Exit Planning Tools for Business Owners

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Work-Life Balance

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The term “Work-Life Balance” is widely cited as first occurring in the United State in 1986 in a research paper. I can’t identify the specific source of this much-referred usage, but it is telling that it would pop up when the last Baby Boomers had just turned 21. They were all in the labor pool, and their competitiveness (see The Brass Ring) was rapidly becoming the norm in the workplace.

In the period beginning in 1912, the Federal Government began passing legislation to limit the number of hours that could be demanded of a worker. With the passage of the Fair Labor Standards Act of 1938, the concept of a 40 hour work week was enshrined in national labor regulations.

In the decades following WWII, the average work week hovered between 39 and 41 hours. As the Boomers assumed their dominant role in the workforce, however, it began to climb for the first time since prior to the Great Depression, and by the mid 1990’s was in excess of 47 hours a week for the entire working population. The race was on!

Just as it doesn’t take an economist to understand why a having lot more people creates additional demand, so it doesn’t take a PhD to explain why working more produces more. Combine a generation that was 50% larger than its predecessor, and have that much larger labor force work 20% more, and you have a rising tide that has carried the US economy through today.

But even those factors don’t fully explain the force that was the Baby Boomers. Driven to succeed, they sought new ways to increase household income. One of those became obvious. As the university system opened up to women, educated and ambitious Boomer moms were pressed into service as wage earners. The two income family became the new norm.

Between 1970 and 1980, while the US population increased by 11%, the workforce grew by an astonishing 29%!

“Work-Life Balance” wasn’t a term before the Boomers, simply because it wasn’t a widespread issue before the Boomers. The returning WWII GIs didn’t wrestle with the dividing line between work and life. There was work, and then there was life. You left the office at 5:00 (or the plant when your shift ended) and came home to your life. In the idealized middle-class family, Mom had spent the day caring for the children and preparing dinner. Weekends were for outings and backyard time with friends (in your new subdivision home).

Boomers abandoned that model by the millions. Although the wife still assumed the bulk of the duties of child care and food preparation (and does today), she had to fit it in around a work week spent supporting a lifestyle of success.

In 1984 (when the Boomers ranged from 20-40 years old- prime child-bearing time) Chrysler Corporation introduced one of the greatest product successes of the decade; the minivan. Built on a car chassis (so women could drive it more easily) it had the first feature that acknowledged automobiles as something other than transportation- cupholders!

Now families had transport that accommodated their need to feed children in between school and activities and home. McDonald’s installed its first drive-through window in 1975 (the oldest Boomers had just turned 30). Mom became an efficiency machine, going from work to school to soccer without ever getting out from behind the steering wheel.

In a foreshadowing of what happened to many products that depended on Boomers to support them, over 1 million minivans were sold in America in 2005, when the youngest Boomers turned 40. By 2008, just three years later, minivan sales had dropped by 80%, to just over 200,000. The Boomers were now in their 40s and 50s. More affluent, they could afford to move up en masse to SUVs. (Everyone had cupholders by then.)

The Boomers had reshaped society, first as children, again as working adults, and now as parents. This reshaping went much further that simple productivity. In their quest for identity through work and material success, the Boomers were about to engineer the biggest change of all.

Since 1776, with a small drop during the Great Depression, every generation of Americans has begun promptly producing a new, larger generation upon turning 20 years old. The Boomers broke that mold. Their need for higher education and early focus on potential careers delayed their marriages and child-bearing by years. Once they began having children, the challenges of juggling job and family, along with medical advancements in birth control, led them to have fewer children than their parents did.

As a result, the tenth generation born as United States citizens (known by their Roman numeral as “Generation X”)  was smaller than the Boomers that preceded them by almost 10,000,000 lives.

By now, you have had enough indoctrination regarding the economic effects of rising and falling populations to understand the implications of a shrinking work force. It is no coincidence that the suffering economies of Europe, Greece, Italy, Spain and Portugal, have had the four lowest birth rates in Europe for the last 30 years. Fewer workers are simply bad for an economy.

But Generation X will impact retiring Boomers through more than just numbers. They grew up in minivans, watching their parents work longer and harder in pursuit of success. They aren’t impressed by the results, and are returning to values that separate work from life.

That may be good for them, but it isn’t promising for Boomer business owners on many different levels.

(This is the fourth installment in a series about “Beating the Boomer Bust.” Previous installments are The Approaching Tidal Wave, The Pig in the Python and The Brass Ring.)

