(By Mike Periu)
“A key problem is that many founders don’t include potential heirs, such as spouses and children, in the operation of the business. Even if they aren’t qualified to work in key positions, just being around the business, understanding how it works and showing them how important it is to you as the founder makes a big difference in helping them appreciate its value“.
Tim Horton was a Canadian hockey player and national hero whose sports career spanned 24 seasons and four Stanley Cups and inspired millions of fans. And when he wasn’t on the ice, Horton was an entrepreneur.
In 1964, at the age of 34, he started the Tim Hortons Doughnut Shop. By 1967, he had grown that business to more than 40 locations with his partner, Ron Joyce, a former Canadian police officer who used to frequent Hortons locations. Using franchising as a growth strategy, the company expanded aggressively, becoming a multimillion-dollar business in a few short years.
In 1974, Horton was killed in an automobile accident, leaving a wife and four daughters behind. Joyce offered Tim’s widow, Lori, $1 million for the family’s share in the business. She accepted the offer, leaving Joyce as sole owner.
For decades afterward, Lori fought a legal battle to have the sale undone, but she ultimately lost. And in 2006, Joyce sold Hortons to Wendy’s for $600 million, a nearly 30,000 percent return on the $1 million he had paid for Horton’s half. The company’s current owners just struck a deal to sell Hortons to Burger King for a whopping $11 billion. The little doughnut shop started by a hockey player now generates more than $3 billion a year in highly profitable sales and serves millions of doughnuts and cups of coffee daily.
If you’re hoping your business becomes a family business, take a look at these three key lessons that you can learn from the Hortons saga.
Involve Your Family in Your Business
Many entrepreneurs dedicate long hours to building a business with the dream of having the next generation take over. Unfortunately, that’s a beautiful thought that seldom becomes reality. According to industry consultants George Stalk and Henry Foley, only 30 percent of businesses make it to the second generation, with just 10 percent making it to the third.
A key problem is that many founders don’t include potential heirs, such as spouses and children, in the operation of the business. Even if they aren’t qualified to work in key positions, just being around the business, understanding how it works and showing them how important it is to you as the founder makes a big difference in helping them appreciate its value.
With time and patience, they can be groomed to play key roles and eventually take over. Without this type of active engagement on the part of founders, however, it’s unlikely that heirs will care about the business beyond any passive income it could provide.
Plan for the Unexpected
Accidents, illnesses, financial setbacks, divorces, career changes and other life events can severely impact an owner’s ability to continue managing the business. Failing to have a backup plan in case any of these things happen to you can mean the abrupt end of your business or, like the Hortons, the untimely sale of your family’s ownership share. A simple solution is to have an insurance policy in place that will provide sufficient funds to hire executives to manage the business you can no longer run.
Assume Your Business Will Succeed
If you believe your small business could be worth $10 billion in 100 years, you and your family will treat it with greater care and respect. Long-term, positive outlooks help when it comes to planning for the future. This thinking will also help your heirs take an active interest in ensuring the company’s long-term success. While there are no guarantees that your business will be around in a century, short-term thinking will ensure that it certainly won’t.
For the Hortons and the Joyces, there is some closure to the saga. Ron Joyce’s son married Tim’s daughter, Jeri-Lyn. This offered some unity between the families despite the courtroom battles. The couple operates several Tim Hortons as franchisees.
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