Operations

Handing Over The Reins To Reign

Jim Luff
Posted on July 8, 2012
Georgieanna and Brion Svenson Sr., owners of Four Star Limousines in Salisbury, N.H., are making sure that 20-year-old Brion Svenson Jr. works in every part of the company, observes and understands how and why business decisions are made, and most importantly, earns his respect before he some day runs the family business. Since the couple is in their 40s, they have no plans to retire soon, allowing plenty of time to cultivate their son’s leadership skills.

Georgieanna and Brion Svenson Sr., owners of Four Star Limousines in Salisbury, N.H., are making sure that 20-year-old Brion Svenson Jr. works in every part of the company, observes and understands how and why business decisions are made, and most importantly, earns his respect before he some day runs the family business. Since the couple is in their 40s, they have no plans to retire soon, allowing plenty of time to cultivate their son’s leadership skills.

Georgieanna and Brion Svenson Sr., owners of Four Star Limousines in Salisbury, N.H., are making sure that 20-year-old Brion Svenson Jr. works in every part of the company, observes and understands how and why business decisions are made, and most importantly, earns his respect before he some day runs the family business. Since the couple is in their 40s, they have no plans to retire soon, allowing plenty of time to cultivate their son’s leadership skills.
Georgieanna and Brion Svenson Sr., owners of Four Star Limousines in Salisbury, N.H., are making sure that 20-year-old Brion Svenson Jr. works in every part of the company, observes and understands how and why business decisions are made, and most importantly, earns his respect before he some day runs the family business. Since the couple is in their 40s, they have no plans to retire soon, allowing plenty of time to cultivate their son’s leadership skills.

The All-American dream for many of us is to start our own successful business. We dream of one that will make us rich and provide well for future generations of our family.

For those who succeed and pass the business down through multiple generations, careful planning of the hand-off from one generation to the next must take place. While it may seem natural to hand it off to the oldest child when the time comes, the oldest child may not be the best choice or may not even want the business, says David K. Nicholas, a CPA with more than 30 years of experience specializing in emotional and financial issues of family owned and managed businesses. Nicholas is a registered representative of Transamerica Financial Advisors, Inc. and founder of Stewardship Advisors LLC. He has assisted multiple generations in succession planning and execution of equity transfers. Nicholas advises on financial investments, management and tax law matters.

The test drive
Before you bequeath the business in your mind to anyone, it might be a good idea to have them work in the business. The assumed heir to the throne just might decide against inheriting it after trying it out. Or you may discover the business philosophies of your offspring vary greatly from yours, and you want to preserve a certain management style or company image. Once the company is handed over, these philosophical differences can cause deep wounds that can destroy a family, Nicholas says. If you decide to bring your children into the business, they should learn all aspects of it. This will allow you to see the areas where they excel and where they may need additional guidance during the transition period.

From experience
All of our boys have worked in the business at various times in their lives. It allowed me to see who had what it might take if the business was ever handed down to them. It was an enlightening experience. We operate a valet parking service as an extension of the limousine business. Every kid worked in valet even before receiving a license. They were old enough to write the license plates on the claim-checks, catch doors for arriving guests, and begin learning the art of the luxury service industry. I quickly learned my oldest son was not the one. He was fine at driving cars but did not enjoy talking to people. He had no desire to be a leader. He just wanted to get the job done and then go home. This made for a great custodian of our building and grounds for many years.

The middle son always has a big grin and knew how to work that tip. He didn’t want to be a boss either, but it was evident that he wanted things run properly and by the book. He left and served his country for four years, and when he returned, he was even more “by-the-book” than ever. Today he is my trainer for all new chauffeurs.  

The youngest son has all the personality of the middle one. He has the charm, the proper compliments at just the right time, and his little heart is burning to take over. He truly believes if things were done his way, the company would triple in size in a year. He has the zeal, but at the age of 27, he needs a few more years to calm down. I did, however, discover that he has excellent selling skills. His philosophy clearly differs from mine in closing a sale. I nearly fell out of my chair one day as he provided the phone number of a competitor to a client and told them they had the best deal in town. . . if they were looking for a budget-type limo. After describing the possible scenarios of using an older limo, I proudly watched him take the deposit. He could very well be the heir apparent.

Start them young
If you have clearly decided to pass on the business to your offspring, you might as well get them started in the business as soon as they are old enough to perform a job function. They just might be detailing cars before they are actually old enough to drive them. Brion and Georgeieanna Svenson of Salisbury, N.H. started Four Star Limousine in 1993. Their son, Brion Jr. was one year old. He is now 20 and poised to take over the business in the future and keep it going. Four Star operates a fleet of nine vehicles in the Massachusetts, New Hampshire and Maine regions with an emphasis on the Seacoast area. Brion and Georgieanna are in their 40s, so retirement is not on the horizon. The Svensons don’t have a firm plan in writing yet but realize the importance of having structure and are working on a written plan.

