“Joining The Family Business” (Business Week Magazine)

Bringing the next generation on board is a common aspiration for those who run family businesses. There’s a reason, after all, that expressions such as “Someday, this will all be yours” have become cliches. But often there’s an equally powerful thought running through the minds of would-be heirs. "They ask, ‘If I join, will I need to be like Mom and Dad?’ " says Richard Simmonds, managing principal of Laird Norton Tyee, a Seattle wealth management firm that works with family-owned businesses. Other common questions: How will this affect my relationship with my siblings? Am I just going to be the steward of someone else’s dreams? It only complicates matters that many young people feel pressured by their parents or siblings – and these days, by a tough job market – to join up.

To be sure, younger relatives are often grateful for the opportunity to join the family’s line of work. But when childhoods have been spent sweeping floors, making deliveries, or otherwise working in the family business, it’s natural to yearn for a change of scenery. To those who have grown up with siblings who could become their bosses, entering the family business can feel a lot like taking a seat at the kiddie table.

So how do you persuade them to come on board? Start by admitting that the decision to join the family business is least appealing to those who feel they have no choice, says Charles Matthews, executive director of the University of Cincinnati’s Center for Entrepreneurship. Then adopt an encouraging but subtle approach. “Low-key can be a very good way to go,” he says. Make it clear that the younger generation’s contributions are not only welcome but needed. Too often, family businesses inadvertently discourage their younger members with a “this-is-the-way-we-do-things” mentality or an implicit suggestion that a younger perspective is by definition naive or inexperienced. “It’s essential that the younger generation be seen as a breath of fresh air,” says Matthews. “Recognize that the younger generation has a lot to offer.”

Younger family members may join the business for any number of reasons, but all insist on autonomy. To win over the wary, assure the next generation that they will be able to make their own contributions without working in the shadows of relatives. Many family members try other jobs before coming back to their roots.Here are the stories of how some children, siblings, and a son-in-law concluded that family really does know best.

For Alan Au, the notion of joining his father’s business brought to mind…ballroom dancing. “My parents loved ballroom dancing, so they made me take lessons when I was young,” says Alan. “I hated it. I began to feel the same way about the business. I had been around it so long, I wanted to be involved in something else.” Au, 36, literally grew up at Jimmy Au’s for Men 5’8" and Under. “I was in a playpen in the store because my parents couldn’t afford a babysitter,” he says. Later he swept floors and sorted spools of thread.

Alan left for college in 1990, planning a career in music. But he soon realized his musical skills were limited and that his chief interest was marketing. One day a professor made a remark that forever altered Alan’s professional path. “As I got more interested in marketing, he urged me to talk to my dad about the business and to really listen to what he said,” says Alan.

What did Dad have to say? Jimmy, now, 69, told his son that the business was top-heavy with older customers – and that Alan, not he, was the one with the youthful perspective who could cultivate a market of 25- to 45-year-olds. “In the beginning, we had some squabbles,” Alan says, “but the critical thing was, I always learned something.” At Alan’s direction, the company shifted its focus to a trendier mix of apparel, striking agreements with designer brands and providing clothing for TV shows and movies. “Most guys would have been very uptight about how they want things done, but my dad was comfortable letting me make mistakes,” says Alan. “He’s been very open-minded to all these new avenues.” Dad is just as pleased: “I feel very fortunate to have my son come into the business and carry it forward.”

At Jen Huang Photography, the age difference between the company founder and the new blood is a seemingly insignificant six years – but that didn’t necessarily make the gap any easier to negotiate.

Jen, 24, started her $200,000 event and wedding photography studio shortly after graduating from Pomona College in 2007. Since then, the business has grown to six employees at the New York City headquarters and a dozen or so part-time shooters scattered throughout the country. But as the business expanded, the need for a second shooter close to home became apparent. Who better to fill the position than Jen’s sister, Annie?

