Fire Your Family? The Cost of Giving Relatives a Pass at Work

Hiring family members can strengthen your business but only when relatives follow the same standards as every other employee.

Hiring relatives is not automatically a mistake. The problem begins when family members receive exemptions that no other employee would receive.

Everybody else on your payroll gets evaluated. Their performance is measured, their compensation is reviewed, and they are expected to follow company processes and demonstrate its values.

But when someone shares the owner’s last name, those standards can suddenly become optional.

The wrong person may remain in the wrong seat for years because removing them would make the next family gathering uncomfortable. Meanwhile, your strongest employees notice the double standard, your margins shrink, and your business becomes harder to scale or sell.

In Episode 17 of From Burnout to Bought Out, Jon and Ryan explain why business owners must apply the same standards to family members as they do to everyone else.

The Wrong Family Hire Costs You Twice

An underperforming family member does not only cost the business their salary.

The total damage may include:

  • Above-market compensation
  • Employee turnover
  • Delayed projects and schedules
  • Lost productivity
  • Missed opportunities
  • Lower profit margins
  • Reduced trust across the team

In the episode, Jon and Ryan show how these costs can add up to more than $200,000 annually.

The financial damage appears in your profit and loss statement. The cultural damage appears in the behavior of your employees.

When your team sees that one person is protected from consequences, leadership loses credibility. Employees begin to believe that performance matters less than personal relationships.

Your best people may eventually leave because they know they will never compete on equal terms.

Hiring Family Members: Apply the Right-People, Right-Seats Test

Family members should be evaluated using the same framework as every other employee.

Start with two questions:

  1. Is this the right person for the company?
  2. Is this person sitting in the right role?

Being the right person means demonstrating the organization’s core values.

Being in the right seat means the person:

  • Gets the role
  • Wants the role
  • Has the capacity to perform it

Evaluate every team member not only the relative you are concerned about.

Once you create a separate process specifically for a family member, the conversation can feel like a personal attack. Running the assessment across the entire company creates a consistent and defensible standard.

Be honest about every negative result. Tenure, talent, and blood should not excuse a fundamental mismatch.

Turn the Emotional Decision Into a Math Decision

Many owners already know which employee is creating the problem.

What they do not know is how to address it without damaging the relationship.

Start by calculating the actual cost of keeping that person in the wrong seat. Review:

  • Their total compensation
  • The market rate for the role
  • Turnover associated with their management
  • Delays or rework caused by poor performance
  • Lost revenue or capacity
  • The opportunity cost of not hiring the right person

Write down the number.

Seeing the financial impact makes it easier to separate the person from the position. You are no longer deciding whether you love, respect, or care about a relative. You are deciding whether they can successfully perform a specific job.

That distinction allows you to approach the situation with greater clarity and kindness.

Coach Them or Plan a Respectful Exit

A low score does not automatically mean someone must be fired.

Ask whether the person is coachable or whether there is a fundamental mismatch between the individual, the role, and the company.

If the person is coachable, create a clear improvement plan with:

  • Measurable expectations
  • Defined responsibilities
  • A realistic deadline
  • Regular progress reviews
  • The same accountability applied to everyone else

If the person cannot or does not want to meet the role’s requirements, schedule an exit conversation.

Do not postpone it until next quarter. As Jon and Ryan explain, the avoidance usually costs more than the conversation ever will.

When the hardest case involves family, consider bringing an objective third party into the discussion. A trusted adviser can help keep the conversation focused on the business while protecting the dignity of everyone involved.

Keep the details private, offer a respectful path forward, and never confuse removing someone from a seat they cannot hold with refusing to honor them as a person.

Ownership and Leadership Are Different

Family succession creates another difficult question: Should your child own the company, operate it, or both?

These are separate responsibilities.

A family member may be capable of owning shares without being qualified to run daily operations. A company can remain family-owned while being managed by an experienced operator from outside the family.

