Some business founders-very few, relatively-manage to succeed. When each of these founders started out, he was in business for himself. Later, with success, he becomes a ``private, independent businessman.'' He is one of the winners. He survived the battle while the losers were all shot out of the water. He can see the future and it no longer looks bleak. He has entered the foothills of his indulgent years.
In his eyes and in the eyes of most of the world the successful business owner has made it. Then one day, he discovers his immortality.
Of course, it's natural to forget about the future once you assume you're immortal. Why think about it? This assumed immortality has probably visited more havoc on family-owned businesses than anything that could be done to them by competitors, tax laws, labor unions or inflation.
The ``immortal'' business owner decides that maybe he's suffered long enough. He's been denying himself for too long. He's cut enough corners. He discovers his growing wealth like the boy who suddenly discovered he could talk to girls. His self-indulgence isn't outrageous right away. That takes a while. But he learns.
Earlier, while his goals were still off in the distance, he wanted to speed things up. That was the time of ``just a little bit more.'' He thought, boy, another half a million dollars in sales and I could do this or that. Growth was a consuming addiction. He wanted leverage from borrowed money, but there was a limit to how much people would lend him.
The last thing he wanted, of course, were equity partners. So the only other source of funds for the business were the customers. That's called ``growth,'' the simple dollar increase in size.
But invariably he gets the whole thing going too fast. As he gets that other half million, he begins to discover that his cash flow just doesn't carry the investment. He soon learns that the cash flow requirements will usually be greater than the immediate growth returns.
But returns are what he wants. What he wants are tax-free benefits. He wants the business to be efficient. He wants to keep the money rather than invest any more in capital assets.
Eventually, the founder starts putting on the brakes. He stops expanding except on sure things. He's reached 55 or 60 and in the back of his mind is this growing desire for some peace and quiet. He wants to live better, enjoy things, take a little time off. He starts to rationalize the concept of ``controlled growth.''
This is what starts to flatten out the growth curve in the family-owned business. It's the founder's lack of tolerance for risk.
He asks himself a reasonable question: Why risk what I have for more of what I don't want-worry, anxiety, work, harassment? He starts to become ``efficient'' instead of effective, to think only in the present, ignoring the future.
The owner-founder retires on the job, but usually unconsciously, and completely unknown to him or anyone else and in ways that are unintelligible to the outsider. As his growth curve flattens, he rides a wave that looks like success. He keeps more and enjoys more-but he's eating his bait.
He's collecting his receivables faster than he's generating them. His capital investment is lower than his depreciation. He worries about returns on certificates of deposit. The IRS is after him for 531 problems, and when his managers suggest that energies and funds be spent in new areas, he says ``not with my money, you don't.''
The permanent two-martini nirvana the successful business founder looks to as his just reward for all the years of toil and sweat is an unworkable pipe-dream-and in his heart he knows it.
It's unworkable because he is not designed for that kind of end. He became an entrepreneur and succeeded because he has a built-in need to achieve and build. This internal drive doesn't disappear once he becomes successful or older.
It's unworkable because, even if he could stand the years of inactivity and aimlessness that come with milking a successful business, the business couldn't.
A successful family-owned business is a better investment in these trying days than gold, diamonds, stocks or oil. It represents earning power. But that earning power will continue only if time, effort, dedication and commitment are invested in the continuity of the business and, therefore, in the people who will make the business work when the founder no longer can.
One thing remains certain: the founder's problems are only going to be solved by his heirs, by the successors to his dream, whether they are from his family or from someone else's family.
This requires that he have some confidence in the future and a willingness to take a risk on chosen successors in whom he has faith.
Mr. Danco is CEO and founder of The Center for Family Business, a national consulting practice in Cleveland that deals with the growth and continuity of the family-owned business.