Malcolm employs some 40 people in four separate operations: design, building, illwork, and painting. That represents quite an accomplishment for a guy who claims never to have fully embraced the role of businessman. But when he finally called in a consultant to assess his company’s structure and practices, the writing was on the wall. The consultant canvassed the employees about the company’s strengths and weaknesses, Malcolm remembers. “To a man, they all said, ‘Malcolm can’t do it all any more.’” The consultant’s first prescription came in the form of a motto: “Keep pushing things down.” Since then, Malcolm has tightened up his staff’s job descriptions, delegated more responsibility, and built in greater accountability at every level. All of these changes will make it easier for him to someday pass the baton, either to his employees or to an outside buyer. “I have to let a bunch of things go, and it’s really hard to do that,” Malcolm says. “But that’s going to allow me to live a little better life.” In the meantime, he is enjoying some unexpected benefits. “There is a certain level of crisis management that has subsided. This was the first week that I didn’t come in at 6:30. I stayed home, got the kids off to school, and came in at 7:30.”
Andrew Goldstein and Charles Barry have already received two of what Goldstein calls “credible offers” to buy their Boston-area custom building business. Both times the price was right—“If our only concern was taking care of ourselves, that would have done it,” Goldstein says—but they were not yet ready to turn over the keys. The experience was flattering, but more importantly, “It really forces you to think about [succession].” Having turned down the golden parachutes, the partners decided to engage their employees in planning for succession, whatever form that might ultimately take. “We’ve set up a steering committee of six or seven employees who have been here 10 years or more,” Goldstein says. They also hired a business manager with an MBA from MIT to take over some of the responsibilities the partners have borne for the past 25 years. “The idea is to start grooming some people so if it comes to that, the people who run the company could step aside. We basically have three options: Sell, sell to the employees, or continue the company. In each of those scenarios we need that team in place.”
Andy Beck is farther down the road of succession planning. With the help of a business consultant, he laid out a five-year plan that would structure his company for an eventual succession of management—and, later, ownership—to a few key employees. Now beginning its third year, the plan includes transferring some equity to those employees while Beck continues to run the business and maintain controlling interest. When Beck decides to retire, that equity will provide leverage for the employees to gradually buy out his share of the company. Preparations for the succession, which has no definite timetable, have included financial planning, a business valuation, buy-sell agreements, non-compete agreements, and other complexities, but Beck states his goals simply. “What you’re trying to do is build wealth and create an income stream.” All the planning serves “to protect you and empower them as you’re on the way out.”
Having worked through the process, Beck offers some advice to other custom builders who would like to smooth the path from owner-operator to some other role. First, he says, “It’s probably a good idea to be thinking about it sooner rather than later. By the time you’re burned out it’s the wrong time to be thinking about selling your company.” He also notes that planning for succession can yield benefits long before succession begins, by showing employees the stakes they share in its outcome. “Any time that you get people to have a say in and an understanding of how things work, the better off you’re going to be.” The process can be tedious and time consuming, but ultimately, Beck insists, “It’s kind of liberating.” And it only takes a couple of phone calls to get the ball rolling. “There are plenty of people out there to help, you just have to have the vision to understand, eventually you’re going to be done working.”
Will your company survive your retirement? Tell the editors of CUSTOM HOME what’s on your mind. Send your comments and questions to Bruce Snider at bsnider@hanleywood.com.
