From left: Evan Jones, parents Carla and Bob Jones, and Lauren Kirchner (L), Dr. Charlie Hall’s EAGL program helped this brother-sister duo look at themselves as business partners rather than just brother and sister. (R) | Spring Creek Growers, Texas Farm Bureau, and Nathan Lindstrom Photography
It takes real soul searching and preparation to know when to hang your shingle and start a business. It takes that same type of preparation to know when to take that shingle down. Or in this case, transfer it to the next generation.
Some business owners can’t even think about “ending” a 40-plus-year career that has truly been their lives. If you’re one of those baby boomer-owned businesses lucky enough to have a plan, you can rest easy. But you certainly are not in the majority.
PivotPoint Business Solutions recently surveyed business owners in the horticulture industry with two major topics in mind: the state of business owners’ readiness to exit or pass on their business; and how to transition out of the business with no regrets.
The survey results show that, among 138 respondents, only 4% feel prepared to exit their business; 22% have started considering exit; and 58% have initiated conversations with family, management, and trusted advisors about their exit strategy.
With these kinds of numbers, Lauren Kirchner and her family’s success story might give you some things to consider.
At the age of 18, Lauren Kirchner, now President of Spring Creek Growers in Waller, TX, thought going to “a nice, shiny university” was going to put her in a Goldman Sachs-type of corporate office, wheeling and dealing as she climbed that coveted corporate ladder.
“My degree was in marketing and finance, and I never in a million years thought this [running the family business] was a career option for me,” says Kirchner. “I never saw myself working as hard as I saw my dad work.”
After graduating college, Kirchner spent a year at a corporate marketing firm in Houston.
“I was in a cube on a top floor overlooking a bunch of pavement, and I was just really unsatisfied with that whole experience. At the same time, I could see my dad delivering those plugs, taking those orders, and risking his life with a truck and a trailer on I-10 in Houston,” she says.
So, one year later, this Baylor University grad’s career took a much different, dramatically better direction when she returned to her roots at her family’s Christmas tree farm. And she never looked back. But like most generational business transfers, it has been a slow process.
You Are More Than ‘The Business’
In Kirchner’s experience, family business owners can be really opinionated and emotional when it comes to thinking about handing over the business. After all, through years of sacrifice, the business has come to define who they are. And that understanding is key to moving forward.
“Whether it’s time away from your kids, late nights, or time away from family dinners, there’s a lot of sacrifice,” Kirchner says. “Plus the financial end of it. You’re putting your own dollars into something to create it from nothing. So, it’s easy to understand why people feel defined by their business,” she explains.
Kirchner emphasizes that you have to be honest with yourself. It is important to understand the implications of what running the business means to other family members and the staff. During the planning phase, it’s best if the family agrees on what is best for everyone.
“That part took probably a year to work through,” Kirchner says. “It was a lot of challenging, forward-thinking. Topics like, what do we really want, and do we want to stay in the business until we’re 65? It’s hard, especially when things happen that are out of your control,” she says.
Look Outside Your Family for Advice
Kirchner and her brother Evan — who also took a year away from the family business, giving him a broader, outside perspective — took an Executive Academy for Growth & Leadership (EAGL) course — Out of the Classroom — from Dr. Charlie Hall, Texas A&M University professor. According to its website, the EAGL program is an executive ‘mini-MBA’ curriculum designed specifically for leaders in the nursery and greenhouse industry to help them with their competitive positioning and profitability. The course is customized to the needs of individual participants.
“The course definitely played a role in terms of how my brother and I were able to look at ourselves as business partners and a brother-sister team instead of just brother-sister,” says Kirchner.
“Probably one of the more stressful moments was doing the capstone presentation in which we brought, you know, the nitty-gritty of our business in front of our classmates and to some business experts that we did not know,” Kirchner explains. “I remember going through that and thinking, ‘Oh my gosh, are we even going to get through this?’ We were both insanely nervous. But we did. And it was such an amazing experience for Evan and me to be able to understand each other a little bit more deeply on a business level.”
PivotPoint advises that when you are ready to step back from the business, one thing to consider is your “Freedom Point” — that point when exiting your business gives you enough financial resources to do whatever you want. Their study results indicate that 54% of respondents do not have a formal estimate of value or business valuation.
To determine your Freedom Point, you need to understand:
- What your business is worth today.
- How much you need financially to live comfortably after you leave your business.
- The gap between your business’ current value and the amount you need for your future lifestyle.
Defining Ownership Versus Management
The family took advice from their business planner, Jared Byas of Common Good Family Business Advisors, who guided them through the process of outlining how their parents wanted to stairstep their exit, from the perspectives of both ownership and operational management.
Kirchner explains, “For example, my father took on an advisory role where he has just a few hours a month dedicated to meeting with us on operational issues and financial reviews. That satisfies his need for retirement but still provides a safe space for us to ask questions and maintain the operational integrity of the business without missing a beat.”
The Five-Year Plan
“The annual stairstep of my parents decreasing and my brother and I increasing each year over the next five years allows us to get a bit of training on how to be business owners instead of employees,” Kirchner says. “We’re learning things like tax liability, so the stairstep approach has been healthy for us all to understand our new roles and be good stewards to our employees by providing solid stability.”
Ultimately, it’s your choice when and how you choose to take down or transfer your shingle. With a little preparation, it can be just as rewarding as the day you hung it.