Before naming an heir, confirm that the person:

  • Genuinely wants to be involved
  • Understands the business
  • Can make difficult decisions
  • Has the capacity to lead
  • Meets the same standards as other leadership candidates

If they pass that test, begin preparing them early.

Let them learn every major area of the organization, from the mailroom to the boardroom. Give them opportunities to make decisions while you are still present to guide and mentor them.

Handing someone a company before they are ready does not honor your family. It endangers the business and the legacy you worked to build.

Start Exit Planning Before You Need It

Only about 30% of family businesses survive into the second generation. Around 12% reach the third generation, and approximately 3% make it to the fourth.

Those numbers make early exit planning essential.

Decide whether your future exit will involve:

  • A family successor
  • An outside operator
  • A sale to another company
  • A management buyout
  • Family ownership with professional management

Start with the end in mind. The earlier you identify the intended outcome, the more time you have to develop people, strengthen systems, and reduce the company’s dependence on you.

What Business Owners Should Do This Week

Run the right-people, right-seats assessment across your entire team.

Review each person’s alignment with your values, understanding of their role, desire to perform it, and capacity to succeed.

Then focus on the hardest case.

Calculate the financial and cultural cost. Determine whether the person is coachable. Schedule the necessary conversation this week not someday after the situation becomes easier.

It will not become easier by itself.

“Fire your family” may be the attention-grabbing headline, but the real work is quieter and harder: apply the same standards to everyone, separate the person from the seat, and make the decision your business needs.

No exemptions for tenure, talent, or blood.

Ryan: Everybody on your payroll gets evaluated. Everybody except the one person you can’t fire without ruining Thanksgiving. So the wrong person sits in the wrong seat for a decade, drawing pay above market, blocking the operator you actually need.

And every employee who isn’t family learns the same quiet lesson: the rules bend for blood. We’re not going to tell you to fire your family. We’re going to tell you to stop giving them a pass.

Those are very different things.

Jon: Welcome to From Burnout to Bought Out, the podcast for business owners who are tired of being the hardest-working, lowest-paid employee in their own company. I’m Jon, joined as always by Ryan, and together we’ve spent years inside owner-led businesses helping founders go from running on fumes to running a business that actually runs without them.

Every episode, we break down the real problems nobody talks about—the burnout, the bottlenecks, the blind spots—and show you what it looks like to build a business that’s profitable, sellable, and doesn’t need you in the building every day to survive. Whether you’re grinding through a plateau, thinking about an exit, or just trying to take a vacation without your phone blowing up, you’re in the right place.

Let’s get into it. Ryan, we’re back.

Ryan: We’re back, Jon. I’m in the big-boy seat again.

Jon: Yeah, goodness. I’m in the tiny, smelly seat.

Ryan: I looked at our statistics, Jon, and we lost 25% of our listeners.

Jon: You know what? The funny thing about that is it’s actually true. Right. And when you have five of them, that’s a huge hit.

Ryan: Yeah, I think they were just on vacation.

Jon: Yeah, that’s the excuse.

Ryan: Yeah, that’s true. It is vacation season, so we’ll give them that.

Jon: I mean, they could still download it, but that’s cool.

Ryan: Yeah. Yeah. And our international listeners, both of them, they were sleeping.

Jon: Yes. Yeah, absolutely. Oh, well, what can you do? It’s more like a hobby anyway.

Ryan: That is true. It’s a lot of fun.

Jon: And there was a lot of talking. I apologize to everybody out there. We covered a couple of episodes in marketing, and clearly I’ve used my best ramblings to good effect. There were over 30 minutes, and I think one was 50 minutes. So apologies out there, people—person.

Ryan: Yeah. And if you haven’t downloaded it yet, just play it on triple speed, and you’ll get to the half an hour.

Jon: Yeah. I speak slowly anyway, so yeah, you can do that. Hopefully, there were a few nuggets in there. Hopefully, it was useful. I had a lot of fun, so for me, it was great. That’s all that matters. I don’t care about anything else.

Ryan: It really is. Absolutely. It’s all about you, Jon.

