speaker 1

00:00:00

"To episode number four of the business brothers and 1, 2, 3, welcome back to another episode. My name is Purdeep Sangha," 

speaker 1

00:00:11

"And I'm Harjeet Sangha, and we are the business brothers." 

speaker 1

00:00:15

"So today's topic is going to be pretty interesting. We're just going to rock it out here today, about the curse of the second generation. What does that mean when it comes to a founding business? Obviously there's gen one, the guys and gals who started the business from scratch, brought it up, built it, and then all of a sudden generation two comes along, which is typically their kids. So their son or daughter that are part of the business, maybe they're not part of the business as they're growing up, but eventually they have something to do with the business. And it's not always good news because it's interesting when we hard share our experience with our family business growing up. You were fortunate enough to actually leave it a little bit. You were working out and different things. You, you got a job at the mill at a young age while I was kind of stuck on the orchard. How was that?" 

speaker 0

00:01:07

I mean, it definitely paid well, but certainly I think come back to the roots of over-fault family business, definitely more meaningful for what we were looking to get out of life. 

speaker 1

00:01:18

"For sure." 

speaker 1

00:01:18

"Yeah. It's interesting. Because hard you were making more money working weekends that I made in the entire week. So being on the family business, it doesn't mean that you're always making more money, but there's, there's definitely some challenges that come along being a second generation in a family business. And that's what we're here to talk about today because it's not just, you know, we talked in the previous episode, we talked about the challenges overall of, of being a family business. But today we're going to focus on specifically the second generation. And, Harge and I are both in the second generation and I can speak personally for myself and I'll let Hart share his perspective and his views, but there's a point in time where I really wanted to grow the family business. I love being in agriculture. It's one of my passions. I love being out in the orchard on the tractor." 

speaker 1

00:02:09

It's just something that is a part of me, but I couldn't really get involved as I wanted to when my parents were more active because they had just had a different perspective in terms of how to lead it or how to run the, the business. And I having a business background and having a different experience, just had different thoughts and there was always a conflict. And one of the examples Harj is when we first got the orchard and we were replanting this particular one, one of the things that I wanted to do was replanting cherries because the returns were higher. It was just a little bit, I personally prefer growing cherries than apples, but my parents were dead set on growing apples because for them it was less risk risk. It was something that is a little bit more hardier, can deal with weather conditions a lot better than cherries can because with cherries, it can be as simple as a quick rainstorm and heat immediately after which happens a lot in Kelowna. I would say one out of every three years, maybe even two years Harj. Cherry crops are just devastated. We know that last two years they were hit hard. Two years in a row. So to avoid the risk, my parents planted apples, but apples have less returns. And so we've seen the challenges with that as well. I'm not sure what your, what your take is on that Harj. 

speaker 0

00:03:35

Well, I think that's one of the first things you see in the challenges of the second generation is what is the philosophy of the business? And certainly the first generation, you know, as you said that, you know, the blood, sweat equity that they put in, they kind of feel like they, their say should have more weight to the decisions of the business or the company. And times change. Right. And certainly is to your point, you know, Apple's ability to withstand more severe weather conditions compared to a softer for late cherries and Marcus continue to adopt, you know, new aspects of techniques for, for growth and, and consumption. So I think you're going to see a lot of those challenges for sure, but I think kind of highlighting, you know, at the top of that is what is the overall philosophy of the business? Is it to maintain, is it to grow? 

speaker 0

00:04:22

Is it to maybe grow one individual point, all those come into play. And certainly the first-generation feels like they have 90 to 95% of the say, and it doesn't matter what you're saying the business is, because they just feel that you have less experience. Unfortunately, you know, using our family as an example, we may have less experience compared to our parents and farming, but we understand how the market has changed in a fast rate compared to the, yeah, their experience. So, I mean, you can look at that and compare it to many other businesses. That's probably pretty common is different philosophy, different market environment. And I'm sure the way they did things worked for them, but it's not necessarily going to work in today. 

speaker 1

00:05:04

"World." 

