My brain has been wrapped around exit strategies this week, specifically the aspect of leaving a legacy and choosing your successors, thanks to some reporting I’ve been doing for the April issue of Landscape Management.
I side with the notion that the most reliable successor is family. Then again I’m a little biased.
My stepdad is the owner operator of a fourth-generation family farm. My brothers, who currently work in the operation, will be the fifth generation to inherit the business. Then there’s my nephew who is in line to be the sixth-generation proprietor, although he’s only 1 so he’s unable to put his John Hancock on anything.
That’s a lot of transition in ownership. I’ve never probed my family on how they achieve it, but the cover story from the November 2005 issue of LM gave me a little insight on how it can be done.
Titled “Moving on” by Peter Fretty, then a freelancer, the story centers on how to smoothly transition ownership to family successors.
“Anyone who starts a business has dreams of their children carrying it forward, but it is important you realize everyone has their own niche,” says Gordon Lohman, founder of Montague, Mich.-based Double L Enterprises. “If they have an interest, you want to be there to support them, but at no point do you want to force anyone into a role where they may not be comfortable.”
Lohman’s three sons did join his business. The gentlemen took the following measures to ensure the transition in ownership from father to sons was successful:
- Plan as early as possible—even if the plans are purely contingency plans;
- Put everything in writing;
- Seek outside input; and
- Follow through with your plan.
“You want the experience to be as pleasant as possible and the more time there is to discuss the transition and work out details, the smoother the actual transition will be,” said Kyle Lohman, one of the brothers. “The earlier you can jump on the process the better.”
Getting input from owners who also went through a transition was important because that shed light on potential problems that could arise so the Lohman’s could address them in advance.
The family prepared a formal, written plan for how the business would be ran five years out of Gordon Lohman’s exit from it. Those types of documents, Gordon Lohman said, “protect the business, which in turn protects all of the families relying on its success.”
Lastly, it’s key to give successors the empowerment to run the business. For the Lohman brothers this meant getting to know customers and employees as well as their father did. And for their father to gradually bow out of the business, this meant he had to respect the decisions his sons made.
“There were times we wanted to incorporate new methods and technologies our father had not planned on,” Kyle Lohman said. “Sometimes he knew they were mistakes, but he did not stop us because he wanted us to learn firsthand from the experience. Not only does this help you better learn the operations, it also helps keep the relationship moving positively.”
