Passing the torch

Succession planning looks different for everyone

For any business owner, it can be daunting to decide what to do with your company when it comes time to step back.

For some, their companies have been the family business for generations and will remain so. For others, selling the company to a trusted employee or another company may be the way to go when it comes time to retire.

According to a 2021 survey conducted by the Society for Human Resource Management, 21% of respondents said their organizations had formal succession plans in place and 24% said they had informal plans. About 20% of respondents did not have a succession plan but intended to develop one, and 35% did not have a plan at all.

The succession planning timeline is different for everyone, but there are success stories to be found no matter the type of transition.

Keep it in the family

The most common and popular option among roofing contractors is to transfer assets and duties from one family member to another. In some cases, generational involvement may even overlap, as it does for Steve Kruger, president of L.E. Schwartz & Son Inc., Macon, Ga. After working in various roles in the company for 16 years, he took over as president in 1994 from his father, Melvin, who currently is CEO; Steve’s son, Michael, is vice president of the company.

Despite three generations in the company, the Krugers did not set a formal succession timeline.

“We have not really had problems or challenges because nothing has been forced. [Transitions] happen organically or when they seem appropriate,” Kruger says.

It may be intimidating for some to have a parent or loved one involved closely in the company, but for others, it can be beneficial knowing each other’s strengths and weaknesses. Kruger says he has sought his father’s advice at every step of the way, and he and his son, Michael, have a similar relationship.

“I love that we have three active generations still here,” Kruger says. “We don’t have pressure because we cheer each other on; our skills complement each other nicely.”

But for some younger generations, involvement in the family business may not initially be their life plans.

Sherri Miles, president and CEO of Miles Roofing Inc., Chesapeake, Va., started her journey with her family’s roofing company after graduating college with a degree in American studies and theology. Her father asked for help with the family business for “a few months,” but when Miles was not sure what her next move would be between law school, divinity school or teaching, she ultimately stayed with the company and has been there for 32 years. Similarly, Miles’ brother, J.D. Miles IV, president of J.D. Miles & Sons Inc., Chesapeake, Va., worked at Vanderbilt University, Nashville, Tenn., for seven years as a senior management information systems consultant before joining the family business.

The quality of life and being close to loved ones can be a draw to keeping a business within the family, as it was for Miles.

“I have been able to run the company while also raising a family,” Miles says. “My children grew up as I did, surrounded by their cousins and extended family.”

For the Miles family, long-term planning and communication are important so future generations can prepare for eventual involvement in the company if they choose.

“[My brother and I] have had family retreats where we have spoken about the company’s history, our paths to and within the company, how the company has changed and grown, and where [the next generation] could potentially fit in the future,” Miles says.

For the six members of the fifth generation, aged 16-23, Miles says though they have worked with the company during school breaks, they are expected to go to college and gain work experience from somewhere else for at least two years before formally joining the company.

Like Miles, Steve Kruger did not initially plan to be involved in the family business. However, he says the opportunity was always available to him. When he did eventually join the business, he was fully committed and says he would not have done anything differently.

“The decision came as a result of [my involvement] being the best thing for the company at that point in time,” he says. “You have to earn leadership roles, especially in a family business, if you expect people to continue to work with you and strive for success.”

From employee to owner

Another possible succession plan is for a company owner to find a buyer among one of their current employees.

Dennis Runyan, former owner of Dryspace Inc., Cedar Rapids, Iowa, sold his company to Lynn Price, a former employee. Runyan joined the company in 1980 and purchased it in 1989. Set to retire once he turned 70, Runyan began his succession planning with specific values in mind.

“As a one-time laborer for the company, I cared about how the new owner’s history would meld with the company’s future,” he says. “I believe in a perfect world, people who become leaders, especially in the construction industry, should spend time getting their hands dirty before they guide a company of people who create the finished products.”

Runyan considered several options but says: “Price was by far the best candidate.”

