Category Archives: Family Business

Thanks to Jonathan for the Profile

Jonathan Fields, author of Career Renegade, drew out the best of me for his podcast with me that he posted yesterday. He has a real knack for getting into the bigger issues, like both sides of entrepreneurship, and how important the rest of your life is, as compared to your business.

Yes, we do talk about business planning and classics of entrepreneurship in this interview, but he also got me talking about how much of my career hinged on mistakes, luck, and my wife saying things like how we’d take the risk together.

My advice: if you get a chance to do a podcast with Jonathan, say yes.

10 Lessons Learned in 22 Years of Bootstrapping

(I posted this yesterday on Small Business Trends. I’m reposting here because this is my main blog, and it belongs here too. Tim )

Last week a group of students interviewed me, as part of a class project, looking for secrets and keys to success. They were asking me because after 22 years of bootstrapping, my wife Vange and I own a business that has 45 employees now, multimillion dollar sales, market leadership in its segment, no outside investors, and no debt. And a second generation is running it now.

Frankly, during that interview I felt bad for not having better answers. Like the classic cobbler’s children example, I analyze lots of other businesses, but not so much my own. As I stumbled through my answers, most of what I was saying sounded trite and self serving, like “giving value to customers” and “treating employees fairly,” things that everybody always says.

I wasn’t happy with platitudes and generalizations, so I went home that day and talked to Vange about it. Together, we came up with these 10 lessons.

And it’s important to us that we’re not saying our way is the right way to do anything in business; all businesses are unique, and what we did might not apply to anybody else. But it worked for us.

1. We made lots of mistakes.

Not that we liked it. At one point, about midway through this journey, Vange looked at me and said: “I’m sick of learning by experience. Let’s just do things right.” And we tried, but we still made lots of mistakes. We’d fuss about them, analyze them, label them and categorize them and save them somewhere to be referred to as necessary. You put them away where you can find them in your mind when you need them again.

2. We built it around ourselves.

Our business was and is a reflection of us, what we like to do, what we do well. It didn’t come off of a list of hot businesses.

3. We offered something other people wanted …

… and in many cases needed, even more than wanted. You don’t just follow your passion unless your passion produces something other people will pay for. In our case it was business planning software.

4. We planned.

We kept a business plan alive and at our fingertips, never finishing it, often changing it, never forgetting it.

5. We spent our own money. We never spent money we didn’t have.

We hate debt. We never got into debt on purpose, and we didn’t go looking for other people’s money until we didn’t need it (in 2000 we took in a minority investment from Silicon Valley venture capitalists; we bought them out again in 2002). We never purposely spent money we didn’t have to make money. (And in this one I have to admit: that was the theory, at least, but not always the practice. We did have three mortgages at one point, and $65,000 in credit card debt at another. Do as we say, not as we did.)

6. We used service revenues to invest in products.

In the formative years, we lived on about half of what I collected as fees for business plan consulting, and invested the other half on the product business.

7. We minded cash flow first, before growth.

This was critical, and we always understood it, and we were always on the same page. See lesson number 5, above. We rejected ways we might have spurred growth by spending first to generate sales later.

8. We put growth ahead of profits.

Profitability wasn’t really the goal. We traded profits for growth, investing in product quality and branding and marketing, when possible, although always as long as the cash flow came first.

9. We hired people slowly and carefully.

We did everything ourselves in the beginning, then hired people to take tasks off of our plate. We hired a bookkeeper who gave us back the time we spent bookkeeping. A technical support person gave us back the time we spent on the phone explaining software products to customers. And so on.

10. We did for employees’ families as we did for ourselves.

Family members — not just our own family, but employee family members too — have always been welcome as long as they’re qualified and they do the work. At different times, aside from our own family members, we’ve had two brother-sister combinations, an aunt and her niece, father and daughter, and husband and wife.

And in conclusion…

Bootstrapping is underrated. It took us longer than it might have, but after having reached critical mass, it’s really good to own our own business outright. It might have taken longer, and maybe it was harder — although who knows if we could have done it with investors as partners — but it seems like a good ending.

Family business is underrated. There are some special problems, but there are also special advantages too.

Solving the Job Crisis One Job at a Time

Blogs are supposed to be personal, right? So allow me to personalize. Let’s consider the plight of one Megan Berry, 22 years old today, graduating from Stanford in two months with close to straight As.

Megan wants a job. More specifically, she wants a job related to social media and Internet marketing in the Silicon Valley.

