Rich Son Poor Son!
10 pitfalls a son can fall into when his father is the head of the family business
Anyone with a slight inkling of understanding the business world has heard of Robert Kiyosaki and his legendary international best-seller Rich Dad Poor Dad. Rich Dad Poor Dad explores the journey of Robert Kiyosaki with his 2 dads: his real father, the Poor Dad, and his friend’s wealthy businessman father, whom Kiyosaki calls his Rich Dad. I found the book fascinating as so much of it rang true in how the poor section of society views the rich class and vice versa.
Now, envision extending the insights from Kiyosaki’s book and flipping the scenario. Picture a scenario where a business-minded father is eager to bring his son into the family enterprise. This introduces the concept of “Rich Son Poor Son,” illustrating two personas of the son and how he deals with the red flags that prop up with each step his dad takes in the family business. Let’s explore!
1. Getting the son into the business
Scenario — the son has finished his college education and is contemplating his next steps in life; be it doing a Master's degree or be it a job in his field of education. At this time, his dad tries to sneakily get him to join the business.
Dad: I would like you to join the family business, if not, then I will hand it over to your cousin.
Poor Son: OK Dad, I will join your business.
Rich Son: No worries, Dad, hand it over to the cousin.
2. Starting the son off in the business
Scenario — the son has joined the business but his dad wants him to take a risk straightaway.
Dad: I want you to start a new department in the company and run it, but I will control the money flow as you don't know anything about it.
Poor Son: OK Dad, I will start a new department.
Rich Son: Im going to start from the bottom, so why don't you involve me in the most profitable part of the business to begin with?
3. Taking corporate loans
Scenario — The company needs to borrow money from the banks to grow the business.
Dad: We need to take corporate loans for the business expansion; it’s a risk, but we believe it will pay off in the long run, and both of us will be personal guarantors for this loan.
Poor Son: Alright, Dad, I’ll support you to take loans for growing the business and sign the documents as a guarantor.
Rich Son: Dad, let’s thoroughly analyze the potential returns and risks before committing to a loan. It’s crucial to make informed financial decisions. I need assets in my name to ensure that in the event the company defaults, the banks don't come after me.
4. Making his son a shareholder in the business
Scenario — the banks insist that the Dad involves his successor as a partner in the business so that they can continue providing corporate loans.
Dad: I’ve decided to appoint you as a shareholder in the business, even though you lack experience.
Poor Son: Thank you, Dad, for the opportunity. I’ll do my best.
Rich Son: Dad, I appreciate your confidence, but let me talk it over with my business mentors and lawyers and I will get back to you with a shareholder’s agreement.
5. Business Practices
Scenario — The Dad fears that the Son when he takes over, will make several changes in the company that will make it unrecognizable to the Dad, who founded the business.
Dad: We’ve been following certain business practices for years; I want you to continue them.
Poor Son: Sure, Dad, I’ll stick to the traditions.
Rich Son: Dad, times have changed, and the industry is evolving. Let’s explore more modern and innovative approaches to stay competitive.
6. Getting a new business partner
Scenario — The dad wants to bring in a new business partner and wants the son to give up part of his shares to accommodate the new partner.
Dad: It’s time for us to get a new business partner in the company; I’ve already decided on one, and you will give your shares to him for free. After all, the WHOLE business will be yours one day!
Poor Son: Okay, Dad, you are right and I trust your judgment. I will give up my shares.
Rich Son: Woh woh woh Dad, I’d like to be involved in the decision-making process and evaluate potential partners together to ensure a strategic fit for the business. Also, I would like to evaluate the company so that I know what I will be paid by the new business partner for the shares that I give up to them.
7. Personal and business finances
Scenario — Dad wants to keep one big pool of money into which he dips for business, home, and personal expenses so that he can evade the authorities.
Dad: We’ve always kept our personal and business finances intertwined. I expect you to do the same.
Poor Son: Absolutely, Dad, I’ll manage them together. Dont worry.
Rich Son: Dad, let’s consider separating personal and business finances for greater transparency and efficiency. It’s a common practice in successful enterprises, and we need to have proper and separate ledgers for each account in coordination with our Audit and Accounts departments.
8. Beware of your wife!
Scenario — Dad doesn't want his son’s wife to see through his trickery so he manipulates his son against his wife’s intentions.
Dad: Wives come and go but business lasts for generations.
Poor Son: Thank you, Dad, I’ll keep everything hidden away from her.
Rich Son: Dad, thank you for the advice but I would like to handle the business situation with my wife privately without accusing her of anything without good reason.
9. Company profits
Scenario — The dad has a problem with the son taking a profit from the company as that money can be used for something else.
Dad: The company will not give you any end-of-year profits as the company will be yours one day.
Poor Son: Understood, Dad, I‘m good with not getting any profits
Rich Son: Dad, I would claim all profits based on my percentage shareholding in the company as I deserve to be compensated for my hard work. No one has seen the future
10. The business is in peril
Scenario — The dad has made some poor decisions in the business and has taken unnecessary risks without informing or consulting his son, and the business is on the brink of collapse.
Dad: Son, I admit that I have made some blunders due to my incompetent, careless, and rigid decision-making and non-consulting attitude but it doesn't mean you resign when I need you most!
Poor Son: OK, no worries Dad. I’m going to support you through this difficult time.
Rich Son: Dad, I’m glad you realize your mistakes but you never listened to my advice, and you didn't share the steps that you were taking. Unfortunately, you reap what you sow, and I gotta go! Good luck and goodbye.
In conclusion, “Rich Son, Poor Son” resonates as a compelling narrative delving into the divergent trajectories a son may embark upon within the dynamics of a family business led by his father. The stark contrast between the “Poor Son” passively accepting his father’s decisions and the “Rich Son” strategically navigating with caution and a hint of paranoia emphasizes the critical role individual agency plays in shaping destinies. The tale underscores the significance of active engagement and thoughtful decision-making in the realm of family enterprises. As we witness the unfolding narrative, it becomes evident that the approach one takes in the familial business setting can wield profound implications, ultimately determining whether one thrives or merely succumbs to the currents set by paternal influence. As Andy Grove, founder and former CEO of Intel, so famously wrote 25 years ago: Only the Paranoid Survive!
Thank you for reading this article. It can be alternatively written as “Rich Mom, Poor Mom” or “Rich Daughter, Poor Daughter” depending on the situation. The point is to be prepared, whether you are a mother who has joined her daughter’s business or vice versa. Are you someone who has been badly affected by the poor business decisions of your parents or children? Comment below!