 

The Brass Ring

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A long, long time ago (I’ve actually ridden only one such in my lifetime) Carousels had a spring-loaded sleeve of brass rings protruding near the innermost (and least popular) track of horses. A bigger kid could lean out and yank a ring from the sleeve with considerable effort, and be rewarded with a free ride.

Today, of course, we can’t even read the description of such an ill-conceived device without cringing at the thoughts of fallen children, their bodies horrifically mangled in the giant gears of the turntable, and the litigation and public outrage that would follow. Times change.

“Reaching for the brass ring” has become a metaphor for chasing success. As I discussed in last week’s column, the massive number of Baby Boomers would have affected the economy regardless of their other tendencies, but their commonality and competitiveness raised that impact by an order of magnitude.

If you are a Boomer business owner, I defy you to say that you’ve never complained about the work ethic of the younger generation. From the mid 70’s to the mid 90’s (prime time for Boomers in the workforce) American white-collar workers saw the rise of an average work week from just over 40 hours to almost 54. This while our European contemporaries were  campaigning for (and winning) 35 hour weeks and ten weeks of vacation. What made American Boomers so competitive?

Our numbers. There were simply too many of us to accommodate at every stage of our lives. Just as the impact of ageing Boomers leaving the workforce will come as a surprise to most, so the flood of people into schools, homes and jobs took the majority of businesses (and governments) by surprise.

I attended public schools in the 1950’s where 45 or 50 children were the norm in a classroom. It had nothing to do with unenlightened teaching methods or weaker unions. There simply weren’t enough classrooms. Between 1945 and 1957 the annual number of new births in the country increased by 53%, from 2.8 million to 4.3 million. They couldn’t build schools fast enough.

When I started college in the late 1960’s, they were pulling trailers into muddy fields and calling them community colleges. There weren’t enough universities for all those who wanted to attend. And when I graduated and applied for a position in corporate America, their hiring offices were like the Department of Motor Vehicles, with group testing and rows of interviewing offices.

It was a time of plenty in America, but there wasn’t enough of what the Boomers were seeking. The “Spock Babies,” as we were called, had been raised to believe that every one of us could, and should, succeed. We all expected the corner executive office, but there weren’t enough places for everyone.

(An aside: I’ve always been curious about Gene Roddenberry’s selection of a name for the First Officer of the Starship Enterprise. Was there some subliminal appeal that helped make Star Trek one of the most popular Boomer shows in history?)

From 1966, when the first Boomers turned 21, through 1975, the rate of college graduations in the United States tripled on an annual basis, from just over 600,000 to nearly 1,700,000 a year. (See the timeline at The Boomer Bust)

Baby Boomers competed for the better places in schools and for admission into the better universities; and then competed fiercely for jobs when they graduated. Once employed, they were part of a glut of other qualified Boomers; roughly the same age, and with similar qualifications. The brass ring went to the ones that worked hardest, longest and smartest. An entire generation accepted competition as a way of life. It was a numerical inevitability.

But many Boomers were squeezed out by the numbers, or were disinclined to engage in a battle for promotions and raises. They still wanted the gratification that Dr. Spock said they should have. They still expected the brass ring.

They went into business for themselves.

From 1975, when the first Boomers turned 30, until 1986, the formation of new businesses in America jumped from 300,000 to 700,000 annually. By 1990, when the oldest Boomers turned 45, the number of new business formations had fallen back to 600,000. It has remained there since. As our population has grown from 190 million to 310 million, the number of business start-ups has been flat.

The massive number of small businesses in the United States, the source of 67% of all new job creation since 1995, is clearly the product of millions of Boomers who sought success outside traditional wage-paying jobs. For the first time since the industrial revolution, (when production consolidated into large enterprises) America became a nation of shopkeepers again.

These are the businesses that are beginning to be sold. Whether there are enough buyers is another question.

Picture Credit

Hunting vs. Farming

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At the family gathering, you are being introduced to a distant cousin you haven’t seen since childhood. The introduction usually includes your status as a business owner. “Do you remember little Cousin Bobby? He owns his own company now.” Or you hear it as you pass a conversation; “There goes Rebecca. You know, she has her own business.”

 You know what they are thinking. It may be the somewhat awed tone of being in the presence of success, or a “Who would believe it?” skepticism. When you are a business owner among non-owners, the undercurrent of envy and admiration comes from certain commonly held beliefs about the lifestyle of a business owner.

 You pay yourself as much as you want. As the holder of the checkbook, you can just decide how much salary you need, and take it. After all, if you determine other people’s compensation, so you determine your own, right?

 You only work as much as you want. No one tells you to be in the office by a particular time. No one orders you to stay at your desk until a deadline is met. You can’t get fired for leaving early. You don’t have to accrue vacation. If you work a lot of hours, it’s probably just because you like money so much, and want more. (See belief number one, above.)

