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Transitioning agency ownership to the next generation (featuring Jonathan and Erik Bernstein)

How to handle succession in the family business
Jonathan and Erik Bernstein

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Many agencies have multiple generations working in the business. Sometimes, it may be a passing thing — a summer internship perhaps — while in other cases, two generations work side-by-side for many years.

At some point, the elder generation may decide it is time to retire, or at least slow down. That’s exactly what Jonathan Bernstein of Bernstein Crisis Management did. He recently announced that his son, Erik, would be taking over leadership of the family business while he takes a step back from day-to-day management.

On this episode of Chats with Chip, both Bernsteins join Chip to talk about the decision to transfer agency leadership, as well as the steps that go in to making it a reality.

For any agency looking at succession issues — but especially those looking to do so within the same family — this episode is chock full of valuable insights.

Resources

About Jonathan Bernstein

Jonathan L. Bernstein, chairman and founder of Bernstein Crisis Management, Inc., has more than 35 years of experience meeting clients’ needs in all aspects of crisis management – crisis response, vulnerability assessment, planning, training and simulations. Prior to launching his firm in January 1994, Bernstein created and served as the first director of the Crisis Communications Group for Ruder Finn, Inc., one of the world’s largest public relations agencies.

About Erik Bernstein

Erik Bernstein is President of Bernstein Crisis Management, Inc. an international crisis and reputation management firm providing solutions for both companies and prominent individuals. As President and frequent team lead, Erik works to support clients in all aspects of creating, building, and maintaining their readiness for, and resilience against, threats to operations or reputation that might impact the bottom line. His expertise bridges from back-end crisis management, including planning, preparedness, and training, to outbound crisis communications and media relations, ensuring a cohesive, holistic approach to protecting clients’ interests.

Transcript

The following is a computer-generated transcript. Please listen to the audio to confirm accuracy.

CHIP: Hello, and welcome to another episode of Chats with Chip. I am your host Chip Griffin. And I am delighted to have with me today two people they have the same last name and you’ll understand why in just a moment. I have Jonathan and Erik Bernstein with Bernstein Crisis Management. Welcome to the show, guys.

JONATHAN: Thanks, Chip.

ERIK: Thanks for having us.

CHIP: It is great to have you here. longtime listeners may remember that Jonathan has been a guest on the show before to talk about a variety of topics. But today, we want to talk about transitioning and agency from one generation to the next and no, I’m not talking about Star Trek. So before we do that, though, why don’t you guys share a little bit about Bernstein crisis management with our listeners?

JONATHAN: Sure. Bernstein Crisis Management is a 26 year old virtual PR firm that focuses on hundred percent on all aspects of crisis management,and crisis preparedness. So everything from vulnerability assessment, through crisis planning training, simulation exercises. About two thirds of our work is crisis prep these days. People are much more aware of the need. And about one third is the breaking crisis, the stuff hitting the fan. And Erik, you want to talk at all about our specific expertise and social media communication?

ERIK: Sure, I think we’re one of the most experienced firms dealing with really the issues that impact everybody online today, and have just increased in on the level of seriousness and the level of damage that can happen over the last 10 to 15 years.

CHIP: And the other thing that you both do is you do a lot for the community as far as sharing information about dealing with crises and that sort of thing. So even if you’re not a client, there’s a lot of benefit that can be had. And later on in the show, we’ll share some of the URLs where you can go to get that information. And I feel fortunate that I’ve had an opportunity to be to work with Bernstein crisis management over the last Gosh, almost, what 20 years now, Jonathan, unfortunately, not as a client, I have not had a crisis that I have needed to call you guys in on but we’ve been able to partner in other ways and so I’ve always appreciated that. And you recently made a little bit of news about some plans for the agency. And what was that, Jonathan?

JONATHAN: Well, we recently announced that I was ascending and if that’s the right word to the the title of chairman and founder versus president and Erik is now president of a company and the reason for that is that I’m moving towards what I call semi retirement at the end of May and Erik will be running the shop and I will be I will be stepping back and just remaining accountable to some of my existing clients and cherry picking some other work I want to do but most of its going to be our

CHIP: and we should mention that you don’t simply share a random last name Erik is indeed your son correct?

