard to many of the people who had worked with him for many years, and then many of the situations of how to not only unwind those relationships, but also how to start creating your own path, creating your own direction. And like all businesses in the world, not always successful.

We were very lucky that our businesses, that that business was successful. And we’re able to turn, we were able to turn around and really make a, make a go of it, even though that was the end, was successful. The challenges that we went through regard that I actually ended up having to fire my father from his own business. And when sitting back on how that went about or how that transpired, those are things that I think could have been sidestepped or handled better. And as I went forward in life and started to not only run my own businesses that I created from scratch or from the beginning, from zero to one, as they say, but also think about started counseling or like, really, how would you say, working with score, working with those organisations that counseled businesses, like how I could have used my experiences to help them and their particulars.

And then going on to your secondary question, like, how do family businesses different than what we call SMEs or these smaller enterprises, is all the interrelationships that you have? I have one client that I’m working with for some time, their entire family, from their cousins, their nephews, their aunties, they’re all involved in the business in one way or another. And so there’s a lot when they have dinner, which they typically have dinner once a month, it’s basically everyone in the business. So the family business is a natural part of what they’re doing as a family get together. And so challenges you have with one family or a member or another at these family get togethers can spill over.

And so he, the gentleman I’ve been working with is quite good. He’s a quite, I think I’m maybe using this word world amicable, but he’s very, he’s a very understands. He’s very empathetic. He’s very understanding. So he could handle those situations very well.

When I was his age, because he’s relatively the age I was, I was not. And so when I, when I had to deal with family issues or family questions, it was, it was more of a deal of force and, you know, trying to get something done versus how can we work together, how can we understand each other? And I think he’s much better in doing that. Even though his family is very complicated, you know, he has very many moving levers that he has to deal with. And so that’s the other thing, too, is when you start talking about family business and the differences, I’d have to say that the way that families are involved culturally, like they come from different cultures or even socially, the way they interact with each other, are very different.

And so you have to get to know those family members. You have to get to know the differences and how they interact. And I think that’s a real main, that’s a big difference, is those social interactions, those family interactions, which can be beneficial sometimes, and it can sometimes be very detrimental.

Yeah, Patrick. So I guess what you’re saying is the relationships we’ve had with family are sort of different. And the way I see them is we’re more direct, we’re more blunt, we’re shorter fused, perhaps, with family members than we would be with staff or employees. And therefore, shall we say, the culture potentially can be different. And depending on the hierarchy of the business or how well structured or how much structure is in the business, that may influence the chain of command and how decisions are relayed through the business and how much effort is required to get things done. Am I reading that correctly?

I think you made two really spot on points there. Number one, I think in regard to areas where there is a larger family presence, and these are typically, you see this in different cultures, but when you have a larger family presence in the business, you have to have a strong leader, a strong head who’s helped build the business because he helps define and helps keep every, for lack of better word, keeps everyone in line. Right. Keeps everyone focused. If you have someone who’s maybe too laissez faire, people just tend to go in their own random directions, and they can end up eating up the business.

And the other point that you hit on was really good. So having a strong leader, I think, in a family business is very important. I think it’s more important than maybe an SME, because when you have other family members, they also have their feeling. They also have their say, they feel a part of it, right. And you have to have that strong understanding but also strong leadership. Right.

To guide them forward, almost like, for like a better word, a shepherd. Right. Keeping his flock going forward. And I think that hits on, the second thing that you hit on about is having a culture. Right.

Having a strong family culture. One of the things that the gentleman I’m consulting in Houston is his business. They have a very strong family culture, and it helps them. Each, each individual who’s in the family helps them identify with the business. So it’s not just about work.

It’s about something that’s important to their lives and important to who they are, which can cause a lot of trouble if it goes in the wrong direction or rubs against them. But when it goes in the right direction or they feel it’s going the right direction, it’s very positive. It’s like a reinforcing factor. Right. And it helps them be a part of something bigger than them.

And I think having a strong company culture where people identify with it and that they feel a part of it is very powerful and very important, even more important in a family run business than most typical business. People need to feel that they’re a part of something.

And what about the interactions and the relationships with the employees, and especially the senior employees in the business who aren’t family members, who have had to perhaps work and claw and earn their way into those positions? And do they feel that some of the family members have just walked into the business or into those positions of seniority and maybe, maybe not should or shouldn’t be there? Shall we say?

