Kathy Boyle | The Thing That Entrepreneurs Don’t Want to Talk About

You’ve built a successful business. Things are running smoothly with you at the helm. But what happens if you get sick… you want to retire… or, god forbid, you die unexpectedly. 

 What happens to the business? What happens to your legacy? To your family?

 Too many entrepreneurs are too focused on the here and now, says Kathy Boyle of Chapin Hill Advisors, and don’t plan for the future. Turns out without them in charge, there is no viable business.

 Most business owners don’t like to think of their own mortality, but that’s where Kathy comes in to ask the tough questions. We talk about…

  • What you should be doing now to prepare your business to be sold
  • The systems you need for a successful transition financially and emotionally
  • Why you must make yourself “unessential” to your company
  • Ways to legally protect your legacy from the IRS
  • And more

Listen now…

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Welcome to the Unstoppable CEO podcast. I’m your host, Steve Gordon. And today I’m really excited. We’re going to be talking about a topic that we have not covered yet on the podcast. And I think it’s a really important one for everybody that owns a business. I have been through the process that we’re going to talk about here. I will tell you if it’s not well thought through, you’re going to be in trouble.


So today, I’m talking with Kathy Boyle. She’s the founder of Chapin Hill Advisors, and she really specializes in helping family businesses avoid the implosion that often happens when you try and transition from one generation to the next or they try and make an outright sale.


So what we’re going to be talking about is business succession. Whether you have a family business or not, you’re going to want to pay attention to this because at some point you’re going to exit your business. The question is just going to be, are you going to exit in a way that you like? So today we’re going to hopefully set you up with some ideas that will help you get there. Kathy Boyle, welcome to the Unstoppable CEO.

Great to be here, Steve.


I’m excited about this. We have not talked about this topic on the podcast before. I think succession planning is hugely important, having been a part of a succession. And I think it’s often ignored.

It absolutely is. Nobody wants to deal with succession because succession equates to mortality. And I have business owners say all kinds of things to me, including I’m only going out of here feet first. I try to tell them that there’s a whole lot of distance between standing upright and being flat on a coffin. A lot of other things can happen and you’re not in control of your destiny. So if you’re not set up, then you spend your whole life or a good portion of your life building this fabulous business that should be a legacy for your family, whether you outright sell it or transition it to the next generation. And it takes care in feeding to do that. It’s a process. It doesn’t happen overnight. The other thing a lot of people say to me, “Oh yeah, I’ll come back to in about five years when I’m ready to sell.” That doesn’t give us the lead time that we need. So that’s the thing that we try to get to people and get them to understand there’s no time like the present to start. And there’s never going to be a perfect time.

Absolutely. Absolutely. We can dive into that for sure. I’ve got some personal perspective on that that maybe will get people to get off the dime, and I know you have a ton of it too. Before we dive into that, give everybody a little bit of sense of your background and how you got to this stage of your career.

Well, I have a very checkered past. So I did not do a straight line career at all, which in many ways prepares me very well for dealing with the entrepreneur because many entrepreneurs are accidental entrepreneurs, and they fell into something.

So I actually love, love, love animals. I’m one of nine children. My parents do not like animals with nine kids. There wasn’t really room for a whole bunch of cats and dogs, etc., etc.. So I must have been an in another life. I wanted to be a veterinarian, and I wanted to go to Colorado. I don’t know how I got that in my mind. I’m from Connecticut. I went to Michigan State because according to me, that was close to Colorado. So geography is not my strong suit. You do not want to ask me directions, but you can ask me numbers, and names, and all that stuff.

So anyway, I went to Michigan State to be a veterinarian, but most of the vet schools in those states are actually aggie schools. The big use of those schools is to be best for hog farming cattle etc. And I’ve been a vegetarian since I was 16, and I do that because I’m morally opposed to killing animals.

So killing a chicken and processing it for poultry science was really not … and plus now all of a sudden I have boys and coed dorms, and lots of people. And so anyway, after the second year it was very clear that I really didn’t want to be a veterinarian. Veterinarians actually have to do whatever their client wants, and I want to be Dr. Doolittle and save animals.

So I moved to Colorado all of my own. I decided if I was going to live there, I may as well live in a great place. So I lived in Vail, Colorado and I became a ski bum. I skied for three years and competed freestyle, waited tables at night to make money. And then went country swing dancing and it was a great life.