JONATHAN: Yes, sir. Cuz my middle son actually.

CHIP: So Erik, did you grow up always knowing that you wanted to be in crisis management?

ERIK: You know, I didn’t really for a long time, I thought I wanted to be a teacher. Actually, I got a little bit better sense of what that would be like through some early college courses and thought, maybe not so much. So I wound up actually doing what most younger people who don’t know what they want to do for a living go do which is work retail for quite a while and and I just sort of fell into working for Bernstein crisis management, just doing some writing. You know, my dad knew I was a good writer, I obviously grew up using social media and, and so we just started with some blogs, and it really snowballed from there. And so

CHIP: I know you’ve been involved with the business for quite a while because we’ve exchanged emails from time to time, but when did you first get involved?

ERIK: right about 15 years ago when I was when I was 21-22.

CHIP: And Jonathan, did you always have in mind that you wanted to have family working for you in the business or were you it was that just

JONATHAN: not not a not a plan at all. I have four children and at one time stepdaughter and I never had any, any indication from any of them. Possibly, you know, the one that came closest, I suppose was Erik sister who went and got a business and marketing degree, but she’d never had any interest. But Erik and Erik proved to be remarkably good writer. He, he got it. He understood crisis management early on. And so the more I gave him the do the more he learned, and he’s virtually been my apprentice. And I really consider that the model that we follow is more of a, I immodestly refer to myself as the master, but it was really a master apprentice type relationship.

CHIP: And it At what point did you have in mind that this might be something where you could transition the business? I mean, obviously, if he was getting started with just doing writing projects, it was probably not an immediate thing. But at some point, it must have crystallized that. This was the path you were on.

JONATHAN: Probably about, what, five or six years ago maybe?

ERIK: I think so. I mean, when it really became serious when I really was running my own projects for clients. I think we both started saying, hey, maybe this is a long term thing.

JONATHAN: Yeah, I kept I kept giving Erik more to do it kept teaching him more and he kept learning it well, so.

CHIP: And so as the process evolved, have you been handing over more responsibility over time to Erik? Or has it really was that more of a shift that you made when you made the final announcement?

JONATHAN: Oh, no, it’s definitely been an overtime he’s been getting, you know, he’s been giving him as much as he can handle basically. And that’s more and more each year at the big difference now is he’s getting to see more of the back end of the business, the administrative stripe, and more and more working with our bookkeeper and that always the pain in the ass part of the job. Yeah,

CHIP: I was just gonna say the fun stuff. I mean, what agency owner doesn’t want to deal with the business operations side of things. Oh, yeah. Now and the reality is very few people get into the agency space with with an interest or aptitude for So I imagine that must have been a learning process for you to sort of, you know, roll up your sleeves and get into that.

ERIK: Oh, yeah. And, and some big learning experiences along the way. You know, especially when it comes to, you know, making sure that you’re paying the tax man the correct way, and things like that. But, you know, fortunately, we have some really skilled financial people, some really skilled legal counsel as well that we can reach out to when we need. And as you’re making this transition, you know, what have you done as far as working with those outside advisors? I mean, obviously, there are all sorts of

CHIP: implications when you’re, I think you guys are changing where the headquarters of the business is to right, since you guys live in different locations. So, you know, there’s a number of sort of bureaucratic changes that take place and so have you been working with professional advisors to smooth that process through?

JONATHAN: Yes, I mean, we, I sat down here in California with my CPA and my bookkeeper and outline What what I wanted to accomplish and ask them, How do we get there? What do we need to do legally and otherwise, also sat down with a lawyer earlier on that. And one thing we decided was moving the corporate Corporation itself. We it’s been it’s been dissolved in California. And Erik already had Erik Bernstein crisis management set up as an S corp in Colorado. So he just dropped the Erik from the name. And all of a sudden we had bernsen question matter from Colorado, but that is as much it’s partially because of the reorganization of our little reorganization. But it’s also because of California is new laws on contract. Right. We are a contractor based business. And, and, and us. I mean, in some ways, I’m contractors darn near full time. So, you know, we were going to get hit hard possibly by the New California law. Now, we’re, you know, as of January 1, we’re not a California Corporation.

