Taking over your family business isn’t always easy

Bill Heestand

More than 30 years ago, I bought an insurance business from my dad, Robert P. Heestand. I became his employee and then gradually, as I grew, he suggested that I could be the owner. Because I was young, it was a shocking idea at first. I didn’t know where the money would come from to buy the business. Over a few years, however, we worked together on it. We hired legal counsel to help us form a partnership, and that started the process of me actually owning it.

As we worked through this for the next three to four years, my dad brought me along on all client meetings. After that, he wouldn’t always go to the meetings himself. Instead, he had me go on my own. That allowed the clients to see me as an authority, and it allowed me to see myself as an authority on my own. It allowed us to integrate the idea of me owning the business before he stepped away.

My dad also discussed with me how the business would buy itself. He educated me about the business having a cash flow, and how the cash flow could be used to buy him out. And there isn’t a way, generally, to turn the cash flow into a single sum of money all at once.

These days, in some transactions, specialized lenders will participate, but that isn’t the rule. So, you probably need to think about it as a gradual concept on both sides of the deal.

Letting go

On his 65th birthday, my dad retired — sort of. He took a three-week vacation, but then he came back into the office the very next day. When he walked in, I saw all the staff turn their heads toward him.

I was thinking, “OK, they’re going to look for him for direction. We’ve got to fix this right now.” So, I took him out to coffee, and I said, “You know, Dad, if you come back, you actually will never retire.”

He said, “You’re right.”

So, he never came back, which doesn’t mean we didn’t see each other or love each other. It just meant that he decided that it was the right thing to do to pass the baton to me.

Learn more about buying a business in the video “7 key things you should know when buying a financial services practice.”

See more from Bill Heestand in the following videos:

• 7 ideas to help build a marketable practice
• Why your risk decreases when you give advice as a fiduciary

William J. Heestand, CLU, AIF, recently sold the business, the Heestand Company in Portland, Oregon, which specialized in employee benefits, retirement plans and life insurance. He’s a past MDRT member and Top of the Table qualifier. His father, Robert P. Heestand, also was an MDRT member.