The next generation of family business leaders intend to make big changes when they take over their family business, they want to change their leadership style, innovate, update the company strategy, and oftentimes, take more risk compared to the previous generation. Yet, despite the fact that most family business owners want to pass their business on to the next generation, research suggests that only 3% will operate beyond the fourth generation.
The minuscule changes of long-term success are largely due to the issues unique to the family business, which are often wrapped up in a tightly woven knot of unspoken plans. In his new book, Disruptive Successor, business coach Jonathan Goldhill offers a proven framework and playbook for unwinding this knot, scaling up your family business, and planning your exit.
Drew Applebaum: Hey listeners, my name is Drew Applebaum and I’m excited to be here today with Jonathan Goldhill, author of Disruptive Successor. Johnathan, thank you for joining, welcome to the Author Hour podcast.
Jonathan Goldhill: Thanks a lot, Drew, thanks for having me.
Drew Applebaum: Let’s kick this off and can you give us a rundown of your professional background?
Jonathan Goldhill: It took me a little while to get started actually, I don’t tell that many people that part of the story but finally, I went to business school after having a couple of failed business experiences and I will tell you that you do learn more from your failures than you do your successes, I think. If you fail fast, you learn fast.
I got a little bit of a late start. I got an MBA from the University of Southern California’s entrepreneur program with an emphasis on consulting. I put my head down from that point on and I’ve been consulting, coaching, training, financing, and advising small and medium businesses ever since. At this point, it’s 30 plus years.
Drew Applebaum: Was there an inspiration behind the book, an aha moment, and why was now the time to write it?
Jonathan Goldhill: I’ve been working with this client for about six years and I’ve watched him go through some incredible transformation, metamorphosis, or maybe we just call it a growth path. It’s been such an enjoyable experience that it made me reflect and think that there’s a lot of other clients that I’ve been working with that are next-generation leaders and they’re taking over mom and dad’s business. They have aspirations to maybe make it bigger and do it better. I thought you know what? I need to put out something that will reach out and connect to these people and writing is a good form of communication for me, so is speaking, and also things like podcasts.
Getting the word out to find those people and say, “Hey, there’s someone out there that can support you in your growth path to being a disruptor in the family business.” Drew, most people, by the way, most families, the business falls apart in the second, the third, certainly by the fourth generation. The statistics are in the book and you can find them online, but it’s a single-digit success when you get to the third generation.
It’s largely because there’s maybe a sense of entitlement, there’s a loss of interest, there’s a lack of adaptation, and updating the business. I wanted to reach out to that next generation, the second-gen leaders who really want to take the business to a whole new level.
Drew Applebaum: Yeah, can you tell us your definition of a disruptive successor?
Jonathan Goldhill: A disruptive successor in my definition is someone who is looking at the status quo of the existing business and saying that what got us here was good but I want to take it there, and we’re going to need a different growth plan, a different road map, and we’re going to need to disrupt the status quo. So, we’re going to need to either improve a product or service, make it better, faster, cheaper, or different.
We’re going to need to change or upgrade our processes. That’s largely why people come to me because a company is missing systems and processes–it’s too dependent upon the people that do it. Or they’re going to innovate in the business model. They’re really wanting to disrupt the status quo. And the status quo is, this is a mom and pop business and we’re going to change it now to one that’s got more professional managers and is run the way successful corporations are run.
A Need for Systems and Processes
Drew Applebaum: Now, who is this book for? Is it only for people who are in a family-owned business?
Jonathan Goldhill: I wrote it for people who are in a family-owned business. But this playbook that I put in my book, this framework is good for anyone who wants to scale up or grow a business–anyone who is an entrepreneurial leader. I’ve been working with entrepreneurs for the last 30 years and not all of them have been family businesses, and many of them have not been second-generation leaders. It’s really written for anyone, but I did write this for that 25 to 40-year-old millennial who is really looking for someone to guide and mentor them in the growth and expansion of their business.
Drew Applebaum: Some of your stats in the book were really staggering, can you tell us about the family-owned businesses in the United States and the size and scale of them?
Jonathan Goldhill: Without looking at the data right in front of me, I can’t cite the statistics, but I can tell you that about two-thirds of the gross domestic product in this country is generated by family-owned businesses. That’s a staggering percentage and that means that likewise, a similar percentage of employment is created by family-owned businesses.
