What Should I Do if Only One of My Three Children Wants My Rare Books Business?

Elizabeth Larkin, Michael Kelly, and Eric Dollinger

In episode 66, hosts Elizabeth Larkin and Gene Marks answer a question about passing on your small business to your children:

“I’m getting ready to retire. One of my three children wants to take over the business, the other two want nothing to do with it. This is something I built for all of them. If one child takes over the business, do I need to find a way to balance out the inheritances of my other children?”


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Elizabeth: Alright, so we’re doing a quick episode today because Gene is off tomorrow on vacation.

Gene: Yeah this has to be very quick, we’re going off on vacation, okay.

Elizabeth: You’ve gotta pack, I’m sure it takes you hours to pack.

Gene: It does. So everybody thanks for listening, it’s been great and we’ll see you next time. Yeah, we’re leaving tomorrow for Jamaica to an all inclusive resort.

Elizabeth: The whole family?

Gene: It’s myself, my wife and my three kids. 21, 21, 22.

Elizabeth: Oh my god.

Gene: So they’re all- everybody is all reared up, they’re all of legal age and we’ll be taking full advantage of the all inclusive amenities.

Elizabeth: So do you do the beach or the pool?

Gene: Both. And I do a lot of shuffleboard. I’m a big shuffleboarder. Yeah, it’s awesome.

Elizabeth: Shuffleboard… I can see you doing that actually.

Gene: Love shuffleboard. And then hopefully some beach volleyball and all that good stuff so.

Elizabeth: Are you bringing books? What books do you bring?

Gene: I’m bringing my kindle and I’ve got a bunch of books that’s on- I gonna read the new book by Al Franken.

Elizabeth: Okay.

Gene: Yeah, I just wrote about him recently because he was interviewed on NPR and was talking about how he makes cold calls. And I thought that was a very interesting thing for small businesses-

Elizabeth: Oh to raise money.

Gene: He raises money. And it was hilarious I mean he gets on and he sings, he says when he’s on hold he’s like, “Please won’t you donate to me Mr. Fine Man.”

He sings to the tune of Avida songs while he’s waiting. And It drives him nuts but you know, the thing with Al Franken you know, he’s a senator and he gets on the phone and makes cold calls to donors.

Elizabeth: Yeah, you have to.

Gene: He has to do that and we all- we all have to do that and as business owners and you know it’s not beneath him, it shouldn’t be beneath us, it’s just something you gotta grind out and do. So I thought it might, interesting…

Elizabeth: You gonna read that one and then?

Gene: Yeah I’m definitely gonna read that book and I’m actually finishing up another book called Veronica, which is by Mary Gaitskill. It’s a novel… A vintage contemporary novel and I like to read novels as well. So yeah I’ll be reading a lot. Oh and you know what I’ll be watching is, if I’m able to, I don’t know if I can with the family around, is I still- I need to start on the last season of Better Call Saul.

Elizabeth: Oh yeah.

Gene: Got that all downloaded and ready to rock.

Elizabeth: I have not watched the second season yet, though I love that show.

Gene: Oh it’s great. It’s a great show.

Elizabeth: Yeah.

Gene: And this first season looks really great and I’ve downloaded it and all that but. Again, I don’t want to-

Elizabeth: What do you download it from?

Gene: I have Kindle so I just, I buy it from Amazon for 30 bucks for the season or whatever.

Elizabeth: Oh and you watch it on your Kindle?

Gene: Yeah I just watch it- I have a Kindle Fire so I just watch it-

Elizabeth: See I have a Kindle Paperwhite-

Gene: Right you can’t do that.

Elizabeth: So it doesn’t do anything else. Which actually…

Gene: This Kindle Fire is awesome. I read on it and then I watch… It’s a tablet. It’s like an iPad, so it’s fine. But because it’s hooked into Amazon, everything I buy is from Amazon.

Elizabeth: So how much work are you gonna do while you’re away?

Gene: I will work when I… But it’s funny, you know you say, I will get up every morning early and I will catch up on emails and I will do some writing ’cause I do writing and I will do that every morning like six until like eight in the morning.

Elizabeth: Where do you go to do that?

Gene: That’s another good question. I love, I will go downstairs to the lobby of the hotel… it’s like a high resort so… I love that time of day, it’s peaceful, I’ll get a coffee, I’ll find some nice…

Elizabeth: I was just gonna say, get a little coffee.

