In our last On Your Mind we asked builders in their prime where the next generation of their companies would come from. That question led inevitably to another: How are the owners of mature companies planning for transition to the next generation of leadership? After decades of work growing and tending a business, how does one best harvest the fruit of that labor? Builders with a son or daughter in the business have a built-in motivation to plan for transition. Those without kin to consider face a different set of options. Prime the business for sale and hope to leave with a tidy retirement nest egg? Groom a management team and back away slowly while continuing to share in the profits? Each path leads to a further round of questions. The builders we spoke with, another group of successful business owners in their 50s, are beginning to address those questions, each in his own way.
Telluride, Colo., custom builder Richard Wodehouse is just cracking the book on succession planning, and coming to terms with the difficulty of selling a business like his on the open market. Much of the worth of a custom building company is bound up in its reputation, Wodehouse says. “And it seems that the reputation, to some degree, rides with the person.” Like most custom builders, Wodehouse is the public face of his company. When his clients tell their friends who built their house, “I don’t think they think of the name of the company as much as they talk of the person.” The salability of a company grows “when you have some systems that run the company so that anyone can fit in,” Wodehouse says, and he is directing his efforts to that end. But he is not waiting for a white knight to finance his retirement. “My thought is that the best thing to do is to sell it to the employees, to develop someone younger who is a key employee to take it over.” Wodehouse has just begun to discuss an eventual transition with his staff and is keeping his options open, but the terrain ahead has begun to reveal itself.
Any number of things can prompt a business owner to address transition planning, says Steve Malcolm, a custom builder in Boothbay, Maine. “For me it was my kids.” Malcolm started a family late in life—his two sons are 5 and 7—and at 52 he’s not holding his breath to find out which one wants to take over the reins. “I’ve got to start thinking about what happens when I’m 60 or 62. How am I going to get rid of this business if I want to in 10 years?” His employees are on his mind too. The young people who started out with him a decade ago have matured along with the company, and their priorities have changed. “They have families, they need security, and that means more responsibility on my end.” With the help of a management consultant, Malcolm has come to the same conclusion as Wodehouse: Systems are the solution. As the business stands today, he says, “A lot of it centers around me, and if I’m not around, what is there to attract a buyer? I need to put systems in place so someone can do my job. I have to make it more of a business.”