And then I went down to Boulder and got serious, and changed my major to commercial recreation and then business. I’m pretty much a serial entrepreneur. I had an aerobics studio called Fitness Fix with Kathy Boyle. I taught for other people. I taught at gyms, I rented a roller skating rink and taught. And I had little flower business, and I was engaged to a guy that worked for what was the NASD in the old days. So that was regulatory body. And he would come home and show me stocks, and I would get it pretty easily.

And we broke up, so I decided to move back east. And I was going to get job on Wall Street and make a ton of money, and get all these entrepreneurs to invest in my aerobics studio. That was my game plan. And I came back and had a very difficult time getting a job in the late eighties as all the boys were according to be born with suspenders on and little silver spoons. And that’s who they were looking for, people that could actually tag onto daddy’s golf course list.

And so by hook or by crook, I actually finally did get a job in a very big firm. I was one of 100, and we had a cold call every day, 100 dials. It was miserable. And I really targeted business owners, and they all had a line of credit. So I actually was forced to learn all about businesses. What a C corp was, what an S corp, how retained earnings went. I didn’t really care about the line. That was the way into the business owner. But I wanted to manage the pension. So I would do that in the morning. And the afternoon I called my LOLs, little old ladies, and I sold them muni bonds.

So I built my business as a stockbroker initially. And then I got certified as a financial planner. And I really love planning. So my business morphed over time to finally add planning in. I’ve done a lot of CNBC, and Fox, and Bloomberg, and pretty much average a show a week. I can make common sense out of the market.

So planning was looked at originally as some other bucket, and now the markets have shifted completely and now planning does come first. So that’s really the long story of how I ended up as plan-a-holic and helping people plan.

So anything that comes with a plan, whether it’s a startup, whether it’s a mature business looking to sell or transition, a divorce plan with. A lot of times work with the women because we become their financial secret weapon. Because I can understand what private equity is, what venture capital is, stock options. And the women for the most part, especially in the wealthier towns, they choose to be a stay at home mom or their career may come second. Their primary responsibility is often taking care of the household and the children. And the men have the friends with money and so the women can be at a disadvantage.

So a lot of times we help women with the divorce plan, and then we call them life plans. The financial plans are really about what’s your life like and what’s really important to you? And we have touchy feely conversations about everything from adoption, to in vitro, to how many kids, to whether your in laws are going to live with you. Does mom have steps in pool? Very practical and we solve these risks.

So a lot of what we do is lay out risk. I have a high risk tolerance myself. I’m a true entrepreneur, so I love entrepreneurs. And I love the fact that we can create something out of nothing, and that we can lapse onto an idea and build it into a business. I find that so exciting. So I love deals. I love entrepreneurs. I love their energy, and I love helping them preserve what they’ve built.


That’s a heck of a background.

Not very traditional.

No. I think somewhere along the line in kindergarten, they forgot to teach you how to draw a straight line, because that wasn’t a straight line at all. But sometimes that’s the best way. I think that’s one of the unique things about most entrepreneurs is that we tend to go on all these different directions. There’s been this link or this association with ADD and ADHD, and all of that with entrepreneurs. And I look at that, whether you truly have that condition or not, that distractibility has a huge advantage. It takes you to the next important thing.

It does. I don’t go to the grocery store without a list. I have a lot going on. I rescue animals, I have 14 of my own. I host events, I have a speaking business. So I really have a full plate every day, which drives me. I can’t imagine sitting around and watching TV. I just don’t. I have a very active life. And I love life. But I have to draw myself little mini lists all day. I started with a day planner, I was trained in the Franklin Covey method, and I still continue to use a physical day planner. That keeps me very grounded, and I try to plan my day in advance. The old adages that they tell you, “20 minutes of planning creates an extra hour the next day,” is really true. Even people wasting time with multiple trips to the grocery store. If you add up an extra 20 minute trip three times a week, you lost an hour of your life. So even planning your meals out and planning ahead.

So I just find it very easy. I just like to plan, and I can throw an event for 150 people. We actually cook all the food for these events. So it brings everything together for me, and I love being able to help people. I love helping people while I’m also doing what I love to do.

The First Thing to Do When Things Aren’t Working


Yeah. That’s great. You’ve been involved in an awful lot of built transitions and advising business. I know you built multiple businesses. When you get to a point where something’s just not working or you’re working with a client and they’ve hit a brick wall, what advice do you give them? What do you draw on from maybe your past, to advise them and push through that obstacle?

