The first paragraph of the September 2015 article on succession planning for family-owned businesses in Entrepreneur Magazine sounded the warning: “More than 50 percent of all small-business owners are 50 or older, according to the U.S. Small Business Administration. That means many of America’s 28 million small business owners are coming to that point in their lives when they need to think about a transition for businesses.”
As AEDC staff has visited companies throughout Allentown’s Enterprise Zone, we continually hear about companies that are in various stages of transition between generations of leadership. With this in mind we decided to profile two Allentown companies, as case studies, that have been working through the process of succession planning. Both companies were in agreement on two key points: start planning early, and get professional guidance from experts with experience in this area.
- Buddy Lesavoy of Lesavoy Butz & Seitz, LLC
- Stephanie Olexa of Lead to the Future
- William C. Fritz of DGK Group, P.C.
Here are the stories of Protective Coatings, Inc. and King Coatings LLC and their journey of planning the succession of their businesses:
Protective Coating Co.
When second-generation owner Steve Long decided it was time to start planning his retirement in 2012, he already knew the family-owned business would be passed to his son Scott Long, now CEO, and daughter Cyndi Roberts, CFO. He’d been gradually gifting both of them shares of the company over the past few years. But he knew that wouldn’t be enough legally to make the company truly theirs upon his retirement.
Protective Coating Co. was started by Steve’s father in 1954 to make a two-part epoxy paste that binds surfaces together without dripping. “We always knew we wanted it to remain a family business and that my brother and I as the third generation would take over,” said Cyndi Roberts.
Steve actually started the succession planning process in 2010 by hiring a business consultant to help get him thinking about how it would happen. Next they brought their lawyer and accountant into the mix for their professional advice on legal, financial, and tax issues.
“It’s important to start the process early so you have plenty of time to get all the pieces in place without being rushed,” said Roberts. “You can’t push it off or table it because it won’t go away. And expect it to be an ongoing process; you can’t really just stop planning once you start.”
Her advice to other family-owned businesses getting ready to start the succession planning process: “Get professional advice. You need outside help beyond your own family and staff. And meet with those professionals yearly to review how things are going. Also, look into all of your options regarding taxes, company structure, and life insurance before making a decision.”
King Coatings LLC
When Jaryd Karpyn selected Bloomsburg University a few years ago for his undergraduate college education, he already knew what his course of study would be – a major in business economics with a minor in accounting. Why did he know this? Because even at age 18 he knew he wanted to work for the company his father had started, King Coatings, and some day take it over when his dad retired.
“I knew I’d have to learn about business and finances in college in order to apply it to our family business one day,” said Karpyn.
Kings Coatings produces a powder coating product used on metal surfaces such as a cars, fencing, gates, and patio furniture. It also does specialty metal fabrication and machining.
The family started by consulting with a business lawyer who gave them advice on their options which resulted in Jaryd being added to the business as a co-owner. They next worked with an accountant to determine if they needed to restructure the business for tax purposes. They ultimately decided to leave the existing limited liability company (LLC) structure in place.
“The entire process took about four years, but the majority of the work was done in about six months once all of the groundwork had been completed,” Karpyn explained.
And while Jaryd’s father is not yet ready to retire, everything is now in place with the business for him to do so when he’s ready.
As for what advice he’d offer another small business going through the succession process: “Have the discussions with your family members early. Be clear, open and proactive. Once you put the wheels in motion, be sure to stay on top of it. Expect the process to take a while; you can’t rush it so just be patient. And consider hiring a business appraiser to help you understand the full scope of your company’s value.”