April Scarlett (with contribution from Donna Gibson)

SO YOU WANT TO BUILD AN EMPIRE:CREATE A BUSINESSTHAT SERVESGENERATIONSTO COME

SO YOU WANT TO BUILD AN EMPIRE?

The spirited entrepreneur goes into business for many reasons. Perhaps it’s to be his or her own boss, spend more time with family, and create jobs for others, all while building personal wealth and giving back to their community. These are valid reasons for harnessing ambition and driving it into a successful new business.

For some however, there is a deeper calling, an ingrained desire to provide for loved ones for generations to come. Who wouldn’t want to be the one to pave a road easier traveled for children and grandchildren? Imagine the reward of knowing something you created will provide for your family long after you are gone.

SO YOU WANT TO BUILD AN EMPIRE?

DEFINITION:

fam·i·ly busi·ness/'fam(ә)le/ /'biznәs/

(n) a commercial organization in which decision-making is influenced by multiple generations of a family, related by blood or marriage, who are closely identified with the firm through leadership or ownership.

Take a look at one of the most successful and pioneering family businesses in the United States today, and you will see the absolute pinnacle of what patriarchs and matriarchs in business dream about. KOHLER was founded in 1873 by John Michael Kohler who made cast iron implements for farmers, and castings for furniture companies. Today, Kohler.Co has expanded globally, hosts a plethora of home interior and energy products, manages luxury locations and international clubs, harbors charity organizations that give back annually in the millions, and boasts $4.7 billion in annual revenue -- and continues to be led by family. In 2009, Michael Kohler’s great, great, GREAT grandson, David Kohler, took over as President and CEO.

There was a time in American history when sons were expected to step into the shoes of their fathers. Men took their grooming for the helm very seriously, shouldering great responsibility with pride. Think of S.C. Johnson, now Johnson & Johnson, founded in 1886. Or what about that Mars bar you just snacked on? Mars, now Mars, Inc. was founded in 1911 by Frank C. Mars, is still run by family and is set to do $27 billion this year in revenue. Companies were built with the intention of being passed down to generations. Other options weren’t even considered like they often are today. There was less drive to “be your own man” or to strive for “something else” to fuel an entrepreneurial spirit.

NUMBERS SPEAK TO FAMILIES

Despite entrepreneurial trends that have lead away from the family business, 35% of today’s Fortune 500 companies are family controlled, and according to the Conway Center for Family Business,keeping it all in the family has its benefits:

• Longevity: More than 30% of family businesses survive into the second generation, with 12% into the third, and 3% into the fourth and beyond.

• The tenure of leadership in a family enterprise is 4 to 5 times longer than their counterparts.

• The environment for innovation in family businesses improves when more generations are actively involved.

• Family businesses retain talent better than their competitors do with a 9% turnover rate annually versus an 11% turnover rate for non-family run businesses (Harvard Business Review).

• In the S&P 500 companies, ROI is greater in family businesses, with a 6.65% greater return than non-family firms.

5 KEYS TO A SUCCESSFUL FAMILY BUSINESS

A strong Succession Plan takes away uncertainty

Built-in Support systems offer structure no matter the business climate

Leadership Development over time ensures smooth transitions

Accountability shared by family members makes for more devoted employees

Strong family values carry over into a value-based working environment

1

2

3

4

5

As the above spreadsheet shows, there are many different types of family businesses. Long gone are the days of fathers strictly passing along their businesses to their sons. Daughters are CEO’s, CFO’s and lead shareholders. There are over a million husband and wife teams running businesses in the United States, some with children, and some without, and families are full of in-laws and cousins and nephews, expanding with different brands or on different lands.

(statisticbrain.com via Harvard Business Review, Cornell University, Conway Center—August 25, 2015)

Family Owned Business Statistics DataPercent of family owned businesses that remain in the family into the second generation 30%

Percent of family owned businesses that remain in the family into the third generation 12%

Percent of family owned businesses that remain in the family into the fourth generation 3%

Number of husband and wife teams running companies 1,200,000

Percent of family owned businesses led by a female CEO or President 24%

Percent of family owned businesses that have women in top management positions 60%

Percent of family owned businesses that indicated the next sucessor is a female 31.3%

Percent of Fortune 500 businesses that are family-controlled 35%

Percent of U.S. gross domestic product that family businesses account for 64%

Percent of the countries employment generated by family businesses 62%

Percent of all new jobs created by family businesses 78%

Average annual workforce turnover of family businesses 9%

Average annual workforve turnover of non-family businesses 11%

Average amount donated annually by a family run business $50,000

Percent of family firms that were controlled by supervisory or advisory boards 94%

Percent of family business owners that expect to retire by 2017 40.3%

Amount of family business owner net worth that will be transferred by 2040 $10.4 Trillion

Percent of those retiring who have not selected a successor 47%

Percent of family business owners who have no estate plan beyond a will 31.4%

DO THIS NOT THAT

Families are full of complexities. Mix those with the complications of business and the workplace and it’s a recipe for emotional and financial disaster. With guidelines in place, you can avoid common pitfalls families in business together face.

DO: Keep work at work and home at home. There’s nothing worse than spending an entire family meal arguing over who blew the account or got paid too little. DON’T: Let home stressors trigger politics at the office. Divorce, illness, arguments—they all happen. Create a policy that keeps them away from work.

DO: Act like a professional. Just because you were hired by your brother, doesn’t mean you get to slack off for a 3-hour lunch.DON’T: Create friction by assuming you get a pass just because you are family, or by letting family “slide” just because they’re related.

DO: Be guided by performance. Train family in all areas necessary so they will remain valuable to them-selves and to the business.DON’T: Make promises you can’t keep. Just because someone is family, doesn’t mean their spotis guaranteed.