In any normal year, this would have been no problem. Google would have snapped her up. Yahoo would have. So would a couple of dozen other companies. She’s an opportunity. A “fuzzy” political science major who won Web awards for programming Cold Fusion databases before she reached puberty, and did serious Web programming work for darfurgenocide.org while still in high school; she’s kind of a bridge, a writer and marketing type who understands the depths of programming. She has her own blog, and blogs at Brazen Careerist and Huffington Post. She’s been on Facebook for four years. She’s on Twitter. She’s on LinkedIn.

But then came the downturn. And the worst year for graduating seniors since sometime in the 1930s. And Megan’s got some possibilities, some things might still work out — one of which came directly from Twitter, by the way — but we’re passing mid April now, and she’s still available.

Think of this strategically. She’s as young as most college graduates, but in her chosen world of social media and Internet marketing, that whole world started about the same time she got into it. So maybe she has something special in the strengths and weaknesses category, something that might help even in this toughest of all years to get a job.

All her information, links to her various blog posts, and all the rest are (right where they should be for a young social media marketing person) at meganberry.com.

No, I Wasn’t Wearing a Rug

People around Palo Alto Software are laughing (with me, not at me, I hope) today because I’ve never been particularly good at hair management, and in this SBTV video the I-forgot-a-comb style ends up looking like a toupee. I promise, it’s thinning hair, but it’s not a rug. Not even a comb-over, just what happens when you try to look combed when you usually aren’t.

I was answering questions about bootstrapping and family business and mistakes I’d made.  If you watch carefully you might see that I was particularly unprepared for the question about mistakes.

Don’t Kid Yourself About Education

This is another question from the entrepreneur.com ask the experts section, and another one that comes up a lot, so I want to post my answer here too.

Question: I’m 17 years old and my parents own a successful restaurant. I feel I need to be well-educated to take over the business, but I didn’t get the best grades in high school. Would a 2-year school prepare me better since I’m not looking to get a job after college? How do I prepare myself to take over my parents’ business?

You might be interested in seeing what I wrote recently — before I got your question — on this from the parents’ point of view. That’s 6 Tips for Involving Your Kids in Your Business on this blog. I’ve actually managed to build a business (Palo Alto Software) that absorbed several of my five children as I got older.

You’ll see there that I believe education is the priority when you’re young. You’ll get so much experience with time that you’ll be sick of it, but now is the time of your life when you have the luxury of getting education. Don’t think you won’t need it because you have a built in job, you will need it and want it that much more. Furthermore, never assume you know the future.

If you don’t have good enough grades to get into your favorite or most desired college, get into whichever college you can and apply yourself. Or do the two-year thing and get your grades up so you can transfer to a four-year college. You’ll never regret it.

By the way, as you get further into your education you’ll probably figure out what you like studying. Concentrate on that, and your grades will improve. And you’ll enjoy it instead of dreading it. Give yourself a break, keep an open mind on this, and keep trying before you give up.

Having an automatic job in a family business is going to work for you only if you do that job well, the company prospers, and you’re glad you’re there. It’s not a reason not to apply yourself in school.

The Secret to a Good Marriage

I’m writing this on a cross-country flight, and posting it on our 38th wedding anniversary. Both of us had forgotten the date, we’re not celebrating, we’re flying to Miami for a speaking gig on Friday.

However, my wife Vange just showed me this quote from her Real Simple magazine. The title of the story was: "What is The Secret of a Good Marriage?" One person answered "wine," another "separate bedrooms," and another "my husband’s wireless headphones during football season" (ah yes, the stereotypes and gender roles. My favorite, which was credited to Cecilia Saad of Washington DC, was:

I once asked an elderly neighbor this very same question. He and his wife had been married more than 50 years. He replied, "Oh, my dear, it’s really very simple. My wife and I agreed long ago that I’d make all the big decisions and she’d make all the little decisions. And in all these years together, there just haven’t been any big decisions.

Happy anniversary. And, for those of you who believe in synchronicity, as in Karl Jung’s work (and I do too), this happened to come up today, when we had both forgotten the date.   

6 Tips For Involving Your Kids in Your Business

Do you own a business? Do you have kids? Do you want them involved in your business? Do you want them to run it one day? Oh, and by the way, do you get a day older every day?

This came up in conversation the other day, talking to women who will be on a panel with me next month at the Women’s Congress in Miami. My daughter is CEO of my company now and two other daughters are among the 40 employees.

The question was whether I did that on purpose, or what did I do to make that happen.

Ironically, given that I’m a planner by profession, this was not the result of long-term planning, at least not exactly.

It took me years to connect in my mind my entrepreneurial business plan software business, Palo Alto Software, with the idea of family business. Even as several of our five children, then in their early teens or preteens, spent Sunday mornings sticking product labels on plastic floppy disks. Even as they took turns, as teenagers in high school, at answering the telephone in the office, it didn’t occur to me.