Jon: Yeah. That’s right. That’s right. And thanks for the new chair.

Ryan: You’re welcome.

Jon: Yeah. The old one had to go, big time.

Ryan: Yeah.

Jon: Well, I get nervous in these things.

Ryan: It’s true. Sorry, Mom and Dad.

Jon: Still get stage fright.

Ryan: Yeah. Yeah, exactly. Well, we’re potty training the little guy. It runs in the family at the moment.

Jon: All right. Let’s get going. Ryan, the title is “Fire Your Family.” But when we chatted before, you said it’s not really the point. What is the point?

Ryan: So the title is provocative. It’s clickbait, but it does mean something. The real message here is you’ve got to stop giving your family a pass on the standard everyone else has to meet.

Right. So let me tell you a little story. It’s a composite story. It’s made up, but I’ve seen this thing happen a dozen times. Right. So we’ll call them the Delgado family: an $8 million mechanical shop, second generation, good business, good margins on paper, the whole nine yards.

So Maria, the owner, she’s really sharp. And she’s built it from her father’s $2 million shop to now $8 million. Right.

And then there’s Danny. Everyone loves Danny, her brother-in-law. He’s the operations manager. You know, he’s been there for 15 years. Nice guy. Love that Christmas.

But the problem is, Jon, Danny can’t do operations. Right. Jobs are running late. Scheduling’s a mess. And above all, two of the best field leads quit because of, quote-unquote, “the office.” Maria knew. Everyone knew. But nobody said it because it meant saying it to her sister over dinner. Right. And nobody wants to have that conversation.

But Danny wasn’t the problem. The problem was Danny was the one person in that company that nobody was allowed to evaluate. That’s really what most family businesses are about. They have at least one Danny, and the owner already knows exactly who it is. And so do the other employees.

Jon: Yeah. I mean, you say most companies. Off the top of my head, right away I can think of a number that have this very problem. It’s somebody who is close to them that they have a challenge with, and it’s preventing things.

So how common is it, percentage-wise? Do we see this in every business? Is it the majority? Is it a specific size or type?

Ryan: It’s most of them, but not all. Right. And people hang on to their family because they’re loyal. They can trust them. They’re not outsiders. Right.

And that’s the detriment as well: they’re also treated differently. Right. They can show up late at work. They can be absent. They can not follow the processes or procedures, and they get away with it. But everybody else gets held accountable.

Jon: Gotcha. Yeah. I think we’re going to dig in a little bit on some of those things. But absolutely. So the subtitle on this is really people and P&L. Break it down a little bit. What is this wrong family member—or grandfathered, for want of a different term—team member actually costing the business?

Ryan: They actually cost you twice. Right. One is in the actual P&L, and one is the culture. And the culture cost really is the bigger one.

Typically what happens in the P&L is that they’re getting above-market pay. Uncle Ray is sitting to watch the gate, open up, turn the lights on in the morning, get the coffee on, and getting paid way more than what he should. Right. And that’s the problem.

And then, if they’re not very good at their job, you have rework, delays, errors, and performance issues all the way down the stream. Right. They could cost you hundreds of thousands of dollars.

But the big part is the cultural cost. Right. So your best family members will eventually quit. Non-family members will eventually quit because of this double standard. Right. That’s the problem.

And in this Delgado family case, they lost the two best lead technicians they had. Right. Now, HR people will tell you replacing them is $30,000 each. Right. That is an actual cost. But really, it takes nine to 12 months to get people up and running. Right. So now you’ve lost really double that. And that’s the actual cost as well.

But there’s also a moral tax. What’s good—what he can do and what I can do—are two completely different things. And that becomes draining on people, especially your good people who are overperforming. But they’re seeing that there’s a secondary line here, and they’re never going to be where Danny gets to because Danny’s blood. And that’s the problem. Right.

So it’s not really just the cost in terms of dollars. It’s also the cost of what’s going on with your employees who are non-blood.