Annie’s initial reply: Not so fast. “I wasn’t about to be the little sister who copied what her big sister did,” says Annie, 18. “I really wanted to do my own thing and pursue my own career.” That meant studying hotel administration at Cornell University. And while Jen appreciated her sister’s reticence, she also knew that Annie would welcome the opportunity to contribute, if allowed sufficient independence. “When I first tried to persuade her to join me, she reacted in a way that most little sisters react,” says Jen. “But I knew I would give her a lot of space and a lot of responsibility. I think that’s what really made it work. She was able to see herself as an individual while helping me build my business.”

Annie agrees. “The most important promise that I got,” she says, “was knowing that I was respected just as much as Jenny, that I could make decisions on my own that would benefit the company.” On shoots involving her own clients Annie arranges logistics, takes all the pictures, and edits and prints the photographs. She pockets 100% of the profit on those shoots, even though second shooters traditionally get only a percentage. Annie has come to think of her part-time work with her sister as “business school for free” and hopes to use the experience to start her own event planning and hospitality company. “She’s given me a great deal of freedom in every aspect of the business,” Annie says of her sister. “But I’m not really surprised that everything kind of worked out naturally. I think my sister and I are close enough that if we want to accomplish something together, we can do it.”

At Hamilton Shirts, a 125-year-old shirtmaker based in Houston, the issue of whether siblings David and Kelly Hamilton wanted to join was mentioned so infrequently that it became a bit taboo.

David, 30, says that at first he didn’t give a lot of thought to joining the family business. Nor did his 65-year-old father, Jim, make any effort to push him into it. “I honestly never considered it, and it was never forcefully impressed on me as a possibility,” says David. “It was what my dad did, and that was all.”

After college, David went into investment banking and left just as quickly. “I was bored, unhappy, and didn’t feel like my work was meaningful,” he says. That’s when he realized the family business was just the right fit. At Hamilton, “we do everything from manufacturing to retail, and I wanted to learn about all of it,” he says. And he was excited to create the company’s first-ever mission statement, which directs 10% of profits to charity.

For her part, Kelly, 33, remembers thinking it was important for her to work elsewhere, despite her interest in pattern-making and design. “I thought I’d learn more about people and gain different work experience,” she says. For several years she stuck to that track, first as a recruiter for oil and gas companies and later as a fundraiser for the Houston Ballet. But two years after her brother joined the family business, she came on board, too. “Having the opportunity to work in a creative atmosphere is a major part of what drew me to working at Hamilton,” says Kelly, who has since learned more about sewing from her dad and the company’s head seamstress. She now selects the company’s seasonal fabric collections.

Kelly, like David, credits her father’s laid-back approach. “He always made it known that we were welcome, but that it wasn’t something that we had to do,” she says. “If we wanted to be rodeo clowns, we were free to be rodeo clowns.”

“I wanted to make absolutely certain that it was their choice and not mine,” says Jim. “To me, when a decision is your own, you’re automatically more committed.”

Jason Zickerman, 40, had more than a few misgivings when his father-in-law, Allen Fishman, invited him to become chief operating officer of The Alternative Board, the Colorado consultancy Fishman had founded in 1990. For one thing, Zickerman already had a job in accounting some 2,000 miles east in New York. But more than that, “I was worried how it might affect my marriage, the great relationship I had with my father-in-law – everything,” Zickerman says. “The business is an economic unit, the family a social one. Mixing them together can really muddy the waters.”

Fishman, who had long been impressed by his son-in-law’s smarts and drive, worked with Zickerman over the course of several months to draw up vision statements that addressed goals and potential issues in exhaustive detail. “We talked about the number of hours we would work, what precisely each of us would do, how it would affect our quality of life with children and grandchildren,” says Fishman, 67. “We basically covered everything and anything that the other person needed to know.” They even agreed on limited participation in the business from other family members, solidifying Zickerman’s authority.

But it was the escape clause that proved most important to Zickerman. If, after one year, either party determined that things weren’t working out for any reason – lack of chemistry, family friction, or something else – their arrangement would terminate. “We came in with a very clear understanding that we would talk after the first year was up,” says Fishman. “If either was unhappy, it would be over.” Seven years later, the escape clause is dusty and unused.


“Struggling to Make Ends Meet” (MSN Money)

You earn about $43,000 a year--pretty good money compared with the rest of the world.