If you’re thinking to yourself, as you read this, that I must be pretty dumb, I say yes, that’s true, but on the other hand, this was a software business started in the heart of the Silicon Valley during the first PC boom, by an entrepreneur with a Stanford MBA degree. It wasn’t the kind of thing people normally associate with family business.

And also it took me years to recognize that exit strategy or succession could be relevant. I’ve loved the business for so long that it had become second nature.  The thought of retirement was horrible, but I didn’t realize that I didn’t have to retire, just change jobs.

As it turned out, what did happen was the gradual recognition that I could change my job and put somebody else in charge, without retiring. I blog now, and speak and write and teach, while Sabrina runs the company. I work more hours than ever, but it’s a different job now and I love it. Nobody reports to me. What a great change. What a relief.

So, happily, things worked out right for me and my company. I love my new job and my company is growing, and the succession move has worked. So that’s why I want to share. 

It’s scary to give advice about things like this to anybody, so I do so reluctantly. I hope I’m not one of those people who gets lucky and then takes credit for it. 

The tips here come from experience. They are not from academic study. When I was in business school we weren’t talking about family businesses. We did have a family business counselor for three years, and she helped us. However, some of these rules contradict what I think is standard wisdom on succession and family business. For example, I think many family business counselors advise against talking business at home. And I think at least some experts on succession would recommend a longer and more explicit and more shared process for succession. But I’ve talked this over with my wife and several of the five grown-up children involved, and they agree that this is what we’d say, industry wisdom or not. So here’s what we come up with.

Tip #1: You will exit eventually. Deal with it.

This is life, not just business. Even if you think you’ll never sell your company or go public, you’re not going to run it forever. So think about exit strategy, whether you like it or not.

Tip #2: Two parents if possible, not just the one in the business.

This is a moot point of course if you’re both doing the same thing, but when it’s just one of the two parents doing the business, it’s still much better if two parents deal with children’s involvement, deciding how and when. In our case it was my business for the first decade but became our business as it grew. Even in the old days, though, when it was just my business, my wife was always in favor of the kids understanding where the money came from. And of course we recognize that you don’t always have the luxury of two parents of the same mind. It’s a luxury, not a necessity. 

Tip #3: Don’t plan your children into your business. It won’t work.

They’re supposed to do what they want, remember, not what you want? Or are we still in the 19th century (and it didn’t work that well then either)?

Trivia contest: name a major movie in which a central character was supposed to go into his or her parents’ business but didn’t. Answer: lots of right answers. It’s an archetype. It goes back to Abraham trashing his father’s store in the bible. Jesus was nicer about it, but he didn’t end up a carpenter. In Godfather, Don Corleone wanted Michael to be a senator, not the next don, but Michael made that decision, not his father. And for a more recent example, take Hiro in Heroes.

You have to hope they want to get involved, and maybe they will. Freedom to choose is essential. Working in the business has to be their choice, not yours.

Tip #4: Emphasize good education, and let them study what they want.

You want your children studying what interests them, not what interests you or what you think is good for the business.

I’m talking higher education here, of course, not Mrs. Johnson’s reading class in the fourth grade. Let them study what they want and let those chips fall where they may. You don’t get good education by forcing it, and good education is way more important than the right subject. I hope you think that’s obvious.

Despite owning my own business and having my MBA, I encouraged my kids to major in things other than business. They should get an education first, learn business later. It’s a trade, not a discipline. Of course I’m biased on this, my first degree was literature, my second one was journalism.

Tip #5: Share what you do. Talk about it. Open up. Tell stories.

My kids had to spend occasional weekend mornings putting sticky Palo Alto Software labels on floppy disks. It didn’t hurt them to know where the money (what there was of it in the beginning) came from. My wife and I shared the work. We walked together to the post office when I was starting a newsletter business, checking for new subscribers. The kids came too. None of that hurt.

Tip #6: Let them try things. Make it an attractive option.

We like these people we raised, we’re happy to have them involved. Whenever we could we tried to make the workplace a pleasant place to be. This of course means everybody, in our case of a 40-employee company that includes the 37 who aren’t our grownup children.

People don’t always find their best place right away. Don’t push them into corners, let them experiment. Let them work with who they want, on what they want, and eventually they’ll end up in a good place.

Ultimately what’s at stake here, if things work out right, is you can end up with well educated hard working people who know where the business came from, and why, and want to take it to the best place for its future. That’s really a good thing.