CHIP: Right. Yeah. The AB five has certainly been a challenge to some of you We’ve talked about on this show previously as well as on the agency leadership website, because it’s it’s impacting a lot of agencies and not just those in California because if you use contractors in California, there are potential issues too. So it’s but but the other thing we had to do chip and this is something I credit my Kelly as my bookkeeper with issue, put together some really nice Excel spreadsheets and mind you, I hate excel

JONATHAN: at using it, but the spreadsheets were incredibly useful, because we were able to do some projections on revenue for the coming year, and how you know how anticipate and how my revenue will be reduced if I’m working less, and where and how there’s different a few different ways we profit from the business, including markup on contractors. So how do we divide the profit from the business more fairly given that Erik has more of a role on a day to day basis? So we’re able to you know, how do we Plug this number in how does this change things? If we plug that number in? How does that change things? So very useful going forward to know how things are going to shift for us in terms of both back end management and bottom line. And for any agency that has multiple owners, it’s, you know, this is an important exercise to go through with your professional advisors, because you want to make sure that you’re being equitable to all the partners, but you also want to do it strategically in the best way so that you minimize your tax impact. Right. And one of the things, one of the things that make this easier, maybe then some of your partner with the strangers, and I, Erik and I work together very well. So it’s not enough. He wants to push back on something they disagrees with. That’s okay. back. I encourage it. And so it goes back and forth. It’s been really quite easy. There hasn’t been any points of contention.

CHIP: And Erik, would you would you agree with that? Or is that? Is that your dad sugarcoating things?

ERIK: No, no, it really has and I think you know, if we did this years ago, I don’t think I would have been as comfortable saying, hey, this, this seems in equal or, you know, I just need this and I, I can’t move on it. Luckily, we don’t have too many points on that, obviously, we both want the other to have a comfortable lifestyle. And, and I certainly want my dad to,

CHIP: you know, make make what he should make from really setting this business up and giving me a great position to be in. So now I think we’ve had it out over more work things than we ever had financial just in debating, you know, our thinking on a situation. And Erik is, you know, look to the future. And, you know, you look at shouldering more of the the day to day responsibilities. You know, how do you how do you look at that, are there are there things that concern you more than others? I mean, have you been involved with business development, for example, up until this point, on a significant basis. I mean, obviously, your dad has built quite a network of clients as well as contractors. You know, so talk a little bit about how you’ve, you know, got yourself ready for that piece of the business?

ERIK: Sure. So I like to think of it as he built this tremendous platform. And it’s been up to me and it’s now even more up to me to see what I can do with my part of it. So I’ve already been doing Of course, business development, client outreach, networking, things like that. I actually do all of our social media and online marketing as well. So I’m, I’m elbow deep and all of that, but the pressure is turned up a few notches. It’s not nobody else is going to go do it. If I don’t do it now. It’s me at the helm. And if I crash and burn, it’s my fault. And, you know, Jonathan, what’s been your approach as far as the the transition? Have you been? You know, sort of handing things off and being little bit more hands off with Erik or is it really been sort of, you know, you guiding him step by step on this? How is how is that process working?

JONATHAN: I think it’s been a bit of both chip. I mean, there’s, you know, as he gets more comfortable with stuff, like for example, now, you know, he’s Every all of the building is now done through his QuickBooks instead of through my quick, you know, so you know that, that even even little things like that I had to learn how to do that he already knew how to build through my QuickBooks, I didn’t know how to build. So, so, but I think as quick as things are turning right now everything is still in transition. Really. We’re staying, you know, we’re still it’s not, you know, we both have agreed that there may be some needs to tweak some of the terms of our, of our, of our turnover agreement, if you will, but it’s all this handshake for us. We don’t, we don’t need, you know, written contracts.

CHIP: Right. But and I think, you know, the the advantage of being family and that you’ve worked together for quite a long time now I you know, help smooth this versus you know, saying a, you know, a more traditional acquisition type structure where, you know, people are starting to get to know each other During the transition, you know what to expect already.