But, recent data from a number of sources conclude that the average American income—while solid among its peers—still leaves many grappling to make ends meet.  And, a 2011 United Nations’ Human Development Report finds the gap between financial affluence and deprivation in the U.S. continuing to widen.

The comprehensive U.N. study examines a number of factors—including income, environment and gender equality—with a focus on identifying programs and strategies that are effective in promoting peoples’ well being and prosperity.

First, the good news: overall, the United States places fourth in the study’s Human Development Index (this measures three basic factors of human development—a long and healthy life, education and standard of living.) Norway, Australia and the Netherlands occupy the top three spots.

Additionally, the U.S.’s gross national income per capita of $43,017 (this represents the average annual purchasing power of each person) is relatively high compared with its industrialized counterparts. Of the top 20 spots on the overall human development index, only Norway, Lichtenstein and Hong Kong report higher incomes.  The top ten per capita countries are:

  • Qatar--$107,721
  • Lichtenstein--$83,717
  • United Arab Emirates--$59,993
  • Singapore--$52,569
  • Luxembourg--$50,557
  • Kuwait--$47,926
  • Norway--$47,557
  • Brunei Darussalam--$45,753
  • United States--$43,017
  • Netherlands--$36,402

Unfortunately, $43,000 often means living paycheck to paycheck and, perhaps more significantly, living beyond your means. To that end, the Federal Reserve's latest G.19 consumer credit report reported a nearly 10 % jump in overall consumer debt in November to $2.48 trillion--the biggest one month percentage increase in overall debt in more than 10 years.

“The average American struggles,” says Dr. Ronald Hill, a professor at Villanova University who has studied poverty worldwide. “They have an old car they’re struggling to keep on the road, they may be late with rent payments and they can’t afford to send their kids to college. At $40,000 a year, they probably haven’t been on a vacation in five years. They feel great restrictions.”

Moreover, the U.N. study also says the growth in income inequality in the United States easily outpaces its peers.  Moving down the list, it’s not until you get to Chile (ranked #44 in the overall study) that there’s a faster growing gap between wealthy and poor.

“What’s striking about the United States is that, comparable to other countries of comparable income, the inequality in the United States is much wider than any other country,” says William Orme, spokesman for the U.N. report. “That’s not only the result of increasing concentration of wealth at the top but the stagnation of income for the bottom 75 % over the last 10 years.  The U.S. is certainly not unique in having little real significant income growth, but the disparity is more acute.”

But, adds Orme, the income difference can be linked, at least in part, to cultural and social diversity unheard of in most other nations.

“It’s not surprising--we are a hugely diverse country,” he says.  “Compare suburban Boston with a county on the Texas/Mexican border. You simply don’t find those extremes in other industrialized countries.”
So, that begs the question--at what income level does the average American begin to feel the financial noose loosen just a bit? Naturally, every little bit helps, but Hill suggests it takes a good deal more income for someone to feel on the cusp of financial security.

“It’s not until about $50,000 where people reach the place where they don’t need any help, and it’s not until the $60,000 to $70,000 range that they begin to stop living beyond their means,” he says. “They would certainly be getting by, but they wouldn’t be doing great. Realistically, you would almost need to double that income average in the United States to feel like you were living a reasonable life.”

Further sharpening many American’s struggles is the all too common absence of health insurance (estimates put the range of uninsured between 45 million and 48 million). While most other countries which place high on the U.N. report have lower median income levels compared with the United States (Australia, Holland and Ireland, to name several), the guarantee of health care, if nothing else, removes the anxiety of a costly illness.

Along those lines, the Corporation for Enterprise Development, a Washington, D.C., advocacy group, issued a report in late January estimating that 43 percent of America households-- roughly 127 million people –would fall below the poverty line within three months if confronted by a serious medical illness or some other emergency.

“In a lot of countries where the social safety net is much larger, such as Sweden and Canada, nobody has to worry about health care,” says Hill. “In the United States, a person making that median income likely doesn’t have health insurance. If they do, they are fortunate among their friends who probably don’t have coverage.”