That’s a great question. And I think that’s one, one of the main falling points or main challenge points that a lot of family businesses run into is when a family member decides to come back into the business. Maybe they haven’t been there and they decide to come back into the business. And you see this from time to time with a son or daughter who’s been away at college or been away getting their experience in, and they want to come into the business. And it is a challenging transition.

I think the biggest thing is when you’re a leader and you’re bringing a family, let’s say you’re the owner, current owner, and you’re bringing a family member in, I think there’s a very important timeframe that you have to treat the son or daughter or family member as an employee, as an employee equal. And if they make missteps, if they make misdirections, if they do things that you normally would, how is he reprimand someone or you would do a pull aside, you need to treat them the same, because if you don’t, as you pointed out, very very well. There could be a situation where there becomes this break within almost a family versus the employee situation. And I think some organisations are better than others in regard to they treat family, they treat employees like family members, and employees feel like that the situation is, you don’t want to probably take it too far. There are situations where people, where employees will take it maybe to the next level. But I think as long as there’s a good balance in the way that you treat family members versus the way you treat your employees and you have a good understanding, you create.

I don’t want to say barriers, but you create boundaries on what’s acceptable behavior and what’s not. And it’s dictated across all family members and non family members. I think that employees have a appreciation that people who are promoted, family members who are promoted are done out of merit versus, I think it’s out of family position.

Capability over blood. Right. So, Patrick, we’re here to talk about exit planning and how to prepare the business for exit. So what are the fundamental differences? Are there big issues around family succession that you’re working with which make things either more complicated or less complicated than a non family business?

Well, one of the things, Darryl, you and I were talking about, one of the things that we really focus on is developing a process and then having people stick to that process. I learned very on, early on, it’s great to coach and implement, to talk to people, but if you don’t have a step by step process or step by step methodology, it’s very easy to get waylaid or misdirected. And so we did is we, after working with over 100 different, different organisations, different family run organisations, we started to see that there was a process that was working for us, and it really was a defined four step process that we worked with. And the first step in that process was really opening, allowing people to kind of open up and talk about the fears and issues that they have with the new leadership and with the existing leadership and having people kind of air their issues. Right. And we made it into a game.

We call it scenarios where what we do is we get people to, we present different scenarios that could potentially come in the business, and then we have people roleplay those issues. And then after they do that, it’s kind of giving them a platform to start talking about it. We have them come back and start talking about issues that they want to role play and kind of work through. And we found that by airing those issues, by airing those potential problems that they see with the new leadership and the existing leadership, it starts to create new ground for them to start having conversations. And I think once they start having those conversations, the fear factor starts to diminish. And that’s really been. It’s really been a saving grace for us. So really what we call it is these scenario games that we play in the beginning. I know it sounds kind of weird that we’re going to have gameplay, but it allows people to open up and discuss about those tougher issues. And it’s worked not only with certain companies, but worked pretty much across the board. So we’ve started implementing that as a part of our workshops that we do. Is the first step, is that scenarios?

So we start to explore some of the scenarios, the various scenarios around, I guess, what could happen and allow the founding or the current generation to start to explore what might happen, if type of situations. And then I guess, you know, just from. From what we see around the place, you know, the issues you’ve got to overcome is the the current generation letting go, handing over the reins fully and not stepping back in and interfering. So you’ve got, let’s call it a management succession or a leadership succession of the business, of controlling the business. And then the other issue I see a lot in family style businesses is, well, the current generation, they want to hand it over to their kids or the next generation of family, and then they’ve got to figure out how the heck they’re going to fund their next phase of life or their retirement or life after work, whatever we want to call it. Whereas if it were a non family business, we would sell the business and there’s an injection of capital to top up your pension or create a pension if you haven’t actually done one.

But in a family business, where the equity changes hands through other structures, so we say, and it’s not as often that money changes hands, even though I note that you touched it, you did buy it from your father. What are the issues that are created by that and how do you address them? The founding family sort of steps back and the next generation steps in the leadership and running of the business. But the first generation still want to be getting continual dividends or financial funding?