JONATHAN: Right? And, you know, there is a, you know, in our case, the obvious weakness in the whole thing, first admit is that we are invaluable to the business, both of us and and, you know, anything happens to one of us laces up or whatever, or worse. That’s does a real number on this. You know what one or the other we can substitute for each other but, but particularly at this time, we’re trying to make sure we also stay healthy through 20.

CHIP: So no trips to China or anything like that on the

JONATHAN: NA. Na, in my case, even in a church next door to Arcadia, where a lot of people come from.

CHIP: Yeah. So, you know, as you’ve made this announcement publicly, what has the response been? You know, have you have you heard from, you know, clients and contractors and you know, the broader PR community. Talk a little bit about the reaction to the announcement,

JONATHAN: but I’ll Speak first and let Erik respond. But I made a point of telling my long term clients, that I’m still going to be there for them. That was in the content so that the announcement the went to them, put it in that context, you know, this isn’t going to change anything in my availability. So you shared the Bible down before you went public, then obviously, yes, yes, exactly. And, you know, and the response has been very good. And they pleased to hear that. And you know, the ones who have known me for 15 years or something said, Well, yeah, sounds like you’re moving towards retirement. I said, Yeah, I am. But slowly, so let’s call it semi retirement for the time being. And because I still want to keep my hand in about 20% of the level of I’ve been working at it,

CHIP: right. So you’ll just have the opportunity now to sort of cherry pick a little bit more perhaps the projects that you’re working on,

JONATHAN: and do a lot more stuff I want to do. It has nothing to do with.

CHIP: Fair enough. And and Erik, what have you seen

ERIK: Everyone’s been tremendously supportive, really, you know, we we took the kind of advice that we give our clients all the time, which is if someone’s going to hear news that might concern them, let them hear it direct first. So, you know, I also did client outreach, of course, it’s more of good news not not that it’s bad news. I don’t mean to imply that, but it’s not necessarily as concerning for my clients that I’m essentially moving elsewhere in the company. But, you know, also, I know Jonathan’s gone out of his way over the last couple of years as we thought about this, to loot me into things so that his clients have had some contact. And really, you know, our colleagues, our contractors, and our clients have been just tremendously supportive, wishing the best of luck and offering support really, all over the nation.

CHIP: And, you know, Jonathan, you’ve really built probably one of the strongest networks out there of crisis communications consultants, I mean, it is that we’ve talked about this I think on one of the previous episodes, this is is really sort of, you know, part of your secret sauce that you have built this You know, very active network of folks that you can tap into, you know, and so do you envision that that will be a seamless transition, given how much they’ve had a chance to work with Erik previously?

JONATHAN: Yeah, we have almost no contractors that we don’t both already know. You know, even if they were originally my contacts, Erik knows them now often has already worked with them. There’s made a very specific process is a good point actually went through a specific process in advance of identifying the contractors whose skills are close enough to mine in terms of experience that if Erik needs to call on more experience help, and I either I’m not available I’m not available you for any reason, including by choice, and then he can call on other people we’ve got you know, people like john Harmon a used to be the, the head of PR for for during the whole Bridgestone Firestone mess and we’ve got a guy named Tim serbo was a big guy at one of the national PR firms totally bilingual English Spanish, great guy to call on and but both of them are in their 50s and they’re supposed to me in my 60s so they’ve still got another decade or more full time work and I’m and and and there’s other people like that and Erik knows who the experts are in the different area. And and even even now the process of adding or identifying new contractors is a very active part of our business.

CHIP: And Erik is is your, you know, taking the the keys to the castle, if you will. Do you have a vision for things that you want to Let’s not say change, but maybe adapt over time. I mean, I imagine you have some of your own ideas that you’re planning to bring to the business.