But the news is not exclusively negative.  For one thing, although the level of financial disparity in the U.S. is relatively high compared with its Western peers, it’s far from the worst in other parts of the world. For instance, the spread between the haves and haves nots in countries such as Chile and Brazil is much greater—even more so in countries in Africa, the Caribbean and other regions where relatively few, exceedingly wealthy people live with an enormous population existing in crippling poverty.

And, if you happen to be one of the fortunate Americans who count themselves as relatively well off, it doesn’t come with the grim circumstances that often exists in other countries where income disparity is more than a matter of numbers.

“Wealthy people have access to things that ordinary people don’t have.  But they’re not happier than others—there’s simply no data to suggest that,” says Hill.  “And, you’re also a big target to others who resent your wealth.  That means kidnappings and other crimes. You almost have to live like a drug lord in some of these places because you stand out so much. You’re much more powerful but you also face a certain amount of isolation.”


“Education and Entrepreneurs” (Business on Main)

When it comes to opportunities for entrepreneurs, the field of education has a decidedly uphill curriculum.

“Education startups certainly have unique challenges,” says Ariel Diaz of Boundless, a Boston-based startup that offers free online textbook replacements for college students. “The decision making process in education is very convoluted, slow and complex.”

But that environment hasn’t discouraged entrepreneurs from approaching education with a variety of products and services. Given the sour mindset that many have for for-profit education-related ventures -- online programs like the University of Phoenix have come under state and federal investigation for potentially exploitative and fraudulent practices – the key to making a go of an education startup is identifying market inefficiencies and challenges but with an overriding focus on doing good.

Sometimes, doing the right thing can have surprising beneficiaries. Judy Zimet began Law Student Ally to provide one-on-one guidance to law students to help them achieve higher grades, obtain internships and other steps to better their chances of landing a job once they graduate.

“This is no longer the world of Tom Cruise in ‘The Firm’, where huge signing bonuses and luxurious gifts are showered upon law school graduates enticing them to join prestigious big law firms,” says Zimet, who is based in Scottsdale, Az. “Today, big law firms are in a financial downturn along with the rest of the world. Consequently, although there are approximately 45,000 law school graduates a year, there are only 25,000 legal jobs available. To land a job, law students need more than a juris doctorate earned with average grades. With personal coaching, law students receive higher grades, maximize class and internship choices, and receive recognition through publicized works and awards.”

Another challenge has to do with the administrative element that plays a role in most any sort of educational system. Since, for instance, a school principal won’t actually be using a product such as study aid software, entrepreneurs are compelled to devise particularly effective marketing strategies – or try to circumvent administration altogether.

“Decision makers are often not the actual users of a particular product or service, similar to business IT decisions 10 years ago,” says Boundless’ Diaz. “This makes sales and distribution a significant challenge for startups who have to learn to navigate this. Some startups, including mine, are opting to go direct to students.”

Academic schedules can pose still more hurdles. While many products and services know no real “season”, education entrepreneurs have to watch the calendar carefully to time marketing efforts and product rollouts.

“The school year is cyclical in nature,” says Diaz. “It means that there are fewer opportunities to iterate on the product, and creates hard deadlines -- namely at the start of school year and semesters -- by which new releases need to be complete.”

Entrepreneurs have responded with fresh marketing strategies, even for those education-related ventures that are a bit more traditional in nature. David Greenberg started ParliamentTutors.com three years ago. The New York company offers in-home and online tutoring to prepare
students for all subjects from kindergarten through high school as well as tests such as the SAT and MCAT.

Rather than advertising in education publications or making in-person pitches to students, parents and teachers, Greenberg opted to pursue a comprehensive social marketing strategy.

marketing proved to be my niche,’” he says. With each new article came more impressions,
more traffic and more backlinks. We now have over 500 tutors operating in more than 20 states and 80

ParliamentTutors’ growth underscores an overriding dynamic of the education system. Some schools and taxpayers pump more money into programs and services only to see student performance continue to erode. Others trim budgets and with it, valuable programs and offerings. It’s a volatile and very personal problem – any entrepreneur with a solution that’s both cost-effective and also boosts students’ grades and test scores will likely find an audience.