DO: Be open to the ideas of younger generations.DON’T: Be blinded by tradition if it isn’t serving the needs of the business.

DO: Spell out all compensation, shares, dividends, in writing.DON’T: Get caught with non-working family members wondering where their piece of the pie is.

FAMILY SPOTLIGHT

Father & Son Team Allen and James Furrer are “One Notch above Awesome” with their Mr. Handyman Family Business

Continued on page 9...

James Furrer and his father, Allen Furrer, own three Mr. Handyman® franchises between them. This dynamic duo is the epitome of teamwork, drive and off-the-charts commitment. They know their plan. They follow the system. They reap the rewards.

When James Furrer agreed to interview for this article, who knew he’d be doing it from his car in the parking lot of a Cracker Barrel while his family dined inside? He, his wife, Sara, daughter Ava, and a group of 44 others were about to make their annual trek to Minnesota for an outdoor family vacation, and James wanted to make sure to touch base and complete it before he went “off the grid.”

FAMILY SPOTLIGHT

James won’t need to worry about Mr. Handyman while he’s away because he and his Dad have built a business together with an excellent team and dual leadership. They were awarded Rookie Franchisee of the Year their first year, as well as Fastest Growing Brand New Business. They have expanded to include Mr. Handyman locations in Indianapolis, Indiana, and in Fort Myers and Naples, Florida, with eyes on more opportunity – and they’ve done it all in 6 short years.

Working with family isn’t always easy, but the two appear to have it down to a science. “We’ve worked all of the kinks out,” James said. “We know each other’s strengths and weaknesses, know the in’s and out’s, and are able to speak candidly with each other.”

Allen Furrer added, “We might not always agree, but we know to shake it off and move on, because at the end of the day, one thing never changes and that is we are father and son.” James is the oldest of six children.

“He [James] shows up and suits up to win every day,” Allen said. James is based out of Indianapolis but also travels to Florida to meet with the team there. Allen does the same from Florida, travelling north. They share the same values and together are a family of faith, work, family and avocations. They all like to spend time outdoors, often on the farm in Indiana, enjoying the river, woods, and time together.

When Allen answered the phone for this interview and was asked how he was, he answered, “I’m one notch above awesome, thank you. How are you?” With the success he and James are sharing with their businesses and their families, I’d say that sounds just about right – maybe even two notches.

Continued from page 8...

AN ADDED FAMILY PERK: LOYALTY

As the research shows, one thing you are more likely to find in a family business is a lower turnover rate. What is the saying? Blood is thicker than water? Hopefully employees remain with companies because they enjoy their work, have a sense of fulfillment and are compensated for their value, but sometimes the reason is much simpler. You’re family. There is something to being loyal to a job or company simply because you are family.

Joel Worthington, President of Mr. Electric®, says loyalty is a characteristic with bigger returns than lower turnover rates.

“Everyone benefits from loyalty,” Worthington says. “Research shows that long-term commitments in relationships are directly tied to greater financial stability, higher levels of satisfaction, happiness and even health benefits. This also carries over to the workplace where those who stay with a company longer usually have higher compensation and find greater creativity and productivity in their work.”

Worthington adds, loyalty is a two-way street.

“As in most areas of life, what we give we get back,” he says. “By being loyal we find others more loyal to us. Knowing that someone else has your back relieves stress and brings greater contentment and peace. Life is much better when we don’t have to be suspicious of everyone. Even in times when we’re in ‘hostile territory,’ knowing that we have a safe haven of friends, or an organization in which we share mutual commitment, gives us strength and courage to meet the challenge head on.”

“Finally,” Worthington concludes, “Loyalty adds meaning to our lives because when possessing this attribute we know who were are and where we fit among those with whom we share loyalty. It gives us direction and spurs us to action. Living without meaning and purpose leads to unproductive, stressful and unhappy lives. Since loyalty has so much to offer, everyone should make it a priority to be known as loyal.”

HOW-TO CREATE A SUCCESSION PLAN

Often new business owners are so swept up in the concerns of getting their business started, that they don’t take the time to think about how the business will end. Exit strategy, or in the case of a family business, succession strategy, is as important as getting the business off the ground.

One: Determine the purpose of the plan. What roles will be in transition? What is the vision?

Two: Determine external factors that need to be considered. Will the marketplace be changing? Will you need to adapt new technology? Is there a new skillset needed that will play into the transition?

Three: Figure out the financials. Is someone buying the company? Are shares being dispersed? Where will the needed funds come from?

Four: Create a timeline. What development must take place before the transition?

Five: Do you know who the candidates are for succession? Is there only one or will more than one be applying for a position? (Example: Siblings, cousins, Aunt Linda)

Six: Line up the legalities. Meet with counsel to arrange legal paperwork.

Seven: Get the plan on paper. Once decisions are finalized and there is a plan in place, make sure there is an official copy with timeline and goals, and make sure everyone has a copy.

Eight: Implement a monitor of the plan to make sure it is followed.

WHAT’S YOUR VISION?

It’s interesting to think about John Michael Kohler back in the 19th century. On a single day, in the small town of Sheboygan, Wisconsin, he started making plows and farm equipment. Just how much of a visionary was he?

Is it possible that he could ever imagine what his company would become?

The plow led to his signature horse trough/hog scalder, and that led to the invention of a footed bath tub, and that would change his business, his life and the lives of his family for decades to come. Now a great, great, great grandson who he never met, operates the family business on three continents that he never visited, with products he never dreamed of. Because of John Michael Kohler, five generations later, his business is still providing a future for his family.

What’s your vision? How will what you do today, in the town where you live, create a future for the next generations in your family?