And that’s a great point. And one of the things we initially looked at and talked to a bunch of people, I think maybe were 50 or 60 different advisors, financial advisors, about these issues is the finance portion of it does play a very important role. And we started to have discussions in those areas and we realised that that’s not really my specialty, that there’s a lot of people who are much more evolved in that area and are better. And so what we started to look at is what other issues are going on after they started clearing the air. And one of the things that wasn’t being addressed is this purpose. I think that’s one of the things you’re kind of hitting on is this purpose that, why am I taking over this business? What does it mean for me? How am I going to be a part of it? And that’s kind of one of the issues. The main issues that, as a person buying a business is you may see how it is today. And this is a problem with a lot of people, a lot of young, young entrepreneurs, a lot of business owners out there, when they’re looking at taking over family business, is they don’t see the value for them in the business. They don’t see themselves in the business. I tried to console them. I said, look, the way you see it today is not the way it needs to be five years from now, right? You need to find a part of the business that you can connect with and a part of the business that you can develop into becoming yours. And that needs to be your new purpose in this business. It doesn’t need to be that you’re going to take over dad or mom’s business, and you’re just going to make it bigger and better. You can find your own path within this business. I’ve always been a person that hearkened back. I read a great book when I was young called the Alchemist. I think a lot of people have read it. And the one thing I took from that is if you’re not careful, you can always miss the gold that’s sitting underneath your feet, the gold that’s right there in front of you.

And running a business, the skills of running a business, of being an entrepreneur, taking over a family business, those same skills that I learned running a business in a small town in Chicago, I use those same skills when running a business in Shanghai, China, in Beijing and Mexico and Ireland. And so when I talked to younger people, I said, you know, you’re not learning to run an insurance agency. You’re not learning to run a restaurant. You’re learning the skills of running a business that you could run anywhere in the world. And I think once you start to, when they start to see it that way, and then I said, you’re going to learn those skills and then start to develop something of your own, they start to connect with that in a better way.

On the flip side, and I think you’re hitting on this a little bit as well, is what happens to the owners is very material. It’s very material because they have spent maybe 20, 30 years building that business. And so they personally identify, they see themselves as the business and themselves are one. And what we have to do is start to talk to them. These are very hard conversations.

People may not know it, but these are very hard conversations. You probably, and of course, you see this in your own business, in what you’re doing, is how do we get them to see that there’s another part of themselves that they can start growing? There’s another part of themselves that they have to start developing. Right. And as you know, that’s very hard.

Right. Is how do we shift that? And it takes time. And some people, for most part, our people, people we’ve worked with, been very successful doing that. It takes a long time, but as you know, there can be people who can’t do that.

They’re just so embedded to their character, they just can’t let go. Right. Because they’re, for lack of better. I don’t say they’re afraid, but they just. They can’t see there’s another part of them that they can develop.

And so we try to work with them to see what else can we start creating. What else can we start doing in your life? Right. Maybe it’s being a philanthropic. Maybe it’s being we had one person become a triathlete, so he just spent the next ten years of his life doing triathlons all around the world. Right? So what’s that next phase of your life? And so we work with both parties, kind of in separate conversations on how do you identify, how can you create that identification with your next phase of your life?

So, Patrick, it feels like a lot of the work you do is really focusing on the, let’s call it, the leaders in the business, the family owners as people someone else can look after the business strategy of taking the business to the next level, and the financial elements and the legal and compliance elements of succession and exit planning. But what you’re looking at, if I’m understanding, is the behavioral and the psychological side of things. This is a big change to my life. I’ve been running this business. The business has had my name on it potentially for the last 20, 30, 50 years, and I identify as the business. You know, there’s legacy there. I’ve made a big impact in this town, this city. My name’s on trucks driving all over the town. I’m on billboards or what have you and I am the business.

And if the next generation, if John Junior takes over the business, is he going to mess up what I’ve built? Is he going to do things differently to the way I’ve done them? And what I’ve built so hard, the reputation I’ve built so hard over the years? And if they do do that, is that okay? Will everything be okay? Will my family name be trash if they just modify and use technology more, for example? And are these the sort of things that you’re working through with owners and family members?

Exactly. And the reason being is exactly as you pointed out, there are a lot of great people who are in the finance and strategy area, and we prefer to enhance those people and to work with those people than to try to, for lack of, better, compete with them. What we want to do is we want to find areas that, where we excel, where we provide exceptional value in and really enhance what all those great, the people who are working on financial planning, exit planning, strategy planning, we want to enhance those individuals because we, you know, there’s so much great work being done there.