“Entrepreneurs love identifying the problem, innovating a solution and assessing the market opportunity,” says Charles Matthews, executive director of the Center for Entrepreneurship Education and Research at the University of Cincinnati. “When it comes to matters of education, however, the deliverables are focused on the patchwork of constituents that constitute the education ecosystem – students, parents, prospective employers and politicians. The bottom line is not just profit or loss, but your impact on society.”

“Right now we are seeing a boom in educational costs and a simultaneous reduction in education effectiveness,” adds Diaz. “This creates a huge opportunity to leverage the prevalence of technology and the availability of open content to dramatically revolutionize education. I believe we are entering a golden age of educations startups, and that education as a whole will see more change in the next 10 years than in the previous 50.”


“Credit Card Binge” (Good Housekeeping)

What would happen if you said yes to all those credit card offers that come in the mail?

For as long as I can remember, I've been hiking out to my family's mailbox at the end of our country road in Maine, collecting the credit card solicitations we get each day. Then I stop by the garbage cans and—ignoring the pleas not to pass up these incredible offers—tear the letters in two and toss them on top of the potato peels.

But recently I decided to try something new. What would happen, I wondered, if I accepted all those direct-mail offers for credit cards and home-equity credit lines--as well as any that came by phone? After all, if these lenders were so hot to give me credit, who was I not to accept such largesse? So, over the course of one month, I sent back every application with a check mark next to the YES!

What happened was pretty frightening. Read my daily debt diary, and you'll learn how quickly and easily you can become a credit card addict.

Days 1 and 2 No letters inviting my wife or me to take on debt. All of a sudden we're pariahs?

Day 3 At last! An "invitation" from Providian for a Visa Platinum card with a 2.9 percentage rate (known as an annual percentage rate or APR). It promises me a credit line as high as $25,000, and the introductory period for the low interest rate lasts five months. After that, it shoots up to 13.99 percent! I fill out the application anyway and mail it back.

Day 9 I get a check from my current credit card company offering me a $6,500 cash advance because I'm "such a good customer."

Day 13 Peoples Heritage calls to flog a 2.9 percent Platinum MasterCard. I say, "Sure!" and sign up.

Day 14 A twofer. MBNA telephones and offers another 2.9 percent Platinum MasterCard. I say go ahead. Also, I get an invitation in the mail from American Express to take its Gold Corporate Card; I accept.

Days 18 through 22 I go on vacation. Upon returning, I find two invitations: Citibank has a Platinum Select MasterCard with a 1.9 percent rate for nine months; no telling what the rate will be after that. And AT&T has sent me a 1.9 percent Universal Platinum MasterCard application-with a $100 gift, no less.

Both cards are touted as money savers. They allow mc to transfer big balances from my current, high-interest cards to these low-interest ones. I have to read the fine print to learn that the low rate applies only to purchases I've already made. The rate is 13.99 percent for any new purchases. Nevertheless, I call Citibank and apply over the phone. I mail in the AT&T card application too.

Day 24 I get an application from Capital One for a 3.9 percent Designer Visa card with a $2,000 credit limit and my choice of seven groovy check designs. I go with the tie-dye.

Day 27 Two cards I signed up for arrive in the mail: the Peoples Heritage Platinum MasterCard with a $15,000 credit limit and the Providian Visa Platinum with a $5,000 limit.

Day 30 I get my American Express Gold Corporate Card. There's no mention of a credit limit, so I call American Express. I'm told if I pay my balance every month, there is no preset spending limit. I suddenly feel dizzy...

Early the next month A reality check. I get a letter back from AT&T rejecting my application, saying that my credit report reveals "excessive revolving credit utilization." This has never happened to me before, but I'm glad it did this time. A few days later, however, I get the Capital One Visa card and the tie-dye checks. Still, someone there--or maybe one of Capital One's computers--must have noticed that I've been accepting a lot of credit offers, because this card comes with a paltry $200 credit limit, even though the original offer promised a credit limit of $2,000. Two more days pass, and I receive my MBNA Platinum MasterCard with a $5,500 credit limit. That's more like it!

This wraps up my month of debt demolition derby. Seven solicitations, five approvals, and a check for a cash advance. Total specified credit limit: $32,500. But because the American Express card doesn't have a preset limit, I'm really free to charge any amount I want.