There were studies years back about publicly traded companies and I don’t want to quote the statistics because they’re a bit dated but the number of publicly traded companies that are still family-owned and controlled is a staggering double-digit number. It’s huge.
Also, if you consider that it’s reported that 96% of all businesses in the United States are under a million dollars in revenue. What does that mean? It means that most businesses are mom and pop, are maybe locally needed goods and services like the dry cleaner, the butcher, the pizza place, those are all family businesses, Drew. It’s not surprising that more than two-thirds of all the employment in this country are family-run businesses.
Drew Applebaum: Something I really loved is that you have your own disruptor story. Although, it wasn’t in a family-owned business. Can you tell us about your story?
Jonathan Goldhill: My family built a very successful business and it was heading into the fourth generation, but there really were no fourth-generation leaders. My father was in the business, and he was a third-generation person but unfortunately, he didn’t live very long, he passed of a massive coronary at the age of 35.
My grandfather and his brothers who started the business with their dad, they decided to sell it. They sold it back in the 1960s and then they maintained lifetime employment contracts with the company and ran the business until they closed its doors in 1986. It was a men’s suit manufacturing business and all that business was going overseas to Italy, Asia, Canada. They didn’t want to continue it.
So, my business, when I got out of college, I didn’t really know what I wanted to do, there wasn’t a family business at that point that I could have joined, and so I started making my path in what turned out to be a consultant to entrepreneurial companies. I started off in nonprofits, I worked for the number one person who was either starting a particular campaign or a grassroots cause.
I was very much about trying to make the world a better place and I bounced around in nonprofits for a number of years. And then, I got the bug for business and got into a few of my own businesses, one was a clothing business that involved an artistic line of clothing based in Venice California, and I learned a lot from that business. A great experience but a failed business.
That was probably due to the nature of the partner that I had gotten involved with. But it sent me back to business school where I then focused on entrepreneurship and consulting and have been consulting ever since. I developed this affinity for family businesses because I saw that they wanted to have the same thing that my family was able to develop, which was, a really thriving business that gave them the freedom to do what they wanted to do because it made them a lot of money.
Drew Applebaum: Now, how difficult is the conversation with the founder–letting them know that the world has changed a lot since they started and grew their business and how do you convince them that now is the time for change?
Jonathan Goldhill: I think it’s probably directly proportional to their age. No offense to us older people, but we tend to get a little set in our ways, and so I think it’s an easier conversation, the younger the founder is. It’s also an easier conversation if the next generation person is young enough and hungry enough, that they want to take the business to the next level and that the founder is confident that their son or daughter can do it.
I’m working with a client right now that the father founder has brought the daughter into the business, and she comes in to save him and rescue him. He wants to still hold on to control. I haven’t had a chance to have that conversation with him yet but it’s not always that easy, to answer your question.
When they’re older, they’re kind of set in their ways and they’re happy with the way things are and don’t want that change.
Drew Applebaum: Are there questions you ask your clients, or that maybe business owners out there should be asking themselves to know if they’re prepared for change?
Jonathan Goldhill: I think that first I spend a lot of time working with this next generation leader to see how hungry they are and how coachable they are. Those are really important things. Are they a good team player, do they have leadership capabilities? I think honestly, it comes down to desire. If someone has the desire and the humility to know that they don’t know it all, then I think anything can be learned in this sphere.
Leadership can be learned, selling can be learned, the business can be learned. Are they open, are they coachable, are they trustworthy, are they honest, do they share the family values that will be important? And then, for the founders are you willing to let go? Do you trust your son or daughter, do you think they have the capability, do you have the confidence in them? Are you willing to pass the torch?
These are conversations that take place over a long time sometimes.
Drew Applebaum: Have you turned down clients because of some of the answers to these questions?
Jonathan Goldhill: I’ve definitely turned down clients who are not coachable. There are people who seem to know it all, they come to me maybe just looking for me to fix the situation in their company. I’m willing to do that, but if I quickly see that they are the problem, then I can’t really continue to work with them.
The first thing we have to do as leaders and businesses is to take stock of who we are and how we show up. If we’re not leading and coming from a place of learning, then it’s really difficult to change people.
Drew Applebaum: Now, a lot of the book is about the seven P’s playbook you put together for managing your business. If you implement the P’s as suggested, what can folks expect?
