20/2015 – Plan short cycle projects, watch political developments

Saturday, 21 November 2015

My wife asked me recently on whether I had any regrets selling the business and not leaving it for the children. We have just had a discussion on the difficulties faced by young entrepreneurs on establishing a successful business in this tough and competitive environment.

It had taken me a total of 25 years to sell a business which was built over 15 years plus an earlier 10 years of experimentation and steep learning curve of the trade. Back in the 80’s and 90’s, entrepreneurs started businesses with the intention to grow big and to last the next generation.

The dream was to build a company worthy of a listing in the main board of KLSE. To be followed by slowly easing the children post graduation into the business. Then pass the reign to them when they are ready as you move up to being Mr. Chairman, probably in your late 60’s. Standard script for baby boomer entrepreneurs. Just look at the successful companies in KLSE where the second generation have taken over and you will know what I mean.

But not all family businesses continue successfully into the second generation. Most of the time, the business model is antiquated and difficult to modernize. Their children equipped with western degrees prefer the glitzy attractive world of finance and technology, more in tune with the future than what is in store for them at home.

I could not see my two sons being happy selling lipsticks for a living. Waiting for my daughter to take over would require me to continue managing the business for another good 15 years. My main competitor is the biggest cosmetic company in the world and their senior management team gets younger by the year.

Imagine a 60 year old Chinaman in the ring on a daily grind against a 40 year old Harvard Business School/ Insead MBA graduate. Experience against youthful enthusiasm looks a bit lopsided in the short term but a continuous change of youthful aggressiveness would eventually wear you down no matter how much experience you have.

If you believe in feng shui, I believe in business cycles and product life cycles. Depending on industries and types of products, life cycles varies in length and depth. But what is certain nowadays and going forward, life cycles are getting shorter and shallower.

There is a pressing need to make things better, looks nicer and deliver it faster. Continuous disruption of the old means shorter life cycles. What used to be management by objective, it is now management by life cycles. Life cycles determine your planning period. It is now getting more difficult to justify long term investment in shorter life cycles of industries, products and brands.

So how can I plan to handover a business to my children in 10 years time when I am unable to look beyond the next year? I concede that next year will be a very difficult year for all businesses. Frankly speaking, beyond 2016, can anyone tell me whether the Ringgit will be devalued, revalued or of no value? Will the current negative political climate be resolved or will our nation declined into a chaotic policed state? How do you invest locally for the long term when the immediate short term looks bleak and uncertain?

Even Malaysian politicians and parties of both divides have shorter life cycles . Everything is in short supply nowadays. Trust, loyalty, intelligence and integrity. Massive amounts of money have disrupted the core ideals of elite politicians serving the nation. The nation now serves the elites.

Whilst the established entrepreneurs have managed to work around changing political scenarios, young entrepreneurs should strive to be more alert when assessing socio economic and political life cycles. The present government is also the largest commercial organisation in the country having a hand in every major industries. Our Finance Minister is actually the most powerful CEO of Malaysia Incorporated Berhad and its group of companies.

In the light of an uneven playing field amidst short political life cycles, my advice to young entrepreneurs would be to plan short cycle projects with an eye always watching the fast changing political developments in the country. Just remember, political chaos will result in loss of economic and consumer confidence and the economy can unravel and spiral downwards in the blink of an eye. Do be careful before you invest.

If you ask your children nowadays whether they would prefer you leave behind for them a thriving business or just cash and properties, which answer would you expect from them?

If I follow Tan Sri Vincent Lee’s advice, my children will get nothing from me. Zero. Zilch.

“Make them hungry” says my experienced and wise friend and they will strive hard in life to make it good.

So readers, what do you think I should have done and what should I do? Don’t sell the business and leave the business to them? Or just leave them cash and properties?

Or horror of horrors, leave them nothing?

Penny for your thoughts at thiamhock.com

Published: http://www.thestar.com.my/business/business-news/2015/11/21/management-by-life-cycles/

5 thoughts on “20/2015 – Plan short cycle projects, watch political developments

  1. Good day to you!

    I have read your article yesterday when I got the newspaper from a car showroom which published on 21/11/2015.