 You only do what you want to do. That’s why you have employees. You can pay people to do whatever you don’t like to do. You write your own job description, as well as everyone else’s. No one is crazy enough to write a job description for themselves for a job they wouldn’t want to do! (Are they?)

 Of course, you are probably smiling right now. We know what it takes to start and build something that achieves that level of freedom. It can take years to get there, and it’s seldom an easy road. Many of us never make it that far.

 But it could be true. The vision other people have of an ideal entrepreneur’s life isn’t wrong, it is merely miss-timed. The entrepreneur always believes that such a lifestyle is in the future, it just isn’t here yet. It will just take a lot of work, a lot of talent, and at least a modicum of luck to make it happen.

 It should be true. Along the way, however, many (if not most) entrepreneurs stall in the  “lots of hard work for inadequate reward” stage of building a business. It happens because as the business grows, they are drawn away from what they enjoyed the most, from what they were best at, and into what the business demands that they do. They become farmers.

 Management is farming. Balancing the checkbook is farming. Paying the rent is farming. Locking up the business at night, or opening it in the morning is farming. Purchasing supplies is farming. Writing procedures is farming.

 Bringing in new sources of revenue is hunting. Finding and training great employees is hunting. Closing deals is hunting. Outmaneuvering your competitor is hunting. Motivating people to excel is hunting.

 As an entrepreneur, you owe it to your company, your employees, your customers and yourself not to get tied down in farming activities. You started your business to do what you do best- not so that you could teach yourself a set of skills that you have little inclination to learn.

Picture Credit

Another Lost Generation?

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I had the opportunity to present “Beating the Boomer Bust” twice this week, one of which was recorded for a Texas Public Radio show this weekend. For those who aren’t familiar with the piece, it discusses the massive changes that are unfolding as Boomers retire from their businesses.

As usual, members of the audience said afterwards “I knew all those things, but I never thought through the implications before.”

A quick recap before I get into today’s topic. “Beating the Boomer Bust” is a look at the perfect storm facing retiring owners who plan to sell their businesses. That largest small-business-owning group in history will be selling all at the same time. The number of buyers is about half as large as the number of sellers, and the buyer generation (Gen X) isn’t interested in the type of work that small business entails.

It is that group, the buying generation, that could be facing a demographic squeeze that changes them into a new “lost” generation.

The first Lost Generation is the group born in the decades just before the beginning of the 20th century. The oldest members of that group were in their teens and 20’s during WWI, which decimated the ranks of the young men, although less so in the USA than in Europe. Those who returned were traumatized, and more worried about enjoying life than making their mark on the world.

Enter the Roaring 20’s. The Lost Generation writers, Gertrude Stein, Ernest Hemingway, F. Scott Fitzgerald and T.S Eliot among others, promoted both hedonistic lifestyles and a cynical outlook towards humanity. The 20’s generally bring to mind Flappers, Speakeasies, Gangsters, and a spectacular finish with the Great Depression of 1929.

Many generations have been characterized as wastrels when they are young. The Lost Generation had the added misfortune to reach their productive years, their 30’s and 40’s, just as the economy made it very, very difficult to get ahead. Now, let’s skip forward to Generation X.

What Boomer hasn’t complained about the work ethic of Gen X? Gen X was born and raised in a time of plenty. They have grown up in an economy that was fueled by a giant generation of workaholics, the Baby Boomers. Their values system places a far lower premium on business and financial accomplishment. Self-actualization comes first, accumulating things is secondary.

Disclaimer: Please don’t send comments about “I’m a Boomer and not a workaholic” or “I’m an X’er and work very hard.” No generational generalizations are universally applicable. I get it.

Now they have the added misfortune of being in their 30’s and 40’s when the economy isn’t very receptive to building wealth or rapidly expanding a business.

At first blush, I didn’t think that was a problem. With one X’er for every two retiring Boomers, there should be more than enough opportunity for even the marginally interested to succeed. The more I think about it, the more I begin to wonder whether that will be the case. Two other factors are coming into play, and both are huge.

The Boomers aren’t getting out of the way, and the Millennials are coming on fast.

Boomers haven’t saved enough to retire in comfort. They can’t depend on the government to make it up for them. They are healthier than any previous generation. If 60 is the new 40, why would they (outside of the public sector) suddenly step down at 65? They want to be busy, and they want to be wealthy. Many, if not most, are planning to spend at least a few additional years in that pursuit.