I think that’s a great question. And too many people can fall into their own super … they just depressed. I just talked to one friend, she spent the last three of the last days in bed. And she’s complaining that it’s raining and none of her things are working. And I’m like, “I’m sorry you got to change your mindset here.”

So whether it’s a Tony Robbins tape, I do listen to Tony Robbins podcast a lot of times in the morning. I’ve got a couple of coaches that send out links to other podcasts. It’s amazing how quickly you can change your mindset. And one of Tony Robbins’ things is actually if you physically move. He actually recommends getting up and just doing 10 jumping jacks, 20 jumping jacks. And physically changing your body can change your mindset.

One of the other techniques that I use is I actually have a journal, and I write in that journal, and I write everything out. I take a lot of time on a weekend. I usually do it like once a week for a lot. If I’m having a bad time, I do it every morning. And it changes your mindset. You’re able to dump all the negative stuff that you don’t want your spouse to have to continue to hear or your best friend to hear over and over and over again. You can dump it into the journal, and then you can create a path to success. I also post a motivational quote every morning. And I find that just reading those motivational quotes. Today’s was, “Be somebody who makes everybody feel like somebody.” It’s just such a simple little thing. But if you go about your day, it’s like give a smile away. It’s free.

So these are corny little things, but they actually really truly work. So I find that you have to find your mindset. And when you’re beating yourself up, and certainly I’ve been through very difficult times, and I’ve been through periods where I’ve never actually been suicidal, but it certainly seem like I don’t know what else to do. What else am I supposed to do? And when we make these mistakes in business that are cataclysmic and I’ve made several, you’re sitting here going, “How am I so smart and I could be so stupid?”

So you can’t spend a lot of time on the stupid because it doesn’t get you anywhere. You’ve got to spend some time on the path. God did this for a reason or the universe did this for a reason. Whatever you want to believe. But let’s create the path out. What works? What’s your passion?

Sometimes you’re in a business or a job that is going nowhere. You might be making thousands or hundreds of thousands of dollars or millions, but you’re unhappy. So change something. What’s your passion? Whether it’s going to live in Costa Rican and buying an apple orchard or fruit orchard. Whatever it is, there’s a way to make that happen if you truly want it.


The interesting thing that I heard between the lines there is that you recognize that you’ve got the power to choose. And that’s powerful because I know from entrepreneurs I talk to, I know just from people that come into my life that I talk to. That I think a very small minority of the people on the planet actually understand that they have the choice. You mentioned if your passion is being an apple orchard farmer in Costa Rica and you’re living in Ohio, that you’re not planted there. It’s not like you got stuck down in the ground and you’ve got roots and you can’t get up and move. And I think a lot of people don’t believe that there really is possibility for them to make that change. Do you run across that when you’re working with your clients ever?

Yeah, not so much the entrepreneurs because I think entrepreneurs are … they’re stubborn, they’re determined. They’re usually visionaries. They usually have passion. So I think most entrepreneurs that I’ve met are the ones that will pull up their boots and take the next step.

The people that I get frustrated with are the people that are like TGIF, thank God it’s Friday. Well thank God it’s Friday. We just lost another week of our lives. I don’t really like to look at life that way. I like to look at what can we do today to make a change in someone else’s life, an animal’s life, or our own future.

I don’t relate to those people. And I’ve been frustrated. We see this in divorce actually. In the divorce with the women who want to cry, and cry, and I understand it’s a very emotionally challenging time. But I’m about okay, you had a great life. You have three beautiful children. They went to private school, you drive a Range Rover, you live in a $2 million house. You’ve been married for 20 years. I’m sorry that this is end of the past, but there’s a whole new life. You’ve got another 20, 30, 50 years ahead of you. Let’s get the best possible solution for you and your family now. Those are the people I like to work with.

So I do get frustrated with the ones that want to tell me for the 15th time, how he left him for a young cookie, or how their life is miserable. They have no skill sets. I asked one woman what was her passion. She had been an analyst on Wall Street. So she obviously had a degree and skillsets, and she’d been a stay at home mom for 20 years. But she started crying and saying she had no passion. The passion was out of her life. I’m sorry, I can’t relate to those people.

So I’m very empathetic, but I don’t have a lot of time. So if someone’s not going to be receptive to listening and working with it, I’m not a good fit for them.