With my experiment over, I try to find out what's going on behind the scenes and what damage I may have done to my 'credit record. I call AT&T and am told I was rejected due to "excessive" credit card balances. This comes into sharper focus when I call Capital One to ask for an increase in its $200 limit and get turned down because, according to a service rep, I now have $80,000 worth of open credit.

Next, I try to cancel all the cards. For the most part, this is easy. But some lenders don't want to take "no, thanks" for an answer. Less than ten minutes after a Capital One rep turned me down for a credit increase, another Capital One operator offers to boost my credit limit to $500 when I call to cancel. An American Express operator almost seems to take my desire to cancel as a personal affront. "I just don't understand why you're canceling," she says no fewer than six times. When I insist, she barrels through a series of questions hoping to sway me--I answer with lies just to get her off my back. ("Do you ever eat out?" "Gosh, never.") After ten minutes, with a sigh that resonates over the phone, she says the account is closed, leaving me feeling vaguely guilty.

During the next couple of weeks, I receive six new credit card applications. Pretty strange for a guy who's just been swatted down.

Had I timed my test differently, things could have turned out far worse. Howard Dvorkin, president of Consolidated Credit Counseling Services in Fort Lauderdale, Florida, says it usually takes about 30 days for a credit card company to get information on a prospective customer. So had I applied for all the credit cards at the same time, all the lenders might have approved me before learning I'd become a debt junkie.

Says Dvorkin: "Red flags on credit reports only pop up when an inquiry is reported-the greater the number of inquiries, the greater the number of red flags. But companies don't do much else in the way of research. It's scary just how happy they are to offer you credit." Still, Dvorkin says, the last companies I applied to saw what I was doing and got nervous.

But what about the rush of new credit applications I got after the rejections? Dvorkin says those are from the bottom-feeders, the secondary, predatory lenders. "Believe it or not, if you're turned down, you're suddenly a great prospect to some lenders," he says. "They look at you as a desperate person willing to take anything, which means higher interest rates, lower credit limits, and stiffer penalties for late payments."

And what about the American Express rep who tried to stop me from canceling? Dvorkin calls people like her The Save Team--a sort of credit bullpen customers encounter when they try to cancel a card. In fact, some save specialists go to great lengths to keep you. "I have a friend who tried to cancel his American Express card and, by the time the call was over, he had almost enough bonus miles for a free round-trip ticket to anywhere in the United States," Dvorkin says.

So, how much damage did I do to my credit? Information about all seven credit inquiries could stay on my credit report-with possible adverse effects-for upwards of two years. Dvorkin tells me to get a copy of my report to make sure that all five credit cards I received reflect "cancellation by consumer." If the report mistakenly says a credit card company nixed its card, that could make it hard for me to get credit if I really need it.

I came away from the experience astonished for two reasons. First, I didn't realize just how easily a consumer can get overextended. And second, I didn't know that lenders sometimes make it extremely hard for you to cancel their cards if you're just trying to keep yourself out of debt.

My advice: Don't be too quick to accept those enticing offers in the mail. You just might be approved.


“Banking Fees” (USA Today)

Banking fees are on our minds these days, what with Bank of America’s plan—now scrapped—to levy a monthly $5 debit card fee.

That one’s history, but there are still a rash of bank fees in place—many of which you can avoid:

  • Use ATMs intelligently. Many cash machines slap on a fee if you’re outside their network. Know where your bank’s ATMs are and make a point of using them exclusively.
  • Read your mail.  Banks notify you beforehand when they’re instituting new fees or raising existing ones. “If new fees are added, you want to know about it ahead of time,” says Beverly Blair Herzog, credit card expert for Credit.com. If a new fee is added, ask whether it applies to you and, if so, what you can do to avoid it.
  • Ask about other exemptions. Some banks eliminate fees if you maintain a minimum balance, says Herzog.  Others forgo fees if you have several accounts. Before using any service, such as counter checks or reactivating a closed account, ask if there’s a charge.
  • Vote with your feet.  If your bank’s fees seem unreasonable, shop around. In particular, says Herzog, investigate credit unions “which usually have lower fees and great customer service.”