Grocery magnate learns from personal failure
The following is a guest post by Stew Leonard, founder of Stew Leonard’s, the Connecticut-based grocery and wine retailer with upwards of $300 million in annual sales. His recent book, “Stew Leonard: My Story,” details the challenges and triumphs in building a company and legacy that his children would inherit. The views expressed are his own.
My son Stew Jr. delivered a bit of news at his college graduation that almost broke my heart: He had been recruited by Price Waterhouse, the big accounting firm, and decided to work for them instead of joining the family business.
Despite our disappointment, my wife Marianne and I felt he had earned the graduation present we had chosen for him: a round-the-world tour. It was 1977, and at $2,500 just for the airline ticket alone, it was an expensive gift. But it turned out to be a wonderful investment.
On one of the flights, from Katmandu to Cairo, Stew sat next to an Indian businessman. The fellow proudly told Stew all about his family business, one that went back several generations. When Stew told him that he had chosen not to follow in my footsteps, the fellow was convinced that Stew was making a mistake.
Stew began to have second thoughts, and later that day he called us from Cairo to tell us that he had told Price Waterhouse he had changed his mind. He was going to make a career of the family business instead.
In the early years of building our business, Marianne and I hoped that our children — Stew, Tom, Beth and Jill — would someday choose to work at our store and we knew that would be more likely if it was fun for them. So every night when I came home for dinner, I told them exciting stories of the events of the day. Even if things hadn’t been great that day, I made it sound like fun: The chickens getting loose on Route 1, a huge display of cereal boxes falling like dominoes, the new baby calf we had just added to our little farm, the children’s friends I’d seen in the store that day. Each night they waited to hear my stories, the excitement, and the news.
Luckily, the strategy worked. In addition to Stew Jr. joining our business and eventually becoming our chief executive, Tom built our operation in Danbury, Connecticut, Beth brought her love of French culture and food to focus on baking, eventually starting the largest in-store scratch bakery in the country, and Jill, the youngest but always determined to have a place in our business, set her sights on shaping and developing our team.
Why Junior shouldn’t take over your business
Entrepreneur and author John Warrilow believes business owners are engaging in a “twisted form of child abuse” when they pass their companies onto their children.
In his new book, “Built to Sell: Turn Your Business Into One You Can Sell”, Warrilow offers his advice to creating a sellable company and argues that 99 percent of businesses can’t sell because the companies can’t be run without their current owners.
In a recent telephone interview with Reuters, Warrilow said business owners should have the best possible exit strategy before they consider handing over a company to their children.
“If your business is not worth anything to a third party, why would you want to give it to your kids?” asked Warrilow, who has started and sold four businesses.
The problem arises when owners can’t extricate themselves, leaving them with no exit options, said Warrilow.
“The patriarch or matriarch turns to their kid and says I make X amount each year, why wouldn’t my kid want my business?” he said. “What you’ve done is you have a business, but you haven’t made it a valuable business for a third party to want to buy. The only exit option is to give it to your kids.
“Well you’re basically ensuring your kids will be handcuffed to this business for the rest of their lives, unless they’re successful in changing the business model.”