Yeah, I can imagine. And that frustrates me too because you look at them and you go, “Look, it’s all right in front of you, you just can’t see your blind. It’s like you’re blind. It’s right there. All you got to do is make that choice and you have the power to do it.” It can be very frustrating.


That’s a fantastic point, and I think one that’s all always worthy … even for those of you listening who are nodding along going, “Yeah, I got it. That’s me.” It’s still good to hear it and have that affirmed, and thank you for doing that Kathy.


I want to take a quick break. When we come back, I want to dive into succession planning because I think this is a really important topic that folks need to hear and I know you’ve got a lot to share on that. So we’re going to be right back with more from Kathy Boyle.


Hey, welcome back everybody. This is Steve Gordon. And today, I’m talking with Kathy Boyle from Chapin Hill Advisors. And Kathy, we promised that when we came back we were going to talk a little bit about succession planning. So for a business owner who’s listening to this and is maybe within five, 10, 15 years of thinking, “I want to be out of this business.” How would you begin to talk to them about succession planning?

Is Your Business “All in Your Head”?

That’s a great question, Steve. And I think let’s frame it first in a macro sense. There’s over 5 million privately held business in the United States. The average age of the CEO is 60. 70% according to PricewaterhouseCoopers who does great surveys, great white papers. 70% of those surveyed say in the next five to 10 years, they’d like to transition in some way, shape, or form. And only 31% of them have any semblance of a plan. And in many cases it’s simply a will, and a will is not enough. And then when you get to the failure from first generation to second generation, only 30% of those businesses survive. And from second to third, only 12%. And from third to fourth, only 3%. The 60% of the reason for failure is lack of communication by the family members, between the family. And number two is 25% is lack of preparedness for the next gen to take over.

So that really gets to the gist of what I talk about, because the entrepreneur is generally a multitasker as you said. We’re a little ADD. And so we’re able to juggle a lot of balls. Also, our intuition is based on experience. So you can talk to someone on a first call if you’re selling them your marketing services through agency, and you can tell whether or not they’re going to be resistant, or they’re going to be a good fit. Are they going to be open-minded?

So the same thing here. You got to think about the business owner. Are they ready to take the time to carve out some systems? That lack of communication a lot of times is that the CEO has everything in his head or her head. And we’re not patient people generally. So letting someone else learn how to do it and make little mistakes along the way, on their own, without mom or dad coming down hard on them. It’s hard to do. And so that’s really the process that we like to think about.

But where we actually start is what’s enough? Everybody, when I used to do CNBCs middle of the day power luncheon and call-ins, everybody wants that magic formula. How much is enough? So your business could comprise 70% of your net worth. And selling it is not something you should undertake in a last minute decision or just pick somebody. When you told me about your transition, you were only four years out of school and the owner came and made you the CEO. Now they spent 10 years transitioning, which is wise. But, sometimes entrepreneurs are too quick to make these mistakes I’ve made with people. I like everybody. I’m a salesperson, you know? So I think the best of everybody, and I also think what I do is easy. And that’s the other mistake entrepreneurs make. We think what we do is easy because we can do it.

So I think coming from the get go of what’s going to be enough? If I have my business doing 3 million or 5 million in revenue right now, what’s it worth to someone else if someone outright buys it? Can I afford to give it to my children? Should I transition it gradually? Should I get some shares over time? Or should we do an ESPP, which is an employee stock option purchase plan, which is more complicated, but that’s a way to have multiple employees, including your children take it over.

What Is Your Exit Plan… and How Do You Know It’ll Work?

So you’ve got to start thinking about what it is you want. And then we create an exit, and we do multiple sets of scenarios. So what if you gave the children your business? How much savings do you have, how much pension do you have? Is that going to be enough? What’s your lifestyle going to be like? Are you going to have multiple homes? Do you want to have one home where all the children and grandchildren come to roost? Do you want to be the big daddy down in a beautiful house in Palm Beach and everybody comes there for spring break and vacations?

So what’s your lifestyle look like? Have you worked really hard all your life and now you want to really completely detach and go lay on the beach in Greece, or go on cruises? So what’s your lifestyle like? And then we peg numbers to that. Then we can work backwards.

So if you have an exit plan in mind and you make it stated, now you have to be able to tell your children. And that becomes another challenge. Because a lot of times, maybe not all three of your kids are suited to be in the business. Maybe your daughter should be running the business and not your sons. Maybe you and your wife or you and your husband disagree on who should be the lead.

