Family-Owned Businesses

By Lisa Karam Middleton

Joe's uneasy these days. In his early 30s, he's got a secure job and is looking to move from a condo to a house. No wife. No kids. Plenty of "toys." But there's a decided hesitation, an uneasiness maybe, when he talks about his future. What's eating him?

For the past ten years, Joe has worked side by side with his father in a successful lube shop, purchased as an established business. Profits were in place from the get-go, and through personal and consistent customer service, they have risen to a comfortable level where both Joe and his father are financially secure.

The problem? There are no apparent plans for passing on the business in the event of retirement or death. There's an estate to consider, and siblings who are not involved in the business, and there's a stepmother.

Questions from Joe regarding the future of the business are met with a response of "don't worry about it" from his dad. But when your future lies within the heart of a family-owned business, it's only natural want to know. You see, in this family, talking about money was just not done.

But Joe's not a little boy any more, and he wants to know the financial particulars.

While there are distinct advantages to working side by side in a family business, it's easy to carry old habits or resentments into the workplace. For spouses, too much togetherness can be unnerving. For those working in a family-run business, there are pitfalls, but it's a very effective way to assure continuity for several reasons.

Signs and Things

Signs and Things of Naples is owned by Mike Boyd and Doug Rondeau, and for the past four years they have been joined by their wives, Linda Boyd and Nancy Kingsbury. Mike, who is president, lists the advantages of working with his family as "having a reliable, stable and honest workforce." Other staff includes Mike's mother, Madeline and his brother, Gary.

The company was started in 1978 by Mike and Doug, entrepreneur types who came from Michigan. Enticed by the weather, they settled in Naples and have seen their business grow along with the population surge. Duties are clearly defined at Signs and Things. Linda works on payroll and bookkeeping, while Nancy works in reception and tracks inventory. Mike and Doug handle sales for the company.

There are drawbacks to this situation, and Mike knows it.

"The drawbacks are just being around each other so much. You just have to deal with it." He also admits that it might be easy to have higher expectations--and not as much patienceÑas you would have with others.

Overall the business is doing well. Plans for the future are simply to keep up with growth. Not surprising, Mike says that staying abreast of permitting regulations, insurance, and worker's compensation has become an arduous task. Plans for the future do not include a method for succession. But they have begun to think about it and eventually hope to implement such a plan.

Dean Steel

Robert Dean started Dean Steel in 1958. Today retired, he continues his involvement on a part-time basis as his son Charles runs the company. Karen Dean, Charles' wife, and their four daughters as well as two sons-in-law are also employed in the business.

Charles began working at the company shortly after college--a planned move--around 1969. Karen expanded her minor involvement when she came on board in 1992 and today oversees accounting. Daughters Nan Dean is an engineer; Jeanie Richards is in charge of human resources for the company's 90 to 100 employees; and Charlotte Edwards works in the engineering department, too. Another daughter, Julie Fisher, oversees payroll from Georgia while her husband, Ken, heads up the manufacturing functions there. A second son-in-law, Jeff Richards is the Fort Myers district sales manager.

The Dean daughters, who all attended the University of Florida, were encouraged to become active in the business. Charles had "always wanted them involved," says Karen and helped transition the girls by having them work summers during college.

The expansion into Georgia has been planned for two-and-a-half years. With 25 to 30 employees there, the company's focus is to grow that market. For the Fort Myers plant, "territory is limited," says Karen, being bound on one side strictly by water. In Georgia the territory is "quite a bit more expanded."

Though it may at first sound like a round of "who's on first," having family members spread throughout the company with varied responsibilities has worked well. "Everybody is working for the same goals. They're all directed in the same way."

Karen agrees that having an honest, reliable--and committed--workforce is a definite advantage and adds, "I haven't seen any real disadvantage. Maybe more so for the employees. It may be difficult for employees to work for a family business."

A combination of business plans was put in place around three years ago with input from the family, the accountant, bankers and attorneys. Placing family members in key positions throughout the operation allows the company to center itself for the growth it anticipates through its expansion plans.

Pass It On

Businesses need a business plan, and family businesses need a succession plan. It's that simple. It might be a hard subject to broach, but it's essential if the business is to survive for the next generation. There are financial implications involved in passing on a business, which can be complicated if there is no clear way to do so.

If there are several siblings who are all working in the business or if there is just one, this will help eliminate infighting between the heirs or at least pave the way for a smooth succession. Consider Joe's dilemma. The frustration of not knowing how succession will occur can impact day-to-day performance and foster resentment for not being included in the planning process of what is inarguably an eventuality. And there are other children in the family who may clamor for a piece of that business.

In Joe's case, personal frustration can fester if not checked. And often it is family with whom it may easier to vent upon than to a non-related business partner.

There are ways of diluting interest in a corporation before someone steps down.

Transferring stock in modest increments may help avoid inheritance taxes. A clearly executed will makes the transfer of power clear and concise. Key-man insurance should be considered. Navigating a business through probate can be a horrendous experience and take away much needed attention at a time when the business needs it the most. If a family member passes on, as Joe says, someone still needs to open the shop the next day. While this may be a slight exaggeration, it's best to consult your lawyer and accountant to define best-advantage options.

Making it Work

While there are obvious plusses to a family-own