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Successful Successions

Jan. 1, 2013
Small business owners often don't know when and how to develop a succession plan that can protect and perpetuate their family business -- Electrical Wholesaling classic content on one of the biggest challenges for business owners in the electrical market.

When you really want to feel the pulse of a family-owned business, ask the owner about his or her succession plan. In a perfect world, all business owners will have a plan developed by a specialist in succession planning and vetted by their company lawyer, outside accountant, board of directors, and, in the case of independent manufacturers' reps, their key vendors.

Sterling succession plans have a successor in place no less than five years before the owner drives off into the sunset. And there are no surprises for employees, because they will have seen a written summary of how the role of the successor, business owner, other key family members and key management executives will evolve over time.

Unfortunately, that's not what always happens with privately owned businesses in the electrical wholesaling industry, particularly those with what may be the emotionally charged atmosphere of a family business with sibling rivalries, crazy relatives with a partial share of the company, divorces and other icky situations.

To be sure, there are plenty of family-owned companies in the electrical industry that have successfully navigated transitions, including the Coisnes of Sonepar, Isenbergs of Western Extralite (now part of Border States), Adams' of Electric Supply of Tampa (now part of World Electric Supply/Sonepar), Blazers of Blazer Electric Supply and Bellwoars of Colonial Electric Supply. With reps, many admire the transitions engineered at Gorin-Hopper-McCoy, Ewing-Foley and John Moore & Associates.

But the electrical wholesaling industry has seen plenty of company transitions blow up because of a bad succession planning. Following are the biggest problems that I have seen distributors and reps have with succession plans over the years.

Bad health and poor planning

You have probably heard the horror stories of business owners without succession plans who died of heart attacks on the golf course and left their companies in turmoil, or of cases where a business owner was incapacitated by a stroke or other health issue before they had appointed a successor.

Not quite the patriarch (or matriarch)

This may be one of the most common challenges for business owners: What do you do when your son or daughter doesn't have the fire in the belly — the “it” factor of entrepreneurship that makes successful entrepreneurs out-hustle, out-think and out-sell any challenge or any competitor?

Entitlement

More common are the situations where the sons or daughters of the owner have a bad case of what succession planning consultants call “affluenza,” where the sons or daughters of the boss believe they are entitled to fast track to the corner office and a lush lifestyle just because they are members of the lucky sperm club.

Communication breakdown

It's important for all companies to keep everyone in the loop on their succession plans, but independent manufacturers' reps sometimes forget to tell their key vendors who they plan to name as a successor. That can be devastating when you are on a 30-day contract with a manufacturer who accounts for 20% or more of your business.

Divorce

Divorces tear apart the fabric of a family, and they can inflict mortal damage on a company whose owner hasn't legally protected his or her share of the business.

Sibling rivalry

It gets ugly real fast when the competition between brothers and sisters gets played out on the public stage of the family business. No one wins — employees take sides, the gossip machine works overtime, and all family members involved come out looking weaker.

Grudge matches

Family feuds can last for decades, and when they involve a family member who owns a piece of the business, that person can, out of spite, derail efforts to sell the company, make strategic investments or otherwise impede progress.

A well-engineered succession plan can defuse most of these issues.

About the Author

Jim Lucy | Editor-in-Chief of Electrical Wholesaling and Electrical Marketing

Jim Lucy has been wandering through the electrical market for more than 40 years, most of the time as an editor for Electrical Wholesaling and Electrical Marketing newsletter, and as a contributing writer for EC&M magazine During that time he and the editorial team for the publications have won numerous national awards for their coverage of the electrical business. He showed an early interest in electricity, when as a youth he had an idea for a hot dog cooker. Unfortunately, the first crude prototype malfunctioned and the arc nearly blew him out of his parents' basement.

Before becoming an editor for Electrical Wholesaling  and Electrical Marketing, he earned a BA degree in journalism and a MA in communications from Glassboro State College, Glassboro, NJ., which is formerly best known as the site of the 1967 summit meeting between President Lyndon Johnson and Russian Premier Aleksei Nikolayevich Kosygin, and now best known as the New Jersey state college that changed its name in 1992 to Rowan University because of a generous $100 million donation by N.J. zillionaire industrialist Henry Rowan. Jim is a Brooklyn-born Jersey Guy happily transplanted with his wife and three sons in the fertile plains of Kansas for the past 30 years. 

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