I had one woman, the husband ran a very, very successful, largest private company of its kind. The only company that could actually probably by this company in one piece would be a public company. And the wife and I were hanging out at her fireplace one night and she said, “I’m just going to sell the company. I don’t want them to be mad at me.” I’m thinking about the two daughters and the son, all three of them run divisions and they’re not going to be mad at her because she sold the business? And then the capital gains tax, and everything else. And who’s the buyer and did you get the right price?

So these are all the different things that we think about. It sounds like a lot, but it falls to the same kind of process. What do you have now? What will you have in the future? What are your goals? How do we get there?


It’s really starting with the end in mind and working your way back. Sounds like.

Exactly. Exactly. And the end can be multiple things because as you know, God may have different plans for you then you have for you. And when the person tells me that they’re going out feet first. And that man happened to be 88 years old, and he ran a car show that made a lot of money, had 20,000 visitors every year. His daughter was in her forties. He was 88. His whole house in Greenwich, Connecticut was a testimonial to cars. Every place there models, magazines, and everything. And I’m meeting with him in his house, and he made a lot of money at this point. He was a character. And his daughter was in her forties, and she did the administration for it. He had two sons. And I said, “Well if you fell dead right now and the house was sold, it’s going to be worth X and the business might be worth X.” And I said, “All three children are going to get their third.” And he looked at me, he goes, “That wouldn’t be good. My daughter is a flower child. She’ll spend it all.”

And yet he needed to take action, and he thought one son was the heir apparent. And the other son, I don’t know whether or not he would have disinherited them or not, but he’s in middle planning the next event. So of course there’s no time to sit down with me. And unfortunately that men got very sick, and he died. The business, it is still running, but it’s not at the level that it could have been with some planning.

So that’s the part for us that’s very difficult is when we get to people and they wait until a cataclysmic event happens in their life. We’ve lost a lot of our edge. Part of the edge we can help people with is if they have a very valuable business. And many entrepreneurs are serial entrepreneurs. They have real estate holdings. They might own the real estate that the business is in. They may own multiple properties. They may have them in different LLCs, they may have them all in one corporation. We look at the structure of those things, and liability, and everything else. But what we look at is what if this business is worth more than your state tax exemption? So right now you’re able to get 11 million per spouse, and if it’s your first marriage, it’s a little bit easier. If it’s the second marriage, it gets very complicated on that because there may be multiple children from different marriages. So we look at all of this.

But you can protect 22 million, which sounds like an awful lot of money. But if you have a business of doing 40 or 50 million in revenue, it’s very profitable. It could be worth that much as a sale value.

So you’re going to be on the estate tax, and then there’s going to be a liquidity crunch for your children because the IRS wants that money in nine months after your death. So we might come in with a valuation firm, and a privately held enterprise is allowed a substantial discount. So we may take one enterprise and discount the valuation, and gift it, and use some of your estate tax exemption currently to gift it into a trust that’s outside of your estate, or it may take other assets and do that. So that’s part of it.

And if you have children, right now we have an opiate crisis in the United States. We have a lot of drug and addiction issues with children. We also have autistic children and special needs children.

So when you have a child that needs special attention, whether it’s from drug and alcohol addiction or special needs, you have to address that. It’s really not fair to the other siblings to make them be in control. So you really have to think through these issues and think through how much is enough. And if they do have drug and alcohol addiction issues, then they probably should never actually have control of a very large amount of money. There probably should be a trust in place. And then choosing that trustee or multiple trustees and what vehicle. And then very often, we’re going to suggest a guardian. We also do this with pet trust. Pets are really important. Animals are very important to my life. I rescue. I help lots of rescues place animals. 60% of the animals killed in shelters in the United States, and we kill three and a half million of them, are owner surrenders.

Special Trusts for Beloved Pets and Troubled Kids

And very often, it is an example of somebody that doesn’t have money and they’re moving out of their apartment or they’re abandoning their dog. But an awful lot of this is people that don’t have a plan of action. They die and they leave for cats in the house, and the in-laws, or the kids, or the cousins don’t want them and they just open the door and let the cats out. So those animals get picked up and brought into a kill shelter and they’re killed.