Gene: A coffee, sit some place nice, so we’re hopefully looking at the ocean or whatever and I’ll sit there for two hours and I’ll knock out my stuff and I’ll put away and-

Elizabeth: You’re still gonna get me your SBA column next week right?

Gene: Yeah I will, as a matter of fact. I’m-

Elizabeth: No, you can have the week off, Gene.

Gene: No, no, no that’s fine. I enjoy you know, it’s really fun to do and keeps me kind of grounded on the- So I’ll do that and then during the day we, we’ve talking before about when you’re on vacation. So during the day, I’ve got my phone with me, I’m not carrying my laptop around but I’m checking emails like throughout the day.

Elizabeth: So I just started reading, I think this is gonna surprise you but I just saw a trailer for the movie and I’ve never read the book, I just started reading Murder on the Orient Express. Which I’d never read before.

Gene: No kidding, well I, Agatha Christie’s book, yeah. And is it dated? Or do you, is it still?…

Elizabeth: No, I actually started reading it last night and fell asleep.

Gene: Yeah.

Elizabeth: So I’m not that far into it.

Gene: Fair enough, fair enough. Yeah I have that issue too, I start reading and then I like nod off. Yes, it’s supposed to be a great book. It really is.

Elizabeth: Yeah, I’m excited for it.

Gene: I read a lot of novels and historical novels and biographies.

Elizabeth: Yeah.

Gene: And I get them all from, I get them all on Amazon, it’s incredible. The world that we live in is unbelievable that you can get- And that’s another even point we’re talking, this is a small business show, these are small business related- Amazon, the reason why I… I used to go to the library all the time now I read on the Kindle. They give stuff away for free.

In other words you know, I get- If you want any book, you can get 5% of it by sample. It’s fantastic. So I’m sending myself samples all the time of books and then I will read the 5% and, I don’t know half amount of the time I end up buying the book you know. And I always, you know I always say that like, if I’m going to a new, perspective client you know, we always give away services. Let’s come on out, we’ll do a few hours of training with you or review this with you.

Or we’ll fix that with you and don’t worry about it. If you like us, you’re happy with us then we can talk about doing more work later.

Elizabeth: You know my favorite example of giving away a little something for free is, there was this ice cream shop that my family used to go to. And you’d pick your flavor and then they’d say, “would you like a sample of another flavor on top?”

Gene: That’s a great idea.

Elizabeth: So you get a scoop of ice cream or you know, two scoops, whatever. And then you get a tiny like, half a scoop of the other flavor that you just wanna try on top.

Gene: Yeah.

Elizabeth: And then of course the next time, you get both flavors obviously.

Gene: I think that’s such a great idea you know. Another thing giving- you know, you just brought this up, I was talking with a friend of mine and he reminded me of a local Italian restaurant in my old neighborhood where I used to live. And this is like in Ardmore, Pennsylvania. They would, they were BYOB restaurants but if you didn’t bring any wine they would- if you asked for a glass of wine they would just give you a glass of wine and they wouldn’t charge you for it.

Elizabeth: Oh nice.

Gene: But they kept a box of, like a box of Franzia wine you know in the… And a box of Franzia wine costs like 15 dollars

Elizabeth: Yeah. But they’re big.

Gene: And they’re big and like- For like a customer to like get, oh thanks, like a nice, like a glass of you know, little white wine or whatever. I mean okay, it’s not an award-winning whatever, but it’s fine and I think that goes such a long way.

And I think the people that run that restaurant are really super smart to do that. They’re like it costs us nothing and like, customers love that.

Elizabeth: Yeah.

Gene: And they come back say, yeah you can get a nice glass of wine with that.

Elizabeth: We had a pizza place by us that would slice up into tiny slithers, a slice of pizza. So if you were waiting for your pizza, they’d give you a little sample.

Gene: Genius. So smart, it’s so smart.

Elizabeth: And people love that, because you know like, I don’t wanna stereotype but it’s usually like the dad that goes to like, grab the pizza.

Gene: That’s right.

Elizabeth: And like, you know the dad comes home-

Gene: Sounds about right.

Elizabeth: And there’s two slices gone from the pizza.

Gene: It sounds about right.