When the business was started, there was no plan to keep it in the family. It was simply a way to make a living for the short term. Nicholas has a firm belief that every business should be started with the intention of selling it. But, “it is the equity you build in the business over years of nurturing that makes it more valuable when the time comes to sell,” he says.

Speaking of nurturing, Brion Jr. is included in business discussions, although he does not actively participate in decisions. Brion Sr. believes it is important for him to learn the reasoning behind business decisions and learn why things are done a certain way. This provides a platform for decision making in the future. The growth plan includes learning to clean cars, dispatching, taking reservations, making schedules, and routing so he is thoroughly versed in all operations.

“I think earning respect is the first place he has to start,” Brion Sr. says about earning the company. “The ONLY way to understand what we do and why we do it is to do it himself. You can’t run a company if you can’t do everything necessary to run the company.”

Los Angeles operator and NLA board director Ron Stein has taught his son, Brandan, the importance of distinguishing between solid family values and business plans. Brandan is ready to lead the company when the time comes.
Los Angeles operator and NLA board director Ron Stein has taught his son, Brandan, the importance of distinguishing between solid family values and business plans. Brandan is ready to lead the company when the time comes.

The Stein theory
Perhaps the most well known father-son team in the industry is National Limousine Association board director Ron Stein and his son, Brandan. Ron is the CEO and Brandan is the COO of Exclusive Sedan Service Worldwide of North Hollywood, CA. The company is a 2007 LCT Operator of the Year Award winner.

Ron Stein believes that family values always should precede business plans. This is a sentiment also stated by Nicholas in addressing the two. “There are business matters and there are family matters, and the two should always remain separate and distinct,” Nicholas says. Brandan is an only child, so fortunately there aren’t many different opinions to share.  

Brandan joined the business at the age of 17. In his third year with the company, it was apparent to Ron that Brandan had the passion, desire and drive to move the business into a new dimension and eventually take over. The succession plan calls for a role reversal in the future to allow Ron a little more free time while still being involved in the operations. This is a method strongly recommended by Nicholas for a variety of reasons.

Like Brion Sr., Ron made Brandan prove himself and earn respect from his co-workers. Ron believes that Brandan accomplished earning employee respect, except among the few who never want someone younger to be their boss. Brandan recalls the days that he worked as hard as he could to earn that respect. He said he was concentrating on the vision and not a job title. Brandan recommends that newbies who take over the reins from their parents “focus on the vision and don’t let people get you down just because no one likes change.”

Financial matters
As to the actual transfer of the business equity, there are many methods to accomplish that, Nicholas says. Some common methods include providing a certain percentage of equity transferred for each year of service. Another method is to pay the exiting parents a monthly installment until a certain amount is paid or the parents pass on.
During the transition period, the successor should be compensated for his or her management participation but not necessarily be made a financial partner until the actual transition occurs, Nicholas advises. His strongest advice is to never surrender ownership until you are absolutely sure of your decision and to make sure family harmony is paramount to business decisions.

“Avoid entitlement programs and make the successor prove competence,” Nicholas says. Brion Sr. echoes that: “Junior will have to earn everything he gets from this company.” Brandan adds that he and Ron try to limit business discussions to business time or time away from their wives to keep business and family matters separate. While the Steins have no current plan for transferring equity, Ron considers Brandan’s time managing the company as his investment to inherit the company. While Ron and Brandan avoid talking business during family time, Ron includes his wife Jackie in periodic reviews and changes to the written succession plan. They take ever-changing tax laws into account when making their decisions.

Keeping it real
No two people are going to manage the exact same way. Brion Sr. expects his son to do things his own way when he takes over. Nicholas, the Steins and the Svensons all agree that there are business systems and there are family systems, and it is important to keep family emotions out of business decisions. As far as picking a successor, if there are multiple choices, Nicholas recommends forming a board of directors consisting of family members, financial and legal advisors, long term employees, and others you value for their business skills. Let them make an independent decision as to who the successor of the company should be. Nicholas also believes that the adult brain is not fully developed until the age of 30.

“While in some rare cases you might trust someone under the age of 30 to take over the business, as a general rule, you should not consider someone under the age of 30,” he says. Nicholas also says that there are operational and financial decisions to be made. Decisions always should remain separate and never be made based on emotions.

Additional reading
Nicholas and Ron Stein recommend learning more about succession planning by reading a book called, Family Business Succession: The Final Test of Greatness from Family Enterprise Publisher (www.efamilybusiness.com, $23).

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Related Topics: business management, family businesses, leadership, succession

Jim Luff Contributing Editor
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