So we’re real big advocates of putting a pet trust in as part of your overall state planning. I happen to have a horse, and my horse is expensive. So horses are very expensive to take care of. So that’s another component that we like to focus on. If your pet or multiple pets are important to you and if they have longevity, you’ll also want to think about them as an entity and not have them become a burden to somebody else. Nobody wants your parrpt. Your children do not want your noisy parrot that can live to age 100. So those are some of the issues that we address as well.


What I’m hearing in all of this is that it is, it’s like peeling back an onion. There’s all these different layers to it. It’s a much more complicated process than I think most business owners would believe because there’s all these moving parts that you’ve probably never even thought of. So it makes sense to reach out to somebody early on, and begin having the conversation. Because I know having been through one, it takes time. It just takes a lot of time. There are a lot of moving parts and a lot of details. And if you don’t give yourself that time, you’re going to end up, I think with a result that you really don’t want. And that’ll either mean that the business can’t continue, or that you don’t get the value out of it that you want.

Right. One of the presentations that I give is how for business owners left $1 billion on the table. You can’t really talk about succession planning. I have a speaking business called Kathy Boyle on the go. And I love to talk to associations of business owners. But I can’t talk about succession planning or no one will be in the room. So we camouflage it by putting these topics in.

But that’s really a combination of you lose a lot of value if you don’t plan for your estate tax exemption well in advance. Because if you have time, you can do lots and lots of thing. If you’re young enough, you can buy enough insurance that’s cheap enough. If you and your wife are both healthy, you can buy second to die insurance. There’s a million different things that you can do in terms of if you have the luxury of time.

But you run out of time, if you have to all of a sudden try to make gifts to all your children of $14,000 a year or $15,000 a year, you’re not going to get rid of millions and millions of dollars. So you’re going to pay tax.

And the other issue is if you don’t plan for transition, if you don’t become unessential. Most entrepreneurs, even very large enterprises, unless they really, really have a structure in place, the entrepreneur is still the decision maker. And I see this all the time, where entrepreneurs micromanage. They hire very expensive people to run things. But that person won’t really make a decision without checking with the CEO. Unlike a corporation where they grow up in the ranks with line responsibility, and that’s not my gift. But entrepreneurs don’t have that kind of structure for the most part.

I recently talked to a CEO who’s 78 years old, no C-suite whatsoever, 273 employees, five different locations, one division losing money. And he built this up over 35 years. He made other mistakes along the way, but he sees themselves continuing to be at the mantle. And his son doesn’t really want to move to the boondocks to take over the company and nor does he want to change his lifestyle to become the CEO.

So that becomes a harder situation. I had a business broker come to me with a business for sale. And the second generation ran that business until he was 89 years old. And he apparently had an iron fist. So sonny boy who’s the current third generation CEO is 75 years old. He didn’t take the company over until he was 60.

So he made multiple mistakes. It’s a high end retail product, and they had a Madison Avenue store for $60,000 a month in rent. But this is where your clientele lives. And in the ‘08 debacle, he also had a personal situation that took a lot of money. My guess is they didn’t have the personal resources to withstand the downturn. And so he made a really, really stupid business decision and moved the business to a much less expensive location, but changed it to where the trade would be, the sales point where it had been a hundred year old company. And so he took this business from 5 million in revenue all the way down to one and a half. And of that, 400,000 was a onetime purchase by a movie star.

So that’s not renewable. When somebody looks to buy your business, they want renewable cashflow. Cashflow is king. They want to see that that cash is going to come in no matter what, and they can build on that. They can open up another location. They can improve the website, they can bring on more products, they can do all kinds of other things. But they want to see the cashflow.

So this guy was not going to be able to sell the business, certainly for what he thought he was going to get in the business broker, and spent a whole year trying to sell it. I happened to have a buyer, but the business broker was just not willing to even entertain it and was very, very difficult.

So that’s a business that the CEO is still running it, but they’re not going to be able to sell it, and they’re not going to be able to sell … I don’t think they have the capital to build it up to where it could be. So those are the sad stories we see.

So if you don’t plan ahead and let your kids … if the kids are taking over the business, you go let them swim. You got to drop them in the ocean, whether that’s going to work for someone else. That’s what I see a lot of business owners do. They have rules in the family, and they go let them swim in someone else’s pond. “Go work for one of our competitors. Go work in another business. Try your ideas out over there. Learn on somebody else’s nickel.”