Elizabeth: And I would do that too if I were picking a pizza, that’s just like, that’s just… Or like some pieces of the-

Gene: You’re looking at me very suspiciously because that’s pretty much what I do.

Elizabeth: Like a couple pieces of pepperoni will be like gone.

Gene: Yes. They’re gone out of nowhere, yeah.

Elizabeth: Yeah, that happens. Alright, we’ll be right back with our question after we hear from our sponsor.

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QUESTION: What Should I Do if Only One of My Three Children Want My Rare Books Business?

Elizabeth: Okay, here’s our question. And I think actually this really applies to Gene so I’m gonna be interested to hear what he has to say about this. This is from Yasin in Bandera, Texas.

Gene: Yasin.

Elizabeth: Yes. And he writes:

“I’m getting ready to retire. One of my three children wants to take over the business, the other two want nothing to do with it. This is something I built for all of them. If one child takes over the business, do I need to find a way to balance out the inheritances of my other children?”

And Gene, you have three kids. Do any of them want your business?

Gene: No, they do not want my business.

Elizabeth: They’ve seen up close that they’re gonna be working on vacation.

Gene: None of them have shown… They have shown zero interest in my business and well, I don’t imagine that they ever would want any part of my business but-

Elizabeth: Well, you thought that about your dad’s business, right?

Gene: Yeah, I did. And a lot of kids are like that. A lot of kids graduate college, they look at mom and dad’s business and they’re like, there’s no way I’m going to go into whatever- And then they go and they work for Big Co. for 10 years and they’re like, you know mom and dad’s business doesn’t look so bad you know.

Elizabeth: Yeah.

Gene: Like my job here isn’t that great and I might as well you know work and own and all that so-

Elizabeth: I know two people that happened to that swore up and down, I will never work for my parents.

Gene: And then they wind up back and they’re like, it’s not such a bad lifestyle and all that kinda stuff. But regardless of whether my kids would ever come into my business or not, you know family business transition is a big issue and you know, if he’s got one person that is interested in coming into the business, you know how do you make the equitable among the other kids? It’s all part of your estate.

I’ve seen this a lot of different times, where you’ve got multiple kids, you got the one kid who is interested in doing you know, working the business and the other kids are not because they’re doing something else. Well first of all, it is all assets. So what I’ve seen companies- what I’ve seen parents do is, they put their assets into their estate and the asset of the business and it, you know most people equally divided among the kids. But the one kid who wants to run the business, well that kid not only takes a salary and compensation but maybe some type of profit-sharing or, you know with the bonus point.

Elizabeth: With the other siblings, yeah.

Gene: Yeah but no actually more like, you know, the other siblings are, they’re not working in the business but they’re benefiting from the growth and value of this business right.

So should the kid working in the business but if the kid’s running the business and he’s in there every day, there should be a little you know-

Elizabeth: He or she.

Gene: He or she. Should be a little bit of extra compensation for that person. And that’s usually what happens, they come up with some type of salary, a bonus or profit sharing arrangement for that person.

Elizabeth: I can just see this always going badly.

Gene: You know, I guess it depends on the culture. Maybe in your family, I don’t know. In my family it would be terrible.

Elizabeth: No, no.

Gene: Everybody would be yelling and screaming and throwing plates at each other of course.

Elizabeth: I just feel like, what if those other two kids are like, that kid that took over the business is running it into the ground and we’re not getting as much money from it. What if two kids want the business and one of them works really hard and the other one just shows up everyday and like chats people up? Like, there are so many things that could go wrong, I feel like you probably need to get a lawyer involved pretty early on in this.

Gene: A hundred percent, yes. And you need to put together a buy-sell agreement because now you’re talking about potential equity. Here’s what you need to do if you are a father or a mother and you are planning on- you are running a business and you want to, you know it’s gonna be a part of your estate to hand down to your kids. The worst thing that you can do for your kids is if you pass away, you leave them with a big pile of problems.

Do you know what I mean? That’s the worst thing. So, you know if you think and listen, think the worst, like what you’re saying, Elizabeth, that there’s gonna be problems, there’s gonna be squabbling whatever. Get together with a lawyer, you know have a proper shareholder’s agreement that you know, when you do pass away how the ownership of the business passes down and make sure that the buy-sell agreement does address those issues. If one of the kids decides to run the business and they are not doing a good job or whatever, well the other kid should have the opportunity of selling their share, if they’re not happy.