But if we don’t get the behavioral side right, if we can’t find a way to really address that, there can be situations that happen that really disrupt all those other great work. So what we feel is we play a very essential role, maybe, maybe sometimes not a huge role, but a very essential role in working with not only the family members and the company, but with those people who are doing strategy, with those people who are doing the exit planning and really trying to understand what they’re doing and how can we all integrate together in creating a successful exit.

Okay. And making sure all the various planning elements fit together as one.

Exactly.

So you’ve developed a process, and I think you’ve got this in the book, and we’ll put the links to the book in the show notes about the episode. But Patrick, what I want to know is if we’ve got a family business owner, if there’s a family business listening to the episode, how will they know that they need you or where you can help? What will be showing up in their business? What will they be thinking, feeling, experiencing, etcetera, to know that, hey, I really should give Patrick a call. He can probably help in this situation.

Well, I think the situation is, and I’ll do this for your listeners today, is that we can post my email. I’m more than happy to give a 40 minutes free consultation and sit down and talk with them. I think the reality is the willingness and the ability to just talk conversations are really key. There have been many times in my life I thought I knew what I was doing. And then I had a conversation with someone that really opened up my eyes to maybe some things I could have done better or maybe things that I was missing.

The old saying is, there are things we know we don’t know, and then there’s things that we don’t know that we don’t know and we want to address. That last one is helping people see that the things that they maybe don’t know, they don’t know, and then bring that at least shift that over into a place where they can understand it needs to be addressed and talked about. And I think having those conversations, or even just the willingness to, I guess people still pick up the phone, right? The willingness to reach out, even send the email, I want to be a part of that solution. So if there’s any listener out there or any person out there who’s interested, I think we can put my email later on and they can reach out to me. I’m more than happy to have a preliminary conversation, just talk with them. And I think that’s really been the key, is when we start having those initial conversations, people can come back and start seeing those things that they may have not even known were on the table.

All right, and if someone were to start working with you, how long in advance do they need to be thinking about this? A program that just is three months or three years? What are the expectations there? How does it work?

We usually do a one day workshop with different companies. Sometimes we can do weekend workshops if they want to include their employees. We usually do a one day workshop. We can do also just on phone consultation, but we prefer to sit down with the business, meet with them, talk with them, and if they want us to do the workshop, then we’ll come in and do that.

And then afterwards we’ll do some follow up to keep them on track. Our process is pretty straightforward. I try to. One of the things as a business owner is I’ve had a lot of people come in and consult me, and I’ve run multiple businesses, and a lot of times they have 8, 12 steps. It’s very complicated. I’m a very simple person. Four steps. I have a book. If you want to work with me, or if you want to do the book, or if you want to do a combination, either one is great. But I always say, keep it simple, follow the process, and achieve the goal.

And we really work with people to just really keep it simple. So no matter what form it is. If it’s a simple conversation, email, call, workshop, we’re there to be a part of the solution. We’re not there to just do consulting. We’re there to help families. And that’s always been a part of who I am.

Okay, so for a business owner, family business owner, you’re at that stage where you’re starting to think about what’s next. You’re not sure of the next step to take. You’re not sure of how you’re going to hand over the reins to the family or who are the right family members. And you just maybe not even necessarily stuck, but you’re just going, how do I get started in this process? Then you may be able to jump in there and help. So Patrick, on top of that, I guess, what’s the key message you want our listeners to take away from the conversation?

The one thing is handing over the family business, moving, exchanging or being able to find a way to transition the business is, for me, one of the most important things you can do as a business owner. We have seen, at least in the United States, we’ve seen a decline of small business owners. And what happens is when small business owners decline, big corporations take over. And we have seen a lack of service, lack of commitment to our communities, and really a lack of quality product quality service. And the one great thing we can do as a whole is not just continue our name and that’s important, but continue what we’re doing because we may or may not see it, but we have a direct impact to our communities.

And it’s that commitment, that great thing that small businesses do is because we’re so committed to our communities, we’re so committed to our clients. And if I can help that continue those companies, those organisations, it’s not only better for them, but better for everyone. And that’s really why I do what I do is really helping not only the small business owners, but helping those communities that are impacted by the small business owner.

Brilliant. Patrick Woock. Thanks for sharing your exit insights with us today.

Thank you very much, Darryl. And thank you very much for having me.