Am I a G2 or a G3 next generation owner? This is one of the most common questions I hear on my consulting engagements as individuals attempt to label their ownership levels.
When I coined the terms G1, G2, and G3 in my first succession planning book more than ten years ago, to denote each generation of ownership, the point was more conceptual than literal. G1, or Generation One refers typically to the founder(s) of a practice or business. In a simple succession plan between a parent and a son or daughter (I’ve actually worked on several plans with a son AND a daughter), the G1 and G2 labels are fairly clear but in most cases, they’re not. Most founders sell their equity to multiple next generational owners, perhaps a son and/or daughter, but usually one or more key employees as well. The ages of these younger owner/investors are material, but the G2 and G3 labels are not. A G1 with three next generation owners or prospects might find that all three invest at different times, in different amounts – it not unusual at all to have one “next gen” owner in his/her early 40s, another in his/her mid 30s, and another in his/her late 20s. Twenty five years later, as these members of G1s original successor team are each working through their own succession plans, the G1 to G2 to G3 process gets murky. And that’s OK.
The G1/G2/G3 concept is a great teaching and learning tool. The reality of a succession plan exists in a detailed pro forma spreadsheet and the supporting legal documents. It’s not the labels that matter – it’s the math! No matter what generation you are, there’s a place for every smart, industrious, and creative team member.
Thanks for reading,
David Sr.