Jonathan Goldhill: Well, I have written this book so that if you wanted to 10x your business, you could do it following this playbook. What you should expect is a reinvigorated purpose about why you’re doing this business.
The results of a reinvigorated purpose which is communicated widely across the company is that you are now building an entirely new culture in the business. A strong culture, a culture that is beyond just a family, but it is based on something much richer. You also will develop the discipline of planning and knowing what your strategic plan is, what your three year, one year, 90-day goals are and of course, you’ll have taken a fresh look at your products and services to make sure they’re upgraded.
You’ll probably develop a much better team of what I call A players because you’ll be upgrading, top grading, high grading, whatever you want to call it your people. You’ll also be doing the same thing with your processes. You’ll make sure that they’re better so that the business could be run in the absence of you the owner being there, and that it is not dependent upon the people so much, but it is more dependent upon the systems. So those are some of the things that you’ll expect and if you put all of those things together then the performance of the company is going to be staggering.
Fantastic, I mean we’re talking about growth and profitability, growth in the value of the business, growth in the size of the business, and growth in what would be the longevity of the business. I think those are the outcomes.
Drew Applebaum: Those are pretty good outcomes. Let’s dig into the first P, which is purpose, and tell me how hard is it and how many layers are there to really dig into a company for them to figure out why they exist?
Jonathan Goldhill: This is a subject that some people have written entire books about. It is getting clear on what your why is and I think this is really a deep, deep thing that doesn’t happen overnight. One of the methodologies that we use to get to the purpose is we use the five why methodology, which is widely known as the Toyota way. I think of it as what would your five-year-old ask you–why do we do this and why do we do that, and why does that matter, why is that important?
That’s the kind of digging that we do. It is like peeling layers of an onion back, and I don’t find that it is easy to get to the purpose within a year or less. I think it is something that could happen in a moment. It could take a couple of years. It just depends on when that epiphany strikes but I think it is so important because I think that it is like the North Star. It is something that we continually move towards.
Let me liken it to a person, a young adult, but someone who is coming out of school trying to figure out what they’re going to do in the world. A purpose is the same as a calling. It is really just getting clear on that and some people never find their calling. Some people never hear it, never have it, I guess, but I think others find it earlier. I think I was fortunate that I found my purpose and calling early in life and so I think it’s continuously guided my efforts and my activities.
It is super important. It is how leaders get people to follow them–an excited and invigorated purpose, and it is beyond just making money or beyond just creating jobs. It is something that is transformative. It has maybe an “aha effect” on people. It is a game-changer. So perhaps what I could share is that a purpose should meet eight different points. It should be stated in just a few words like three to seven words. It is written in simple language.
It is big and bold and has an “aha effect” on people. It comes from the heart. It involves everyone. It is not about money and it is bigger than a goal. I think it is something that is best tested when it resonates with the A-players on your team and they say, “This is it.” They start feeling more fired up and charged up because they align with that purpose as well.
Drew Applebaum: Can you recall any big breakthroughs or surprises when clients have started to look at their own business for purpose and through that lens?
Jonathan Goldhill: I talk a lot in the book about a particular company and I weave the story–quite frankly the person I write about was the muse that I thought about when I wrote the book. I watched their purpose infuse the company. I am not sure I can speak to specifics but it was a game-changer.
The story I am talking about is about a landscape company that employs a lot of field laborers where we initially thought the purpose might be to help new immigrants or people who are not yet legal citizens become legal and give them a path towards citizenship. Then we realize that was too small–that was just about the employees and it wasn’t about other stakeholders. It wasn’t about the community, their clients, their customers. I don’t recall how we hit upon the purpose of raising the bar but that seemed to resonate with everyone, and we went through the five whys exercise.
When we came upon that thing and we thought, “Look, this sounds pretty good. Let’s see if this one sticks,” and it did. We tested it over the next three months and what I observed was that people became much more engaged and it was a defining moment in terms of changes and activities. So, raising the bar meant they’re going to not only upgrade their people and their processes and their performance, but they were also going to do things in the community that raises the bar.
So, they do a monthly donation of a day doing landscaping out in the community. They were also going to raise the bar in the industry by giving back, by being a go-giver and a contributor and participating in leadership roles in the statewide association and speaking publicly about raising the bar and writing articles or being written about in national magazines in the industry. Everything was about raising the bar.