Looking back on this, and reviewing my tips, I can see of course that not everything here applies to everybody. Also, that I’ve probably left some key elements out, although not on purpose.

Furthermore, I’m embarrassed to seem to be recommending against planning. But in this very special case, planning is too much in danger of becoming pushing, as in pushing your children, forcing your dreams down their throats. So you can’t really plan on this, you have to just work on making the conditions right, and make it happen.

The Rest of the WSJ Story

The Wall Street Journal has a story today on my decision to name Sabrina Parsons CEO of Palo Alto Software and dedicate my time to blogging, speaking, and my next book. It’s nice to get press notice, and Laura Lorber did an excellent job boiling down 75 minutes of interview to a few hundred words.

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This may have started with Steve King’s story, Baby Boomer Un-Retirement over at Bizlabs, which was related to my post The Ideal Job on this blog, and one last April when I announced the decision. 

I emphasized that this  isn’t retirement, it’s a delightful new job. "He wasn’t — and still isn’t — interested in retiring," Laura wrote, and that’s important. "Now blogging full time, he posts up to 10 times a week to more than three blogs, including blog.timberry.com."

I’m a bit embarrassed about the King Lear  references. Laura reported that accurately, but I really don’t spend my time reading Shakespeare classics (talk about out of date!). I looked up Lear after a reference in a conversation, and it seemed interesting because of the old guy and his three daughters. For the record, though, I also mentioned Christopher Buckley’s Boomsday, which is about baby boomers getting out of the way, and about blogging as well.   

I also talked about how I never really liked the management side, but stuck with it for 19 years because this was my company, my work, and I felt that I had to run it or it wouldn’t be run. Then I turned around and saw that there are others around here who can run it as well or probably better than I. So I get back to my writing. During that long interview, Laura asked me about career paths. I mentioned how I gave up the VP spot at Creative Strategies to do the work myself instead of managing others, which I described as First Day of a New Business in a previous post on this blog.

Nepotism vs. Common Sense

If my wife and I raised well-educated, hard working children, who believe in our business and carry it forward, is that bad? At one point, years ago, we had preteen kids putting sticky labels on floppy disks in our living room. We had teenage kids going to the office and answering phones for the business after school. Our son managed our Internet presence from 1998 until 2001, and our daughter and her husband built our UK subsidiary and then managed our marketing for years. Three of our daughters work for our company, Palo Alto Software. One of those three runs it.

Is that bad? Apparently some people call that nepotism and that sounds ugly.  In Nepotism vs. Family Business over at MommyCeo, Sabrina Parsons objects:

We can see that family businesses are extremely important to the US economy, and are part of what makes America what it is today. So, how do you reconcile a family business and these negative attitudes towards nepotism? You can not see a family business from one generation to the next, unless family members work and run the business. Family succession planning is very important to the health of a family business. Good family succession planning means the difference between a healthy business that keeps growing and running from one generation to the next, and a business that burns out and fails, or worse gets sold out of the family (often times for bargain price to be dissolved for assets).

She has good reason to be angry. She’s responding to a Harvard Business Review post, picked up by NPR today,  that seems to assume family members are by definition incompetent. That’s a dumb generalization, a sloppy stereotype.

In fact, the real definition of nepotism is favoritism and unfairness, not just family. I looked it up. Google gives me 7 definitions of nepotism, 6 of which incorporate unfairness and favoritism, leaving one outrider that assumes nepotism whenever there is a family tie in a business.  Wikipedia, the best of them, clearly defines it as favoring relatives because of their relationship rather than because of their abilities. That’s one of the points Sabrina is making.   

So let’s clean up this sloppy thinking up. I expect better from NPR and HBR. Passing leadership on to smart, hard-working, and committed family members isn’t bad. Sharing DNA doesn’t lower ability. Don’t talk about nepotism without making this important distinction.

Is This the Ideal Job?

I had a nice note from Steve King of Small Business Labs in my email today. The question was, "where do you find the time?" I enjoyed answering that, because we undervalue family business and success and such. So much so, in fact, that I decided to (with apologies to Steve) post that answer here.

Some people misinterpret where I am as "retired" since I named my daughter Sabrina Parsons CEO last Spring. Actually I’m still president here, but not running the company; I have carved out my ideal job, which is speaking, teaching, blogging, and writing about business planning, small business, startups, etc. I do a lot of webinars too, for example four in the two weeks ending today. This is really fun. It’s the job I always wanted. Ironically I think I’m spending half again more hours than before, but Sabrina runs the company, I just think, write, speak, etc. Nobody reports to me. And with Sabrina in charge, the company is refreshed, renewed, growing, and very well managed.

And Steve, thanks for asking.

–Tim