    I am working with my dad since after I resigned my second job in IT since 2005. I am in my mid 35-40 years old now. My Dad is a successful businessman in construction industry. Although I am happy to carry on with his business but I don’t think he will want to pass his business to me. Maybe I am not a boy. I learnt the news from my colleagues who work with my father when I was very young. I learnt a lot from him but in technically I am not pro like a foreman. I am very upset at first but life have to continue. I am still working with him without hoping or getting anything from him except my salary. Live life like a normal person – Owing credit cards, pay home loan and car loan. Spend wisely even what I yearn is rather difficult as it is costful to me. My salary is not enough to cover my want.

    I have just started my family. My husband is working with an IT company. Both of us can consider is working for others. My boy is still a baby. And have to add extra budget in the household – nanny fees, milk powders, pampers, insurance, later on kindergarden fees and miscellaneous.

    Current economy drop. Things get expensive. Petrol and toll increased. Political unstable. Salary remain unchanged. Government said want to achieve high salary income in year 2020. Oh this is so much stress to businesses out there when the economy is slowing down everything increase, business sales drop very much. How to increase salary to employees??

    Day by day pass by my father and I am getting old I am worry if … Selfishly thinking I am worry for my future too. If I have no income how to survive? If I cant get a better salary for a MBA graduate with less experience like me. What to do? So many commitments. In my family I have five others siblings too. My mother pass away few years ago.

    My father has invest in housing properties. I hope his next investment will be buying shop lots. I don’t think he will invest again. Properties is too costly now except at the urban ares. I have many plans for my own business too but i don’t have enough money to start a business. If I can start my own business I don’t have enough to cover future expenses if my business is soar. I tried SME loan but failed.

    I understand most of my generation born in 80s have this problem encounter too. Some are lucky some are not. I am consider I am lucky to be graduated in oversea university. Not all children will simply spend unwisely. Parents will always won’t know whether if their children have tried but not lucky to be the chosen one or can’t be seen already considered ‘My children is not working hard enough’. How to strive hard if parents have this thought always? I believe children now is working hard to earn money. Matters are how they use it? If they are not using the money for illegally why not? If they are only spend it usefully like builing their chapter of life bulding their own business or carry on your business? Why not leave for them?? Starting a business not easy nowadays. You don’t want your children to be blacklisted too.

    If you leave them nothing, I believe life will be miserable to them when you’re gone. Or why not while you’re here guide them. Point out to them what if this what if that. Let them voice out to you. If not you voice out to them. Don’t let your children scare of you which they always will find reasons to ignore you or even if you successfully sit down with them. They will act in another way not them. I wish my father is guiding or pointing which direction I should go instead of having me now blur blur in the company and bully by other his experienced workers of him. But he is really busy and we have less communication until he has a negative thought of me.

    Old saying is not the same already with what is currently changing daily.

    Our generation life is totally different from your generation. World is advancing so do every country.

    We are surviving.

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  2. If your kids are passionate about business get them to start up one and you can be their angel investor. As investor you must expect return on investment ultimately. Give them targets to achieve. Give advice where needed but don’t interfere. What you want is results. If failure arise find out where is wrong. This way you act like any investor. Investor expect returns or de-invest. Management must produce return or get fired. It must be this way only to produce good entrepreuners. Best wishes. Richard.

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  3. I subscribe to Robert Kuok’s principle (or rather his mother’s) : “儿孙能如我,何必留多财;倘若不如我,多财亦是。If my children are as capable as I am, there is no need to leave them with inheritance money; if my children are not capable, giving them more money is useless as well”.

    I am the 3rd generation 40 year old managing the family business with more than 130 staff with 25 branches nationwide. If I would have started with nothing, I believe it would have made me “hungrier” and a stronger person.

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  4. Depends how your kids were brought up.if they work for money,better returns.if money works for them,can be small returns but no risk.some dad left loans in their businesses.

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  5. guess the thing that is hard to let go for a successful entrepreneur is his successful.biz. The sweat & toil to bring it to fruition will probably etched in the mind, if not the heart. He will wish for longevity.

    I have developed this school of thot of instead of being disrupted by external forces, we need to develop our own Courage to disrupt it by ourselves. It appears illogical, unthinkable.However, if U were able to do that, U remain the leader, rather than to be hit by “others” (the land, the environment, the mkt).

    guess I got to salute for not leaving your biz or much to your sons. Without trying or toiling, they will never learn. It’s all about direct perception & experience.

    Yuum seeng!

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