Elizabeth: Yeah, they sell their share.

Gene: So there needs to be a buy-sell component.

Elizabeth: Now what if you want to step away from the business before you pass away?

Gene: Same thing. Exact same thing. So it’s, you’re just doing a transaction, it’s supposed to be arms-length.

Elizabeth: Yeah. But then you do need to step back though?

Gene: You do.

Elizabeth: You can’t be like micromanaging.

Gene: That’s a whole other conversation to have because I’ve seen that at it’s worst-

Elizabeth: We actually have more questions about this topic. We’ve got like the parent that feels like they can’t step away yet

Gene: Right.

Elizabeth: But the kid wants them out, yeah. We’ll bring this up again.

Gene: And we should, you know. Just you know, on Small Biz Ahead we should consider doing a series on family business issues and we should consider addressing those again on this podcast because there really are a lot.

Elizabeth: Alright. Well, first step is probably figuring out what you wanna do, talking to your kids about it, going to a lawyer.

Gene: Document it in a buy-sell agreement.

Elizabeth: Would you go to the lawyer first or your kids first?

Gene: I would go to the kids first before the lawyer. Lawyers are best used to-

Elizabeth: When you know what you want to do.

Gene: When you know what you want to do and then they can advise you if the direction is correct. I wanna say that in all cases but that’s usually the best use of an attorney.

Elizabeth: Now just on a personal note, would you want one of your kids to take over your business.

Gene: I would, no problem…

Elizabeth: Because one of them went into accounting right?

Gene: Yeah, I do have one that’s in accounting but we don’t do that much accounting work, so…

Elizabeth: Yeah, that’s true.

Gene: So it wouldn’t be that, that you know applicable. But if 10 years from now, my kid come over and said he wanted to take over my business then, yeah sure, you know if the timing is right for me, it’s fine.

Elizabeth: Alright. We’ll be right back with Gene’s Word of Brilliance.

WORD OF BRILLIANCE: Customer Loyalty Program

Elizabeth: Okay, this week’s Word of Brilliance is actually gonna be from me and I’m gonna ask Gene about it. And the word is, it’s three words, it’s customer loyalty program. Oh no wait… That’s three words, sorry…

Gene: Yeah. Customer. Loyalty. Wait hold on… Yeah, that’s three words.

Elizabeth: Customer loyalty program, yes. It feels like it should be four for some reason.

Okay, so we recently published an article, it’s called “Five Secrets of Creating a Customer Loyalty Program That Actually Works” and I have a stack of these cards at home like, “Oh you brought a coffee you know, you need to buy eight more and then you get a free coffee.” Do those work?

Gene: Yeah, they do. I think they do work. They carry them around and you can, first of all you can have those cards made up so simply. You know like Staples, they do those services right you know.

Elizabeth: What about those plastic cards?

Gene: Yeah, same thing. I mean again, Staples will do that for you as well or you could just do it, there’s services online that will do you- So getting those loyalty cards made up are really simple, punching them or stamping them, you know you get a little custom stamp you know, made or whatever with your logo. Very, very simple little program to set up, very simple. And then, honestly people, you know they get it so they like to come back, they like to use it and you know they buy what 10 sandwiches they get the 11th sandwich free.

Elizabeth: Or what about something like Amazon Prime, like what about charging for your customer loyalty program.

Gene: You know-

Elizabeth: Because that’s what Prime is. I mean people forget that but it’s just, it’s like we talked about on a previous episode about how you have loyalty to American Airlines, like that Amazon Prime makes people loyal to Amazon.

Gene: It does. It does.

Elizabeth: You have to be, you have to be offering something pretty good to charge for it.

Gene: Yeah, I mean Amazon is, that’s a whole different bowl of wax altogether. What Amazon Prime does is, the model that you can use for yourself is that, I think it’s only 99 bucks a year, is what you have to pay? The value if you’re an Amazon customer, just on the savings and shipping alone, let alone all the movies that you can get if you go to Amazon.

Elizabeth: Yeah, TV shows.

Gene: And the TV shows and all of that. They’re giving you 50 times the value for you know, the dollar that you’re spending. And if you’re going to have a loyalty program and you’re going to charge somebody for a loyalty program like, hey if you join our membership program for $25 a year or $90 a year. You better be giving 50 times the value back. Don’t even make it-

Elizabeth: Yeah, like VIP perks.