Preparing the Next Generation to Take Over Isn’t Always Easy

I have a Greek guy that gets very upset, he complaints to his wife all the time because he tells his son, “Don’t lend money to this guy.” And he’s sitting with me in his diner and he touches the salt and pepper shaker like it’s a shock. He goes, boom, he gets burned. He goes, “But it’s my $10,000 he burned.”

So that’s a lot of times we get too close to the fire and we think about it too personally, and we’ve got to be able to let those kids make some mistakes. They’ve got to learn to spread their wings and fly on their own.


The realist is we all made some mistakes. And that’s how we learned, and that’s how we built businesses to begin with. And if they don’t have the opportunity to do that, they’re not going to be prepared.


There’s only so much I think that we can … we never want our kids to have to go through every single mistake that we made. Hopefully we can transfer some of the learning that we developed. But they’re going to make some, and they need to. And particularly if they’re going to run a business.

Exactly. And it is a very hard thing because it becomes personal. And of course the family dynamics get into this. One of the things that we often advocate is divorce is extremely messy if it’s in a family business. If the in law has worked in the business, he or she has keys to the kingdom, they know where all the secrets are buried. And if you haven’t been 100% up and up on your books, they can turn you in.

And I’m not saying anybody’s doing something bad, but it can make it extremely difficult. Divorce is very, very disruptive, especially if both parties are working in the business. Because now you have business disruption, and now you have the family dynamics on top of that.

So we are big advocates of making prenups part of your family business governance, and actually having governance, and having rules. One of the things that we also see is there’s two different siblings, and the older sibling’s kids get to the finish line first. So at 21, they walk into the business after college and take over. The next one is five years younger or six years younger, and his or her kids are much younger. And by then they’ve realized that they made some mistakes. Maybe the 21 year old isn’t mature enough or maybe not all the kids are as mature as one another. Now they don’t want them to have voting shares, or they don’t want them to have a seat at the table yet.

So thinking about this when your kids are young, when the kids are seven, and eight, and 10, it seems so far away for them to walk into the business. It’s much less emotional, and it’s much easier to plan with a pragmatic kind of tone.

I was talking to one business owner recently, she has a foundation. Her board is too … she’s French, so her board has a lot of French and she really is in America. It’s an American foundation. So my suggestion was she needed to broaden the board, and we were talking about governance on the board. She’s a former attorney so she’s very pragmatic, and she’s much less emotional than many people that I run into. But she couldn’t even imagine some of the stories that I began to tell her from having sat on boards, and the things that I see with financial malfeasance or term sheets that went on terms that went on too long. Or having a mechanism for realizing that this board member is not a good fit, and being able to get them off the board before they create damage to the foundation or not for profit.

So same thing applies in a family business. The less emotional you can be, the further on you can plan. I have seen everything. I have seen siblings not let the other siblings into the house they inherited, and not be able to pick the pictures of them and their mom from when they were five years old because the house went to one particular brother. Money is very emotional. And if it becomes a family business, one granddaughter that I was referred to handle part of her inheritance was her grandfather had the largest business of its kind in the United States with a Hong Kong partner. And one daughter got mad at the other daughter over the transition, and she sued her for over 30 years.


And became a lawyer just so she didn’t have to hire an attorney.


Oh my goodness.

It was horrible. And you can’t even imagine ending up in this. But these are the war stories. So what we try to tell people is we’ve been there. We’re in the trenches, we’ve seen it. We’ve learned the mistakes, we can identify them ahead of time. And our job, it’s your business, Steve. So if you want to wear blue shoes, that’s your choice. And I might think you really should wear these black shoes, but it’s not my business. It’s not my life. It’s ultimately your decision. But I’m going to just point out the risks. We order them in order of priority. So whatever’s on the upper left hand quadrant of our little risk matrix, those are the things that if you don’t address soon, if something happens, your financial stability is upside down.

So that’s how we proceed with this process because every business owner is busy. There’s never enough hours in the day. First words out of their mouth are generally, “I’m so busy, I’m so busy.” And there’s never an ideal time to start this.

So our process is designed to work with the business owners. We make little action steps, and then we bring in the right person to help them execute. Whether it’s valuation, trust and estate, new accounting firm, maybe a fractional CFO. Again, if you’re running multiple businesses, a lot of this stuff is in your head.