The Millennials (depending on who you ask, roughly the generation born between 1985 and 2005) are coming of age in a difficult environment. Jobs are scarce, finances are lean, and the position of America in the world is changing. All indications are that the Millennials will push harder than the X’ers to get what they want.

Where the X’ers are widely characterized by their sense of entitlement, the Millennials clearly expect their lifestyles to be a direct outcome of their success in work.

So this is what leads me to ask about a Lost Generation.

The Big Picture: 78 million Boomers, still working hard, and delaying their exit from the business arena. 38 million Gen X’ers, with high expectations and lower motivation. 80 million Millennials coming on fast and intent on competing for what they want.

The Small Picture: X’er in his late 40’s who has spent the last 20 years in business telling the employer how he wants his job to fit his lifestyle. He is waiting for a late 60ish Boomer in front of him to get out of the way. When it finally happens, he suddenly finds that there is a Millennial in his late 20’s who earns less and works more waiting to leapfrog him.

If you are a Boomer business owner who can’t find the next generation of leadership among your X’ers (and there are millions of you), start looking at your Millennials while you still have some time to train them.

 

Painting: Han Wu Shen “Young Worker” at paintinghere )

Lifestyle or Legacy – Part 3

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Let’s turn to the Legacy Builders.They are the business owners who have achieved Lifestyle status (as defined in the last posting) but continue to work hard to build their businesses. Their objective is a company that does far more than merely provide a comfortable lifestyle and assure retirement.

A little bit of elimination to start, as we did with the Lifestyle owners. Just as we said a Lifestyle Business was neither a pumped-up hobby nor merely an adjunct to an alternative lifestyle, the Legacy owner isn’t a couple of things that people might normally assume.

Let’s set a baseline. The typical Legacy Builder runs a business that is very capable of continuing its day to day activities independently and indefinitely. Operations, management and sales are handled by competent employees. In fact, each is probably better than the owner at what he or she does. They are in the top 1% of American incomes. It varies widely, but we’ll call it a minimum of $500,000 a year. The Legacy Builder nonetheless chooses to work a full (45-50 hour) week to continue developing and improving the business, and not incidentally adding to its profit.

The Legacy builder is clearly not obsessive-compulsive, a workaholic, or in any other way driven unwillingly to work beyond common sense. It’s easy for observers (and sometimes family) to accuse the Legacy Builder of being enslaved to the job, unable to tear away for a personal life. That isn’t true at all. The Legacy Builders I am describing spend time with family and other pursuits. They coach Little League, attend recitals, and are active in the community. They take nice vacations (usually with family), and live in nice homes (often several of them), but are seldom ostentatious.

It is true that they are frequently missing in the devotion of time to community activities, preferring to fund the work of others. In fairness, I’ve spent a lot of time working in community organizations. There is a lot of wasted time. If I had the money to pay for someone else to do it, I probably would. Legacy Builders don’t like to have their time wasted.

They are also not greedy. Their continued push for improvement is not for the personal gain. They seek greater success for other reasons. As Bill Gates once said, “Money is just a way to keep score.”

I call them the Legacy Builders because they have an eye for a target that is beyond merely running a successful business. They have a bigger picture; a larger objective in mind. Developing an organization that lives beyond their own careers is at the core of their strategy, but it isn’t just monument-building that drives them. It is what that organization can accomplish.

Some are motivated by the benefit to the community that their talent can deliver. More jobs, more people who can provide security for their families. For others it is even a greater community responsibility, the money to form a foundation, or to fund worthwhile causes. For others their family is the motivation. They seek to change the lifestyle of their children, and their children’s children, permanently (or at least for the next few generations).

Many of the Legacy Builders are simply entrepreneurs without a limit on their creative drive. Most business owners have a difficult time looking backwards. Yesterday’s achievements are ancient history. They see no point to basking in past accomplishments when there is so much more that could be done.

Some Legacy Builders attempt things for the thrill of accomplishment. Once attained, the successes immediately become the basis for the next level, the next mountain to climb.

Admittedly, a substantial number of Legacy Builders have a head start when compared to bootstrap entrepreneurs. They achieved a substantial level of success in an existing organization, and used that as a spring board for their own purposes. They may come from a family where there was Legacy-type success in the past. They may have just been lucky. But none of those things explain their push for greater achievement in business when they are long past the point at which most owners would be satisfied; and there are plenty of bootstrap start-ups in the Legacy class to disabuse the notion that the game is fixed at the start.

Most Lifestyle owners say that they really want to reach Legacy levels, but few actually do. In my next post, the last in this series, we’ll look at what it takes to make the leap from Lifestyle to Legacy.