Jon: Yeah. I mean, we impress upon leadership teams hiring based on values. Right. And there’s high integrity. We break that down. We go through all the different value sets and define it for that organization.

Integrity and accountability are a huge piece of all of those. So, yeah, if you’ve got one person marching to the beat of their own drum and the rest of the business is held accountable, that can obviously create some discord. But is that just the cost of having a family business? Does it just come with the territory?

Ryan: No, Jon. Plenty of family businesses run clean. Right. And the clean ones, they don’t play like this. They’re running a business here, regardless of who it is. So it’s really the exemption. It’s really the, “Okay, well, nobody—Danny’s untouchable.” Right. And that’s what really kills the family business.

Jon: Got it. All right. Quick break. Today’s episode is brought to you by Expo Marketing. And the tie-in is honest: we’re spending this episode on the face your company shows internally.

Ryan: Expo Marketing does the face you show the world: your trade show booth.

Jon: Excellent.

Ryan: Yeah. Award-winning custom, portable, modular, and rental displays. They work with everyone from first-time exhibitors up to the Ubers, Sonys, and Vivians of the world. Ninety-nine percent of their clients stay year after year, which for a vendor is basically the retention number every business in this episode wishes they had.

Jon: That is right. Their tagline is literally, “We don’t just build booths. We build trust.”

Ryan: Custom-engineered Signature line, tool-less setup. It cuts your labor and your freight costs, which is the whole thesis: reduce the hidden costs on the show floor and on the work chart.

Expo Marketing ships all across North America. ExpoMarketing.com. 949-250-3976.

Jon: Get the number again. Build the booth. Build the trust. Same energy. Ha ha. We just made that funnier by ripping.

Ryan: That’s awesome. I’m laughing at you. That was your “ha ha.”

Jon: Somebody said you’re actually funnier than me. I was thoroughly gutted.

Ryan: Yeah, I couldn’t reach you for two days. You were in the fetal position.

Jon: Yeah. And it just cost you 20 bucks, didn’t it?

Ryan: Yeah. Wait till you get the feedback on this episode.

Jon: Exactly. Revenge is mine.

All right. Okay, so we’ve got a framework for this, and it’s based on the Synergy Operating System: right people, right seats. Walk me through it and how it applies to families specifically.

Ryan: All right, Jon. So we’re talking right people, right seats. A lot of our listeners understand that if you’re familiar with EOS and those kinds of things. You might not practice it, but it really is a thing.

We want to talk about two different things here: the right person and then the right seat. The right person is someone who is a values fit. You take it for values. Do they have them or not? Is it innate in them? Are they making business decisions based upon that? Those kinds of things.

So it’s very easy. Line up your core values. If you have five—or if you’re Dave Ramsey, you have 23—and keep going. Right. It’s very easy grading: plus embodies it. You point to them as the example to everybody else. Plus-minus: sometimes they’re coachable, but they want to improve. Minus: actively violates it.

It’s a culture cancer. You know it. Everybody knows it. And it spreads. Here’s the rule: anyone with a minus on a core value improves or leaves. Period. No exceptions. Danny, nephew—it doesn’t matter who it is. That’s it.

Are they in the right seat? We call that GWC. You get it. You want it. You have the capacity to do it. And all three of these must be a yes.

So, do they get it? Do they understand their role? Not just the task, but do they understand what they’re doing in that company? Do they want it? Was it given to them 15 years ago because there was a void, or do they actively want to be in that position, helping that company in that role and its responsibilities? Capacity: do they have the mental and physical capacity to do this? Can they actually do the job? If it’s a 50-hour-a-week commitment, can they put in the 50 hours? Can they lift the boxes or not? That’s the whole thing.

Here’s the thing. Everybody loved Danny. He was a values fit. He was genuine, a great human. Everybody thought he was the greatest guy. And if you thought of the core values of that company, you thought of Danny.

The problem is, was he in the right seat? And the answer is no. Two lead technicians left because of “the office.” There were always delays. There were always those kinds of things. So you can’t teach a person to be a good person with the values fit. You can teach them to be better in a professional manner, but not in the wrong seat. They just don’t have the skill sets in that.

