By Mark Crawford
Coming out of the recession, precasters are working harder than ever – and often still doing more with less – in an increasingly competitive environment. Many business owners don’t feel they have time for things like succession planning. Yet the recession is a powerful reminder that proper leadership and planning is critical for surviving tough economic times.
Even so, succession planning is easy to put off. It takes you away from your business, it’s expensive, it involves legal counsel and it can stir up emotional family issues. However, when done correctly, succession planning creates a stronger company by identifying leadership that can reach and exceed its future goals as well as assure stability and success for the next generation.
Go for it
Howard Wingert, president of Concrete Sealants in Tipp City, Ohio, and his wife, are second-generation owners. Their son, Jesse, has worked with Concrete Sealants since 2010 and is the next generation of ownership. In 2014, Wingert launched a 10-year plan for transitioning to third-generation ownership. One of the first steps was establishing a timeline, which gives everyone a reasonable expectation for when the transition will occur.
Choosing a reasonable timeline is important since there should be enough time to communicate key details, but not so much time that stakeholders lose interest and older leadership hangs on. Wingert picked a 10-year plan for several reasons.
“Being 58 years old, it seemed like a good plan to be ‘out of the way’ when I reach 68,” he said. “We also have several projects for growing the business which should reach maturity over the next 10 years. That gives me time to be a mentor to Jesse so that he continues to learn the details of running the business. It also establishes a level of certainty for all employees to feel comfortable as to where the company is headed.”
Mark Wieser, vice president of Wieser Concrete Products in Portage, Wis., has also been on both sides of the succession planning spectrum. His father founded the company in 1965 and started transitioning ownership in 1996. That process was finalized in 2008. In 2013, Wieser initiated the second round of succession planning, which is still in development.
“We teamed with our accountant and a very good trust lawyer who helped a lot with the process,” Wieser said. “For example, I learned there are tax implications if succession planning is not done properly and at the right time. We decided to transfer some of the ownership to an irrevocable trust.
“One of the issues small business owners face is paying capital gains taxes on the increased value of a company. Our approach is an example of how proper planning can alleviate some of those taxes.”
Dealing with family
Managing taxes and accounting issues can seem easy compared with discussing the future of the company with family members. Depending on family dynamics, it can be an emotional roller coaster. Considerable time is often required to work through existing personal and family concerns to arrive at a consensus regarding the future of the company.
“It isn’t a straightforward procedure,” said Aaron Ausen, vice president of Dalmaray Concrete Products in Janesville, Wis. “If there was a dummy’s guide to it, trust me, I’d buy it.”
Ausen is about halfway through developing a succession plan for three generations – his 90-year-old grandfather who still comes to work every day, his father, and Ausen and his two brothers.
“Human emotions are at play,” he said. “For example, how do you develop a safe exit strategy for your elders without making them feel like you are pushing them out the door? Negotiations are needed to determine when they will retire and how they will be taken care of without hurting the company.
“This can be tough. You are talking to the owners of the company, who are also your parents and grandparents, but you really must make your opinions heard to stay in control of your future.”
Wingert agrees. He said reading books, talking with experts and attending seminars is not the same as going through the process in person. Succession planning is a personal task. Knowing when your successor is ready to take on additional responsibilities is sometimes difficult to realize and even more difficult to acknowledge.
“I sometimes need to be prodded by other employees and my wife to turn over some of my responsibilities to Jesse,” Wingert admitted. “Listening to and following up on comments such as, ‘He already knows how to do it’ or ‘How do you expect him to learn it if you don’t let him do it?’ is important. Letting go of control is not easy.”
Succession planning can be complicated and expensive. If the succession plan involves selling the business to the next generation, fair value of the company and terms of purchase must be determined.
“My experience purchasing Concrete Sealants taught me that calling upon the advice of people who are familiar with the business is better than hiring outside consultants,” Wingert said. “Seek the advice of people who know you and know your business, such as your banker, an outside certified public accountant or your attorney, who can help establish a fair value for your business.”
There is no one-size-fits-all solution for strategic planning. Wieser recommends conducting in-depth research on succession planning strategies before getting started. Talk with different people – lawyers, accountants and peers – to see what advice they might have.
“Don’t make commitments to people before you know who is capable, willing, and deserving of running your company,” Wieser cautions. “Maintain that flexibility until you are sure. You need to be fair to family members, but fair doesn’t necessarily mean equal in all aspects.”
One of the most difficult aspects of the process is making an honest, unbiased appraisal of the talents of the next generation. Are there one or multiple potential successors?
“This is an exceptionally difficult decision when the succession plan involves a family-owned business,” adds Wingert. “Honestly, evaluating the skills of children can be a challenging process. Seek the advice of knowledgeable people who can assist in making objective evaluations of talent.”
Perhaps one of the greatest benefits of succession planning is the peace of mind felt once finished. Dalmaray Concrete Products is about halfway through its succession planning process. “It is gratifying that we are retaining our family ownership and staying true to our roots,” Ausen said.
Wieser agrees. Although Wieser Concrete’s planning process is in its early stages, Wieser said it is good now that they have started the steps to keep the company moving forward.
Finally, it is never too early to discuss succession planning and possible directions for the future.
“Don’t delay the conversation,” Ausen urged. “Life can be short. If something happens and you are not prepared, the future of the company, and everything you have worked for, could be at risk.”
Mark Crawford is a Madison, Wisconsin-based freelance writer who specializes in science, technology and manufacturing.