speaker 1

00:05:04

"That's a good point. There are different philosophies is definitely a big one that stands out there. And I just, from our personal experience, what we see a lot of is is that clash that happens between gen one and gen two, because there's no clear guidelines in terms of who's running the company because sometimes the gen two feels like they've been a significant part of the business growth, right? And they attribute it to their own work. But gen one is saying, no, this is, this is our sweat equity. We built this thing. You might've helped a little bit, but this is still ours. So there's definitely a different risk element, different philosophy as well. And if, if the gen two and the gen one aligned with the philosophies of the businessman, that's when things really take off, right? That's when the energy is there, the momentum is there and that's where you can really scale your business and take it to a completely different level. The other thing Harj that I see what happens with a lot of gen two's is, is they're afraid too, although, you know, it guys like us where gung-ho, we're ready to grow a business. We're ready to do what we need to do in the back of our minds. There's still this little voice that says, what if we effort it up, right? What if we do something that just tanks this business and then we have just thrown away our parents' entire lifetime worth of work. "And." 

speaker 1

00:06:28

"Yeah." 

speaker 1

00:06:29

"That sits in a lot of people's minds." 

speaker 0

00:06:31

Oh, certainly I think, you know, kind of going back to our own personal experience, you know, there's going to be areas where none of us have experienced it and you're both taking a risk or a real leap of faith in that, that field or that perspective, but from, from your comments of, you know, not, you know, you know, leaving the business in worse shape than, than what you found, of course, inheriting the business or having a parents help you acquire a business does definitely give you a head start. I think you could also look at the other way too. I think our parents taste tasted risk fully. I mean, they came to this country, not knowing the language, not have any assets. So they're able to maybe in some aspects tolerate risk more than the second generation, just because they had much harder obstacles and challenges, challenges, as opposed to the second generation where, you know, we can say we've had it pretty good, we haven't really tasted failure through our business. 

speaker 0

00:07:22

So maybe we won't be able to see the, the different variables that they can see with their perspective. But I think that can go both ways. I think the second generation may want to take on more risks compared to the earlier generation or just have lease or less of an appreciation for what risk really is because they've never tasted it before, but you know, it's a balancing act for sure. I think, you know, first-generation and second-generation are going to have different, different value systems, different philosophies, but at the end, you know, I'm not saying one is better than the other, but if they can learn from each other and be in harmony, be on the same wavelength, that business will have much more success going forward, as opposed to just, you know, pure perspective on one generation's view. 

speaker 1

00:08:04

That's a good point. And the other thing that I see is the power struggle that happens with gen two and between siblings, for example. And, what ends up happening I think with gen one is, if it's a couple that's involved in the business, they have to work together. They have to be in sync. Otherwise, the business isn't going to be growing, but with gen two, that's not necessarily the case because siblings also have different viewpoints. Siblings also have different perspectives and also different intentions, right? One sibling, again, this happens often is when there's a business and especially closer to when gen one is ready to retire, gen two, some of the people that are not in the business say, well, there's going to be some money to be divvied around. I need to get more active, even though their entire life, they weren't active at all. 

speaker 1

00:08:56

Now they have an interest in the business and, and we see that quite often as well. And then that power struggle between siblings happens. And that's never a good sign. Harj, you and I just this past weekend, prior to recording this episode, spoke to someone who was just talking about this very challenge. One of the, one of his kids is wanting to, you can say, take on certain businesses that they have in the family portfolio. Another one is, hasn't been involved at all, but now is asking questions to say, okay, you know, how is this going to be divvied? And in speaking to this gentleman, it was, it was very evident. And he said himself that he's worried about that. What happens now? And when we were talking about the conversations that we have with families, he was like, wow. Yeah. You know what, that's exactly what we need. And I think we gave him a lot to think about. 

speaker 0

00:09:49

Yeah, I think those are always going to be challenges for sure. I mean, if there's only just one child in the family makes me make it a little bit simpler, but certainly we can't dismiss or forget about the spouses of the, the, the business owners themselves as well. So as much as the siblings get along, we have to take apart the spouses too, because, you know, keep in mind, they're making sacrifices as well for, for the family business. And their support is definitely a key factor for the success of the business. So, you know, even though the siblings may get along, you know, there could be a spouse here and there that says, you know, what is our take on it? Even though we're a passive shareholder or passive beneficiary of the business may be, they may be asking more questions, come time to when there might be an actual transition of the business. 