And that’s usually the family track. Uncle Rick is over on a Sunday afternoon. Dad gets a call: “We lost so-and-so. Hey, Rick, I need you to take this over.” Right. And is Rick really the person for that job? That’s the question we come to.

So we’ve got to make sure everybody across the board, family or not: are they the right person in the right seat?

Jon: Got it. I hear you’ve got a fun fact.

Ryan: Fun fact, Jon.

Jon: Okay.

Ryan: I think my listeners will appreciate this. The word nepotism is literally Latin for nephew, “nepos.” Renaissance popes kept elevating their nephews to cardinal. And it got so out of hand that Pope Innocent XII had to ban the practice in 1692.

The first written anti-nepotism policy came from the Vatican. So if the Pope needed a rule for this, so do you.

Jon: Absolutely. Do not bring your nephew on, whatever you do.

Ryan: That’s right.

Jon: All right. So really, the thing that paralyzes owners here most of all, I think, is the paralysis you get when you face these situations. You don’t know what to do, especially when a family member is involved. How do you cut through all that?

Ryan: So, Jon, I’m in a group, and a lot of business owners are there. And I listened to this guy for six months complain about his brother. He wanted to fire his brother for six months. Right. And this was leading up from the last two years. It’s been an ongoing thing.

It is really tough to cut through the emotion by doing the math. But you’ve got to turn that feeling into a number. So let’s do the Danny math here. Two field leads lost, hard to replace: $30,000 of salary. It really is about $60,000 each because of attrition and getting other people up to speed. He’s making above-market compensation for the seat. His estimated throughput lost to scheduling and delays could cost $120,000 in margin. The total drag is over $200,000 for a year on a business that’s doing $8 million. That is real money.

It’s not cold. It’s the opposite. The math is what lets you be kind, because if Danny wasn’t in there—if it was somebody else who wasn’t blood—you’d make that decision in a heartbeat. That’s a $200,000 business decision.

And that’s the problem: we have the emotion involved, and it’s going to be a tough Thanksgiving dinner or a tough Christmas dinner, or my sister might not speak to me for three months. In my case, that would be a blessing. But that’s the thing. Family always gets complicated.

Jon: Yeah. So what you said there effectively is: make the emotional decision a math decision. That’s the move here. You’ve got to turn it into a math decision and have that conversation based on what it’s costing the business.

Ryan: And that’s the move. Take the name out of it. Take the person out of it. I’ve got A and B. A has cost me $200,000. B is a stellar employee, whatever that is. Flip over the card. Who is it?

Jon: Yeah.

Ryan: Yeah. And just get it done. Honestly, the family member is probably feeling some of this, and a lot of these conversations generally turn into a positive space anyway. If they’re feeling something, they have pressure on them and they’re not performing. They want something that works for them as well.

Generally, they do turn into a positive result at the end of the day. So it’s worth having those conversations. Don’t hold back.

Jon: Okay. We’re going to have a new segment that we agreed on. We don’t know what to name it yet, but we’ll call it the Marketing Tip of the Week. It allows me to put my big-boy pants on each episode as well.

So here is your Marketing Tip of the Week: your best customers are hiding in your email list.

Acquiring a new customer costs five to seven times more than selling to somebody who’s already paid you, knows you, and trusts you. Yet most owners spend everything on acquisition and let their customer list stagnate.

A simple monthly email—one useful thing, one soft touch, one offer—to people who already know and trust you is the highest-margin marketing there is. It’s also why this is the first Marketing Tip of the Week. It’s the most ignored because it isn’t shiny, and no agency makes that much of a commission on it.

So your one step this week: export your past customer list, load it into whatever email tool you already have, and send one email. A genuine thank-you, a useful tip, one low-key offer. That’s it. Don’t wait to build the perfect campaign. Just reach out to your existing customer base.

