82.1 F
San Fernando
Thursday, Mar 28, 2024

Fourth Generation of Smiths Now at Helm of BMW/Mini

The Great Depression. World wars. Technological advances. These are some of the changes the Smith family has endured during its 90-year run selling automobiles in this region. To share the secret of the family’s success, Tim Smith, president of Bob Smith BMW/MINI participated in “The Family Business: Land Mines and Golden Opportunities,” a Jan. 17 presentation of the Family Business Center of California State University, Northridge. A member of the third generation of the family, Tim Smith said that he and his eldest three brothers became active in the business, started by their grandfather R.A. Smith and passed down to their father, Bob, upon graduating from grammar school. The pre-pubescent Tim Smith had the task of washing cars. He was likely more of a nuisance than a help, he joked. Still, his father’s intention in putting his children to work at such a young age was to give them a work ethic. “Your children aren’t entitled to your wealth,” Smith said. “One thing my dad did was give away a lot of money. He wanted us to work.” Family Business Center Director David Russell wondered if Smith and his siblings,he also has a younger brother and sister,felt that their father should have simply given them a hand-out. Smith acknowledged that it is easy for the younger generation to feel as if they are owed. “As time goes on and the business grows, you get the feeling you’re entitled,” he said. Children of entrepreneurs tend to believe that they’re responsible for making business thrive because, as they play a larger role in functions, they watch their parents assume a lower profile. But, “that’s the way it should be,” Smith said. Now that his daughters Anne and Catherine work for him, people have started to ask Smith what he does. His answer: “As little as possible.” While Bob Smith expected his children to work for their money, Tim Smith said that his father did give him and the other children active in the enterprise stock in it before its worth grew. “He separated retained earnings and turned it into preferred stock, and then we bought into common stock,” Smith said. The children not employed by the company weren’t given stock, however. Marta Vago, a family business consultant who sits on the Family Business Center advisory board, wondered why Bob Smith made this decision. He did so because there is a correlation between the number of family members who own stock and the number of disagreements there are, Smith said. Moreover, added Vago, when family members who don’t work for the business own stock, they are typically too ignorant of its inner workings to understand pertinent issues. In 2001, Bob Smith died. Five years before his death, however, Tim Smith and the other children employed by the business decided to buy him out. It was a difficult decision to make, Smith said, but his father understood intellectually why the move was necessary. He believes that, by doing this before the patriarch died, arguments about the value of their father’s stock were avoided upon his death. How did Smith’s youngest siblings feel about the eldest buying their father out, Russell inquired. As it turns out, Bob Smith never told the youngest son about the buyout, Smith said. The patriarch did leave more in his will to the children who didn’t have company stock as a means of compensation, though. This was possible because Bob Smith did not have all of his money tied up in the family business. But what would have happened had that been the case, Vago asked. In such an instance, the family could divide the worth of real estate from the worth of the business to leave more to the children without company stock, Smith answered. Bob Smith wasn’t the only family member involved in a buyout. Tim Smith said that he bought his older brother Mike out of BMW, while Mike bought him out of Toyota. As in the first family buyout, Smith said that this move was necessary for estate planning purposes. “It had to be done,” he stressed. With four generations of Smiths having been active in the family business, attendees of the presentation were curious as to how to motivate their own children to want to enter family enterprises. Particularly, will children be turned off if they hear parents complaining about the business? The Smiths have certainly had matters to complain about over the years. They’ve weathered Ford’s struggles, Acura’s attempt to find its way, Mercedes’ transition period and more. To stay afloat during times of struggle, Bob Smith “started a leasing company. He got rid of Dodge and got into Volkswagen,” Tim Smith said. Through it all, Tim Smith has found the service sector to be the most reliable part of business. Though children may have an awareness of a family enterprise’s struggles, Tim Smith said that, “If they sense you enjoy the business, they’ll be more likely to gravitate towards it.” Bob Smith had always wanted his children to be involved in his company. As a young man, however, Tim Smith was set on a career in law. His mother would have to defend him to his father. “You leave him alone,” she would say. “You let him go to law school.” While Tim Smith ultimately didn’t end up a lawyer, he had an open mind about whether his children would follow him into the family business. His son, for example, is not involved in Bob Smith BMW/Mini, and he doesn’t consider that a disappointment. Smith said he just wants all of his children to have a career that suits them. Besides, “If you have someone in the wrong position, it affects the whole equilibrium of the business,” he said. Ensuring that family members are a good fit for the company is key, but, so is ensuring that the family has a forward-looking view about business. Smith said that family business owners get into trouble, “as soon as you stop thinking about the future.” Overall, the key to the Smith family’s success was Bob Smith, according to his fourth-born son. “My Dad was a visionary,” Tim Smith said.

Featured Articles

Related Articles