I recently met with two brothers, I’ve only met with one. And they own seven different restaurants. They own push carts, they own all kinds of stuff. And now they’re buying real estate in four different states. And they have no wills. And he has four minor children. So I’m very blunt. So I said to him, “If you died, your wife would want you to come back. Not because she missed you. She would just want to kill you again because you left her intestate in four states. You’re going to have probate attorneys in four different states, and she’s going to have to travel back and forth and get court documents and everything else.”

This is so easily fixable. I have wonderful trust in estate attorneys. And the other thing is I said to him, I said, “You’re the only one that can juggle this. You’re the only one that knows he’s taking cash flow from one place and putting it in another wherever he sees the need.” I can tell what he’s doing even without having getting into the financials because he hasn’t hired me yet. But these are the kinds of things.

And sometimes again, I see this a lot with first generation immigrants. A lot of times I’ve worked with Turks, and Persians, and Greeks, and they tend to hire someone either in their local community. So if they’re in a smaller town, they hire the local attorney that was recommended. Or if they’re Turkish a lot of times or any ethnic generation, they tend to hire someone they trust. So a lot of times that’s their own ethnic background.

And that’s great when they started out, and I’m not panning them in at all. But very often, the business went from 1 million, to 10 million, to 20 million. And they have multiple real estate, maybe in two countries. And now you’re dealing with a whole infrastructure of international tax.

I have one particular man that I work with, and his trust and estate attorney own part of the ski mountain where he had his ski house. The man graduated NYU in 1954. He was ancient, and he was a real estate attorney, not a trust and estate attorney. This particular client owns a number of properties in Israel. And I don’t know the estate tax structure in Israel, but we definitely need to know what it is. Because if we change ownership, we have to be able to factor that in.

And these are the kinds of things. I find entrepreneurs often go with their gut. They hire somebody from the golf club or hire somebody that their buddy is using, and they don’t think big picture. They don’t think whether or not this person is truly the right fit for them over the long term. And we can all sell against one another, right? So I can take apart somebody else’s work because it’s 20/20 hindsight. So that’s the other thing is we can get sold variously as to why so and so is going to be your ultimate cure. So you really, the sooner you can start this process … and it also works with startups. If you’re starting a business and you think you have a brilliant idea, I can’t tell you how many conversations I’ve had with various friends of mine who were thinking of opening up a business and, “I’m going to open a toy shop.” Well we’re about to go into a recession. So are toys recession resistant?

I have somebody right now opening up a pet wellness therapy center, and she’s been a corporate wife for 25 years, and she has resources. So she has very expensive things for her pets that take away pain. And the average person may not be able to afford that, number one. And number two, it’s not recession resistance. So I’m trying to convince her to embody doggy daycare, because doggy daycare is actually somewhat recession resistant. It’s cheaper if you have one dog, and both people in the household are working. Drop off the dog rather than having dog sitter come multiple times. And then we have constant cashflow. And she wasn’t really wild about this because she didn’t want to have to clean up poop.


Right. It’s funny. There’s always that part of the running of any business that none of us really want to do, but it’s part of the deal, right?

It is. It is. It is.


Well Kathy, this is absolutely fascinating. This is an important topic that folks really need to focus on. I used to be involved in a CEO group, and our first question to every new member is, “What’s your exit plan?” That was one of the things. We kind of held people’s feet to the fire so that they would know how they were getting out. And I appreciate you sharing those insights with us today.


So if folks want to find out more about what you’re doing and want to get in contact with you if they need help, where should they go? What’s the best place for them to reach you?

So our website is easy, chapinhill.com C-H-A-P-I-N H-I-L-L .com. We’re located in Bedford, New York which is just outside of New York City, but we can work anywhere in the country. And our phone number is (212) 583-1992 and I’m extension 101. And kboyle@chapinhill.com is my email, and you can easily find me on LinkedIn as well.

Awesome. We’ll make sure we put all of that in the show notes so people can reach out if they feel like they have a need. And again, I think this is such an important thing for business owners to focus on. We talk a lot on the show about marketing, and sales, and all of that other stuff. Which in the day to day is, it’s got the attention of business owners. And I think that’s the danger with something like succession planning, whether you’ve got a family business or you’ve got a business that you ultimately want to sell to the outside. If you don’t start thinking about it early, you’re not going to get it done and you’re not going to get the value out of it that you really should. So you owe it to yourself to begin having these conversations early.


Kathy, thanks for pointing this all out to us and shining the light on something that’s so important. I appreciate you being here.

I love being here. Thanks Steve. I appreciate your podcast.

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