All right, Ryan. So let’s flip it. Sometimes the family member is genuinely great. How do you make that work without the rest of the team getting resentful?

Ryan: Family in the business is not the problem, ever. The problem is family who are never evaluated, who are on different standards than the other folks. And when they pass the same test as everyone else, they’re a tremendous asset, and often your best one. Everybody knows that, and that’s okay. It’s appreciated by all.

So Maria has another relative in the business, her cousin Rosa. She runs the books. She’s value-plus. She gets it. She wants it. She has the capacity to do it. She lives the values. Nobody resents Rosa, ever.

The difference isn’t blood. The difference is Danny was never evaluated. He was put on the throne, and everybody else is just there being held to a different standard.

That’s what really makes the rules for family employment. There are four of them that you really should live by to make this thing equal across the board. I like to call it FRSN.

First, F is fair-market compensation. We’re not paying Uncle Rick $50,000 above market because he’s retiring in a couple of years and we’re trying to make up for him. Everyone gets compensated fairly. That’s the big key.

R is real work: a real seat with real accountability. On the accountability chart, if they report to somebody who’s a non-family member, they have to be held accountable by that non-family member. The rules are the same. They get disciplined just like anybody else. There’s no special treatment.

S is the same review. They get the same performance conversations, the same scorecards, with the same consequences.

And N is no side channel. This is where it goes off the rails a little bit. We have a leadership team. We’re making decisions. Then cousin and nephew—or nephew and uncle, whoever it is—are having side conversations outside of work. Everybody else has to play catch-up constantly because decisions are made between the two.

We’re supposed to have a leadership team. We’re supposed to have these people in there making their money. And that’s the problem. Also, don’t bring your family issues to work. That’s a big thing, too. Everybody feels the drama. It’s not just you. Everyone knows what’s going on when Mommy and Daddy are mad at each other.

Fair-market compensation is the linchpin. We’re not padding somebody’s pay because it’s being seen as underpaid by everybody else. “Why is that person paid $50,000 more than me and does half of what I do?” That’s a culture problem.

The team doesn’t resent competent family being paid fairly. That’s the key. They’re not going to resent that if everybody’s on the same peg, or if someone’s making more and they deserve it. They applaud that because they want to see that path for themselves as well.

Jon: Got it. So equitable throughout the entire organization makes a lot of sense. Okay. So the owner’s done the math. It’s real. They’re prepped. They’ve got the structure that you’ve just described. Now they actually have to have the conversation. So walk me through this. How does it work?

Ryan: Okay. So the whole conversation turns on one move. We have to separate the person from the role. You’re not rejecting them. You’re saying this seat isn’t their seat.

Let’s talk about the structure of what happens. You have to do it at work, not at a family event. It’s a business conversation, and it needs to be done in a business setting. Don’t ambush somebody at a barbecue, have a few too many, and then say, “You know what? You’ve been ruining this business for years. Get out of here. My wife and my daughter never liked you anyway.”

You’ve got to lead with the person: “I love you. You’re family. That’s exactly why I owe you honesty.” And if it’s your mother-in-law: “You’re family, and you’ve had this coming.” Same kind of thing.

Name the seat, not the person. “This role isn’t working for you. It’s not working for the business. Here’s what I’m seeing.” Then come over with concrete examples of what’s going on.

I’ve been involved where a father had to fire his son, who was supposed to be the heir apparent to the throne. It’s not a good conversation, but it had to happen.

Bring the GWC, the core values, and not your feelings. “The capacity in this seat doesn’t fit you. You just don’t understand the role and what’s needed to bring this company forward.” That’s not a character flaw. It’s just a seat mismatch. We want people working in their strengths, not their weaknesses.

So offer a path if it exists. If they’re the right person but in the wrong seat, do we have a seat for them? Can we transition them over to something else that would be more suited to them?

Okay. In your case, Jon, it would be watching paint dry. We want to keep you away from others. And that’s your strength. You just let us know after your nappy nap that the paint’s dry, and we can go put on the second coat.

