TOUGH CALL: Future Shock
Your retirement is three years away, and you’re torn about what to do with the company you’ve built.
How time flies when you’re having fun. Realistically, the word “fun” may not accurately describe the past 35 years of growing and building a LBM supply company. But you’ve worked hard to do right by your customers and your market, offering (and standing behind) quality products. You couldn’t be more proud of the company you’ve built, and a great team of people who’ve been right there by your side. Driving to work each day, you see housing developments that were once empty fields, and know that many of those homes were built with materials from your store.
You’ve ridden the housing cycle roller coaster more times than you can count and, after the last especially brutal ride, you’ve decided that it’s time to retire.
With several family members directly involved in the business, along with a team of seasoned, dedicated non-family associates, you always thought that your transition from day-to-day operations would somehow take care of itself. You were wrong.
In fact, as you get deeper into the process, the outcome is getting murkier, instead of clearer. Here are the players and the situations:
• You always assumed that your oldest child, Bob Jr., would pick up where you left off. He’s doing a solid job as assistant manager. However, you have serious doubts about him at the helm of the company you built. He seems determined to make significant changes to the company’s operations, to “make his mark.” You understand this, to a point, but don’t believe in change unless it makes sense.
• Bob Jr.’s little sister, Susan, is just the opposite. Currently in outside sales, she has turned out to have the business savvy, enthusiasm and people skills that would make a great leader. She has the right stuff, but you believe she needs a few more years of experience before she’d be ready — not to mention what moving her ahead of her brother would do to your family dynamic.
• Your longest-term employee, Max, has been through it all with you. Currently serving as your GM, he understands the business nearly as well as you. He and the rest of your team have suggested using an employee stock ownership plan (ESOP) to buy the company.
• The other option is to sell to the company in the next town over. They’ve expressed interest in paying cash for the company, and they’ve assured you that they’d take care of your people. While the cash is appealing, you’re having a hard time putting that ahead of your kids, Max, and the rest of your crew.
You’d like to retire in three years, so you still have some time to sort this out. But time seems to be flying by faster than ever, so it’s time to make some decisions.
What would you do?
Family first: Structure it so that Bob Jr. and Susan have the opportunity for equal ownership. And have open discussions with them to determine their roles.
ESOP: Max and the rest of your team have gotten you where you are today. The question is: What role, if any, would there be for Bob Jr. and Susan?
Cash out: You’ve invested years of your life building this business. It’s time to cash out—provided the acquiring company agrees to take care of your kids and your staff.
Combination: The best solution may be to combine elements of the other choices, with partial ownership going to Bob Jr. and Susan, Max and the team, and possibly the company in the next town.