This type of succession can be beneficial because the owner and employee already having a relationship and trust in one another. Runyan says he asked Price about 10 years before the deal was finalized whether Price had ever thought about owning a roofing company. When Price expressed interest and hesitation, Runyan says they worked together for several years to explore all the ups and downs of ownership to fully prepare Price for the role.

Runyan advises company owners looking to sell to an employee to choose the right person.

“[Handing off the company was] difficult from a friendship standpoint but easy knowing the company would continue with the same values we enjoyed together under the tutelage of Price,” Runyan says.

For Price, who has been the owner and president of Dryspace since 2020, maintaining company culture between Runyan’s departure and his leadership was one of the most important factors in the transition.

“Dryspace wasn’t just a roofing company in our eyes,” Price says. “It was where our friends worked, and it provided the lifeblood for so many families. This [transition] was our opportunity to make sure the Dryspace name and culture could carry on.”

To ensure everything went smoothly, Price says he and Runyan structured the buyout as a “true succession plan,” starting the process as early as possible. To prepare, Price, who joined the company in 1997 as a general laborer, enrolled in and graduated from NRCA’s Future Executives Institute and worked closely and regularly with financial advisers, accountants, insurance agents, the Dryspace team and the company’s clients. “Looking back, it seemed like it was going to be a long, drawn-out process,” Price says. “But I wouldn’t do it any other way.”

Outside buyers

For owners who do not have family in the business or a plan to sell to someone within the company, there is the option to sell externally, such as to a general contractor or private equity firm.

Bob Morgan, CEO of Upstate Roofing & Painting, Rochester, N.Y., sold his company to Roofed Right America, Milwaukee, after starting as an estimator in 1998 and acting as sole owner since 2016.

“I did not have a succession plan in place,” Morgan says. “This allowed me to bring in other teammates as equity stakeholders in the new organization and provide stability far beyond my tenure. This wasn’t initially on my radar, but the more I looked into it, the more it made sense for myself and my team.”

According to Crain’s Grand Rapids Business, after acquiring a company, private equity firms often will provide strategic and operational support to help the company develop a detailed growth plan, process improvement, address labor challenges and more. Morgan says it is important to conduct research regarding a private equity firm to understand its ultimate goal for one’s company.

Similarly, Dave Tilsen, president of Tilsen Roofing Co., Madison, Wis., sold his company to a local general contractor after taking over in the 1990s from his father.

Tilsen explored other options, including an employee transition and external transitions with a business broker and merger and acquisition firm, but he ultimately sold to a contractor who worked with the company since it opened, and Tilsen says their business objectives and cultures aligned well.

“It is important to seek a contractor who will act as a partner and support the network post-transaction,” Tilsen says. “I am fortunate to have sold to a general contractor who is supportive and respectful of the brand Tilsen Roofing has built in its 70 years in business.”

Planning early and taking time to complete the transition process can make it easier for everyone involved. Tilsen still is heavily involved in the day-to-day operations of Tilsen Roofing; he says he does not expect letting go of the company to be difficult when he fully retires because the process will be gradual.

However, both Tilsen and Morgan say due diligence was the most difficult part of the transition because of the amount of work put into it, as well as the acceleration of the process at that point. Carefully choosing the correct advisers and attorneys for the process early on can help everything run as smoothly as possible.

“It was a brutal three-month process,” Morgan says. “But I was well coached by peers and my merger and acquisition accountant and attorney. Upstate Roofing & Painting runs a tight ship, so our process was considered smooth, but it was still a heavy lift.”

The right path

According to Young Presidents’ Organization, 75% of all businesses fail to survive past the first generation of owners whether through a transition to a family member, key employee or third party.

However, with a succession plan in place, as well as keeping in mind important aspects such as communication and timing, these companies are proof success can span well beyond third or even fourth generations.

AVERY TIMMONS is Professional Roofing’s editorial assistant.



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