But here’s the big thing. If there is no right seat—and sometimes this is true—it’s time to cut the cord. It’s time to have the exit talk, but with maximum dignity. Give them a generous runway.

But here’s the key: it’s got to be totally private. It’s not in front of the folks. It’s a discussion held in private. And then we don’t discuss it with the rest of the family, because then it becomes an embarrassment.

In this case, you might want to consider a neutral party. One of those non-blood family members who’s part of the leadership team can have that discussion for you. They facilitate, advise, and get it done for you. That way, it doesn’t feel like betrayal, depending on your relationship with that person. It’s just a business decision that had to be made.

You protect your relationship by being honest early and private forever. And that’s how you’re going to get through it.

Jon: Awesome. Yeah. I mean, that conversation, especially navigated with a third party, makes a lot of sense. Even that has to be sensitive as well. You’ve got to be able to be open with the family member. You don’t want them coming back and saying, “Oh, you didn’t even have the gall to have the conversation with me.”

So there are some nuances there, having to navigate it all. But I think that’s excellent, sound advice.

Okay. I think it’s time for another sponsor.

Ryan: Sponsor moment.

Jon: Expo Marketing sponsored this episode, and I’ll take the tie-in on this one. A trade show booth is a team sport: design, build, logistics, setup, teardown. If one part is wrong, the whole thing wobbles on the floor.

Ryan: Right seats for a booth.

Jon: Exactly. Expo Marketing’s Signature line is tool-less. No setup crew required, which, as a Canadian, I appreciate because I have personally assembled IKEA furniture in a snowstorm, and I know what missing the right person for the job feels like.

Ryan: That’s your one.

Jon: That is my one. Custom-engineered, cuts labor and drayage, ships show after show, or rent one for a single show. And they handle the logistics. Made in the good old U.S. of A. Award-winning, Inc. 5000.

The booth is the one team member you can actually swap without a family meeting. Expo Marketing, ExpoMarketing.com, 949-250-3976.

Ryan: You got the number again. And, oh, by the way, if something is tool-less, don’t worry. Jon is the biggest tool I know, so he can help.

Jon: I can be of assistance. Let’s stop the tool joke right there.

All right. Okay. Starting to wrap up here. This all gets ten times harder when the family member is supposed to inherit the business. That adds a giant wrinkle. How do you handle succession honestly?

Ryan: Yeah, that’s it. That’s the biggest one. Right. I am the heir apparent to the legacy, the throne.

Here’s the rub: can your kid actually inherit that and run the company? Are they destined to follow in your footsteps or not? Those are separate decisions that need to be made. It doesn’t mean they can’t own the company. But can they own it and run it? That’s the economics.

Some people just aren’t their parents. They don’t have the minds that their parents do. They want to do something else with their lives. So why would we want to put that burden on them if they don’t want it in the first place? But it doesn’t mean we have to ruin the economics of that success that we’ve built up.

They can own the company, hire an experienced operator to run it, and have a leadership team there to do those things while they go off and pursue something that makes them happy.

Now, you might have hit the jackpot if they’re the right person. If that’s the case and they pass that test—hey, they’ve got what’s going on, they want to be involved in this company, they want to build the company even higher and better and make you proud—fantastic.

Then we have to set aside a time to groom them. Sometimes you hear it: from the mailroom to the boardroom. Have them know every aspect of the business. Maybe they’re great in finance. Maybe they’re great in operations. Whatever that is, we’ve got to groom them, and it’s going to take time.

We want to have them making decisions while we’re still there, so that we can guide them and mentor them, so that they have plenty of time to practice instead of, “Here, Junior. Here, Sally. Go take it away.”

I think the big thing is, if you’re forcing the person who’s not ready to be the heir, it’s not honoring your family. You’re actually endangering it. They could just take this thing all the way down with them, and your legacy is gone.

So that matters enormously. We’ve got to make sure that the people we’re passing it on to actually want it and can actually do it. That’s how you honor your family and your legacy.