People are attracted to this company now because people who want to be a part of a great exciting growing company, that want to be part of raising the bar, they show up to work and show up to want to join this company. But if you are not part of that, if you don’t resonate with that then you are no longer a really good fit with the company. So, it had the effect of, let’s put the right people on the ship and throw the wrong people overboard.
It’s been a game-changer, everything is better, and I am talking about from profit to performance to processes to people to their planning, to their products–the whole experience.
Drew Applebaum: Now after digging into the purpose, something you just mentioned was you move on to planning. Is this the hardest step? Because I think a lot of folks will be really, really motivated by this book but making a plan makes it real and now you are accountable. So how hard is it to really put the pen to paper and get started?
Jonathan Goldhill: You know that is a good question Drew. I think we can put the pen to paper and we can put the fingers to the keyboard and type up a plan, but it is about accountability and it will snuff out people who don’t want to be accountable. It starts with the top. If the founder or the leader, the next-gen leader, or the leaders of the company don’t want to be accountable then it all just dies from there.
I wouldn’t say that I have fired a lot of clients but they have disappeared when they couldn’t be accountable to the plan. When they couldn’t work on the business and they spent too much time being head down working in the business. A classic phrase–working on versus working in the business. Planning is all about working on. It is all about setting the expectations and then creating an accountability culture that people live up to. This is where the rubber meets the road to be cliché.
And you’re right, a lot of people fail at that point, and then the rest of the seven P’s fail as a result. They’re not in any particular order by the way. I’ve put them in this order because they made sense to me but it is circular. You can jump in at any point in time and the truth is that all of these were like legs of a stool that hold each other up and if you fail in one leg it is going to hurt. It is a tough one.
Drew Applebaum: You mentioned there are a lot of methods and techniques in the book that we can get into but I really want to ask you this question, why is now the time for the younger generation to share their vision and to lead?
Jonathan Goldhill: So that’s a really good question. It is something that I have been pondering and I am not sure I’ve got the best answer at this moment but here are some of my thoughts on it. We are living in a world today that increasingly is encouraging of entrepreneurialism or entrepreneurship and there is a lot of support and a lot of resources for people who want to start and grow businesses. We live in an economy and a society that really supports and promotes people starting and growing businesses.
The next thing is we’re also living in a generation where millennials, if we can define them as a group, really want to beat their own drum and they want to be part of companies who have a social purpose, who have a calling, and are doing something bigger and better. They’re very often prone, I think, to creating their own businesses. I don’t have the statistics on it, but I would argue that people are starting entrepreneurial companies at a faster rate of formation today than at any other time in history.
That, I think, is the reason why it is so important. People want independence and they want the freedom to be their own boss. It is a time in history when it just is right.
Drew Applebaum: Can you share more on the resources you offer with the book on the book’s website?
Jonathan Goldhill: Sure. So, there is a website called Disruptive Successor Show that is going to have the first chapter of the book. It will be available as a free download. In addition, the tools that I reference in the different chapters of the book where there are action steps, they’ll be available for download. Just simply plug in your name and email and you’ll be able to download those tools and those are just a sampling of some of the tools in my toolbox–some of the ones that I go to and use most often.
I also have a deeper toolset for clients that want to come and work with me directly and I make those available to them. There is enough here for you to get started and make some really serious progress in your business. I know people who are really committed and want to take it to the next level will probably reach out to me.
Drew Applebaum: Jonathan, writing a book, especially one like this one, which is going to help a lot of people, is no small feat. So, congratulations.
Jonathan Goldhill: Thank you.
Drew Applebaum: If readers can take away one thing from your book, what would you like it to be?
Jonathan Goldhill: The one key take away would be that if you want, there is a way to do things better. If you want to be the change maker, then this book will give you a road map for how to improve your family’s business, how to disrupt any industry and drive more success and have a more fulfilled life.
Drew Applebaum: Jonathan, this has been a pleasure and I am so excited for people to check out this book. Everyone, the book is called Disruptive Successor, and you can find it on Amazon. Besides checking out the book Jonathan, where can people find you?
Jonathan Goldhill: You can reach me on the web at thegoldhillgroup.com. You could email me, [email protected] That is probably the best way and also disruptivesuccessor.com and I will be launching a podcast at the same time the book goes live called The Disruptive Successor Show. So, check that out as well. You will be able to find that link through the Disruptive Successor website.
Drew Applebaum: Awesome, Jonathan thank you so much for coming on the show today.