Gene: Yeah and it’s gotta have like tangible, like- The thing with Amazon Prime is that we all know, we can pretty much know how much we’re buying from Amazon during the year and how much our shipping is costing.

Elizabeth: Oh my god, I don’t even wanna think about how much I buy from Amazon.

Gene: Right. Right, and we know- We don’t know the exact numbers but we know, right. And on top of that like, you think about like the movies they offer. We can assign a dollar value. You know what I mean, and so we just know quickly that, wow for the 99 bucks they’re charging me I’m like… So if you want to offer a loyalty program like that, it’s gotta be quantifiable and it’s gotta be a mini multiples of what you’re planning on charging. So go ahead and do that if you’ve got the kind of business that leads to that.

Elizabeth: Could you do something like that with your type of business?

Gene: It’s tough. I thought about it a lot. So many people that listen to this show, we’re in the service business. So you know, the greatest business in the world are subscription businesses, right?

They get the annual fee and people just repeat it, it’s the best. So we all want to be that, we all want to be that.

And I have not figured out the model where I could charge you $100 a year. I haven’t come up with a profitable way. I could be like, “Hey Elizabeth, I’ll charge you $100 a year and then I’ll, every year you’ll get 10 hours of free training for our products.” Well, when I do the math myself I’m like, well I’m losing money on that you know, that’s not helping me.

Elizabeth: Yeah but who’s actually gonna remember that, to book it?

Gene: People do.

Elizabeth: Really?

Gene: Oh yeah, oh yeah. Listen to you miss moneybags. They…

Elizabeth: That’s the beauty of subscription services though, is people- It’s like a gym, people forget about it and-

Gene: They do and then they get and then- That brings me to the other one, they do forget for a time and then at some point we all look through our credit card bills and we’re like, I can’t believe I’m paying you know every year for this and then you cancel it.

And you don’t cancel it- you kinda cancel it with a little bit of a distaste you know, that was a waste.

Elizabeth: Yeah.

Gene: And that kinda thing. I don’t wanna do that, I don’t wanna be- I don’t want my clients canceling me because they’re… I want them to be using my services, I want them to enjoy working with us, I don’t want them to cancel me and be annoyed.

Elizabeth: What about setting expiration dates on rewards? So let’s say, I don’t want to keep going back to the punch-card but let’s say-

Gene: Its good

Elizabeth: Let’s say like a good smoothie shop and you buy five you get- They actually have it in the cafeteria here, it’s a punch-card for- They bring in local fruit to my office and if you buy a piece of fruit you get a little punch-card and then the fifth piece is free.

Gene: The fifth piece of fruit is free?

Elizabeth: Yeah.

Gene: Okay.

Elizabeth: But apparently I’m the only person at The Hartford that uses who uses this. So every time I go up-

Gene: Do you get the free fruit?

Elizabeth: Yes. Every time I go up with my punch card and my local apple or whatever it is they’re like, we don’t have the sticker like, but we’re just gonna initial this for you.

Gene: Oh, that’s annoying

Elizabeth: No one else does this.

Gene: Yeah if you’re gonna do it, you gotta commit to the program or else the whole thing falls apart.

Elizabeth: And then I, and then I get my free piece of fruit and they’re like here’s your card for next time. I’m like, why are you continuing to make me do this. (laughs)

Gene: You gotta commit to it. The other thing when we talk about loyalty programs, big hot thing now is, its mobile applications or loyalty programs. Belly is a really good one, Affinity is another good one. The mobile point of sale systems like Shopify, BigCommerce, Magento

They have add-ons, some included, where they provide mobile loyalty programs and-

Elizabeth: Interesting.

Gene: Why I think those are really good is, smart retailers are saying, “Hey listen, if you download our mobile app then you know, your next purchase or whatever, you’ll get 10% off or if you make the purchase using our mobile app.” What’s good is then that, now you’re accumulating data about your customers. So people are using the mobile app to make-

Elizabeth: We’ll put those in the show notes, everyone.

Gene: Yeah. They’re using it to make their purchases and then you’re gathering their email address and their preferences and start building a history with stuff that they’re buying from you so you can reach out to them proactively. That’s what I like.

Elizabeth: Great. All right we will talk to you in a couple of days. Thank you so much for joining us everyone.

Gene: See ya.

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