Jon: Gotcha. And that speaks to exit planning, right? Sitting down early and having a strong exit plan. Is it family? Is it another operator who comes in? Sitting down and working that out earlier—the earlier, the better.

Ryan: Start with the end in mind. Brilliant. So let me tell you something out of the Ford playbook.

The statistics I want to leave you with are that roughly 30% of family businesses survive into the second generation. Seventy percent don’t, Jon. They don’t have an heir, or they have an heir and it crashes. About 12% survive into the third generation, and around 3% into the fourth.

It’s handing the operating seat to the heir that we need to test. Maybe we can have a fourth-generation-owned business, but it’s run by somebody else.

Jon: Got it. Awesome. Okay. Owners listening: they know exactly who their Danny is. What do they do this week?

Ryan: Run right people, right seats on your entire team. Everybody. Not just the family member. Not just the others. Everybody.

Get the grid: values fit, seat fit, get it, want it, capacity to do it. Yes or no on each. Values: plus, plus-minus, or minus on the core values. And you’ve got to be brutal on the minuses. No mercy for tenure, talent, or blood. That’s the whole discipline.

For anyone who scores low, family or not, ask one question: are they coachable, or are they a fundamental mismatch?

Then do the math on the hardest case: the turnover they’re causing, the seat opportunity cost, the compensation gap. Write down the number. You know who it is. You’re going to know exactly what you need to do.

Schedule a coaching or an exit conversation. Not next quarter—this week. The avoidance is costing you more than the conversation ever will. It’s costing you in the P&L. It’s costing you in the culture. This is the time to do something about it.

And if the hardest case is family, get a third party in the room. Take the emotion out of it because it’s a business decision. Ultimately, it’s better for everybody.

Jon: Awesome. Sometimes I feel like we’re family, Ryan.

Ryan: It is.

Jon: And I can’t wait to not speak to you because you spilled wine on my favorite couch.

Ryan: You threw away my favorite chair.

Jon: I did the world a favor on that one. All right. Take us home. The takeaway, sir.

Ryan: All right. Fire your family. That was just the clickbait to have an honest conversation with yourself. The real work is quieter and harder.

Apply the same standard to family that you do everybody else. Right people, right seats, values fit, get it, want it, capacity. Run it evenly. No exemption for blood.

The wrong family member in the wrong seat costs you at least twice: real dollars in the P&L and your culture. It really costs you street cred with your employees as well.

Don’t make this an emotional decision. You’ve avoided it for years. Now this is a business decision. Finally make it, because the number is what’s going to let you be kind.

When family passes the same test as everybody else, they have fair-market compensation doing the same work—the real work, the genuine article. That’s the way to build your culture up. Everyone’s treated the same.

But you’ve got to separate the person from the seat. Offer a path with total dignity and keep it private forever if it doesn’t work out. Never confuse handling someone a seat that they can’t hold with honoring them.

Run the grid on your whole family and team this week. You already know what you’re going to find.

Jon: All right, press print. That’s great. Good episode, Ryan. Lots of tips in there. Lots of information for people to act on. Thank you so much, sir.

Ryan: Yeah, no. Awesome, Jon. And one last fun fact: Jon has been fired by five of his family companies.

Jon: All my family members have fired me. That’s why I live here, not in the UK anymore.

Ryan: You can no longer go to Europe, people.

Jon: Well, only for short periods. That’s the mandate. That’s what the court order says.

All righty. That’s a wrap, Ryan. Thanks a bunch.

Ryan: Thanks a bunch. Sayonara.

Jon: That’s it for this episode of From Burnout to Bought Out. If something we said today hit home, don’t just nod in agreement. Pick one thing: the number you’ve been avoiding, the process that only lives in your head, the conversation you’ve been putting off for six months.

Do that one thing this week. That’s how it starts. And if you’re not sure which one thing to pick, drop us a line. We’ll happily point you in the right direction.

New episodes drop every week. Until next time, stop burning the treadmill and start building something you can actually sell.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top