ERIK: You know, for this first year, honestly, my main focus is don’t screw it up. You know, keep the same level of service that we’ve always delivered people and get comfortable. You know, I’d certainly like to grow the business, I love to make it larger. I think that’s the goal of any business owner for the most part. So, you know, maybe next year, but for this year, I’m really focused on just keeping everything on the rails and keeping everything smooth. Make sense? First, do no harm. So Jonathan is if someone’s listening, and they’re thinking about this same transition for their own agency, what are some of the things that you would encourage them to keep in mind? What tips would you have for them, as they’re looking to hand off? And then Erik, I’ll ask you, as the next generation, you know, what advice you would give to people who are on the receiving end of that transition? So Jonathan? Well, I

JONATHAN: I think we took the same approach with this and we take a lot of times when doing planning for our clients, not that we had a crisis, but this had the potential for crisis if it wasn’t done right. And so we did you know, we, we mutually brainstormed, along with the assistance of our bookkeeper and CPA and so on and lawyer. What could go wrong? You know, what’s, what’s the worst case here? What could go wrong? Make sure we plug all those holes and advance. So that thinking was very important to do. And to be very, very realistic and our financial projections, you know, rather much rather underestimate and overachieving. And so those are the two big things for us was just getting ahead of issues before they become issues.

CHIP: Make sense? And Erik, on the as far as the view from the next generation, what what advice would you have for people who are taking on their their family business?

ERIK: You know, I’d say know what you’re good at. I am good at crisis management. I know it. I’m good at client relations. I know it. I am not good at bookkeeping. I’m not good at taxes. I’m not a lawyer. So so really having those trusted people where we can have 100% honest conversations with them and say, This is the real deal. Tell me if I’m screwing something up. That’s given me a lot more competence, and of course, having somebody who I can be completely honest within that, you know, Jonathan’s not only been my boss for 15 years, he’s been my father for my whole life, obviously. So I do feel like at this point, I can come to him and say, I did something that shouldn’t have happened. How do I fix it? What do you think? So sort of the same advice that that you have, you know, for your clients, which is good communications, right, you got to be open and honest. That’s number one. It’s number one for for everything in life as far as I’m concerned.

CHIP: So are there any questions that I haven’t asked either of you that you you think I should have that we should cover here?

ERIK: Yeah, I’d say expect everything to take longer than you think it will. You know, nothing from getting your business name changed to processing all of the bank account information is going to be quick. It’s going to take a couple of months for it to all go through. Something is going to be missed. And it’s going to take you a little bit of extra time. So just give yourself plenty of time, I’d say

JONATHAN: yeah, we had little stuff going on with, you know, unexpected length of time to get a new employee ID number for his Corporation, you know, the new barnsey crisis management, which delayed being open open the new printing crisis management bank account and that little stuff, but you know, not not crises, just little stripe.

CHIP: Yeah, everything in business takes longer than you think it will. And, and particularly when you’re when you’re looking at a major business transition, whether that’s transitioning from one generation to the next, or transitioning from owner to employees or selling the business. All of those things take much more time than you imagined. And so the sooner you can think about them, and plot it out, the better. But the weirdest thing for me chip, honestly, is that I don’t own the business anymore, littler. It still,

JONATHAN: though, so it’s got my name on it, but it’s legally 100% owned by Erik now. He could they could just tell me go to hell, you don’t have any more work.

CHIP: So So now he gets to turn the tables back back when he was a kid you probably said as long as you’re under my roof. And now he gets to say as long as you’re working for Hi business.

ERIK: Oh, I hadn’t thought about that. But now

JONATHAN: you’re welcome. All I’ll show you something that all of my all of my kids heard growing up, you can do anything you want to do if

ERIK: you’re willing to live with the consequences.

JONATHAN: All of my children continue.

CHIP: And that is a good note to end on. Before we finally close out though, if someone’s interested in learning more about Bernstein crisis management, where can they find you guys

JONATHAN: at WWW dot Bernstein crisis management com, where we also have some, a lot of material we give away if you want to go Look, they’re

CHIP: fantastic material should give away a great newsletter and, you know, really valuable stuff for any communicator.

JONATHAN: Thank you.

CHIP: Alright, well, on that note, Jonathan and Erik, really appreciate the time that you’ve taken to share these very candid insights about the transition. And if anyone’s interested in learning more, I’d encourage them to get in touch with you guys. And of course, if you’ve got a crisis turned to Bernstein crisis management. And on that note, thank you. We’ll draw this episode of chats with chip to a close and we’ll be back here with you next week.