speaker 0

00:10:38

So there's a certainly more layers for sure. And even when you think you've discussed everything, there's always going to be some new avenue come coming through and provide another wrinkle. But I think the most important thing is, is conversation and recognize it and be aware and you know, and just providing transparency for everyone. Because the last thing you want is just a heavy, heavy dispute. And of course pretty because we were both in the Okanogan the same time we've seen those conversations happen as well, when there's no communication and there's going to be a transition to business when everyone starts putting up their hand, wants their own share. 

speaker 1

00:11:11

Yeah. When it comes to money. Right. And I think that's one of the things that this gentleman said when, when money's involved, things get dirty and everybody says, Hey, look, you know what, I'm good with my sibling. I, whether I don't need the money or whatever it is eventually when the money starts to get distributed, that's when people really start the nasty start, a part of them really comes out. So the other, the last thing I think here that pops up in my mind, hiding hearts, you might have something else as well, but it's really having to prove yourself because again, as much education as you might have as much experience as you might have in and outside of the family business, you still feel like you have to prove yourself. Not only do you as gen to feel like you have to prove yourself upwards. Sometimes that pressure is there from gen one where they kind of make you feel like you have to prove yourself. 

speaker 0

00:12:05

Yeah, it's definitely a lot of added pressure. And that kind of throw that into the identity bucket is really who are you as a second generation growing up in a family business and it's not easy. You know, the first generation is going to feel like they did all the hard work and they've given you such a head start that you can't screw it up. And then meanwhile, the second generation is probably seeing, you know, the, the increased level of, of eyes upon them, you know, from other family members or peers, or even competitors that say, Hey, you got a really good head start. You have to be successful. So I think the identity crisis can play a huge part of that. And, and certainly, you know, business itself is hard enough, but when you feel that, that level of success and what it pertains to, it's really hard to kind of quantify that for the second generation. Because it's not just about the business. I think the other aspects are just so important, your, your home life, your, your physical health, all those things. So when we think of what the second generation goes through, you, you really do see in common, an identity crisis stem and from what you're talking about. And, you know, even though you may have a good head start, it actually can be to your detriment with not being able to grow it enough. 

speaker 1

00:13:18

And then there's that other part too, if you're gen two and you don't want to take on the business and you don't have an interest in it, but you're being forced to because there's a legacy aspect as well. And then what do you do if you don't want to, but you're being pushed into it and you don't have the passion for it. And I'm a firm believer of that when you lose passion for your business, he better watch out because that's when the business starts to go downhill. And unless you have a really good management team, who's super passionate about it and you can be completely hands-off and even them, then that's a tricky, that's a tricky place to be in. I believe that being passionate and, and having a strong desire to be in that family business is absolutely critical 

speaker 0

00:14:00

For sure. They, they say kind of the two started in formulas for, you know, owning a successful family businesses is passionate and perseverance so. If you're missing one of those formulas, it's going to be a pretty tough slug to, to, to be successful. 

speaker 1

00:14:14

Yeah. I liked that one, passion and perseverance. That's smart. So we've, we've talked to quite a bit about some of the challenges that the gen two specifically faced in family businesses, but it's all, not all that bad. There's a lot of good stuff too. So Harj do you have any recommendations for gen two in terms of how to get through those challenges? 

speaker 0

00:14:34

You know, I think, you know, speaking personally and professionally, I think just having more communication, I think certainly what we can see with the first generation that they may be communicate less, but we have more tools that we're equipped with today. So certainly communication can kind of, you know, take away a lot of the challenges that you may see in a, in a family business. And if we don't openly have those conversations you know it's pretty hard to solve some of the challenges. 

speaker 1

00:15:00

Just coming our way. Yeah. I, I would just echo that because communication is the fundamental foundation for every relationship, whether that's personal or business, if communication isn't strong, you're going to have challenges without a shadow of a doubt because we haven't gotten to that point yet where we can read people's minds. So it's important to actually have that. And I highly recommend that every family go through communications training, that if you haven't been formally educated in communication, then you bring the family together or as individuals and learn what effective communication is. It can solve a lot of problems, not only in business, but outside of business in your personal life as well, whether that's your marriage or with your kids or whoever it may be in your life, just having strong communication skills is just going to make your business and personal life a lot stronger. So want to thank you for listening in, and we will see you next time. Take 

speaker 0

00:15:54

Care, everyone.