Looking to the future: Succession planning family-owned businesses

CEDAR RAPIDS - Richard and Faith Miene began thinking about who would own and operate Miene's Septic Service after their son, Rick, had been working for them for a number of years.

'As we watched Rick mature and work in the business, he started to gradually take more of the initiative on things like purchasing a new piece of equipment,” Faith said. 'He would do the research, talk to the sales reps and arrange to demo a piece of equipment.

'About 10 years ago, as Rick took more of an interest in the business, we decided to give him some stock in the company. It was a small transfer of shares, but we wanted to help him feel more a part of the company.”

Richard, now 70, and Faith, 65, launched Miene's Septic Service Inc. in 1973 with a single used pump truck, operating out of their home to sell septic maintenance services primarily to residential customers. Rick, 43, began working for the company when he was 19, but Richard insisted that he go to work for someone else to get experience outside the family business.

'I worked for Pate Asphalt in Hiawatha, where I developed an interest in excavation,” Rick said. 'After about a year, I came back to work for my parents, and we began offering excavation services.”

Richard and Faith were storing septic service equipment at their home and Rick was parking excavation equipment at his residence. Four and a half years ago, the company acquired land on North Center Point Road in Robins, constructed a building and moved the equipment and office to a central location.

Rick bought the company from his parents in 2009 and has expanded its employment and revenue. Richard continues to work part time, primarily on the septic services side of the business, and Faith is full-time office manager.

For many family-owned businesses, succession planning takes a back seat to the day-to-day challenges of running the enterprise.

Unfortunately, waiting too long to develop a management and ownership succession plan may not allow for enough time to mentor the next generation to run the company.

Nationwide, 67 percent of family-owned businesses do not have a succession plan, according to surveys by the MassMutual Financial Group. That may explain why 70 percent of family-owned companies do not make it beyond the first generation of ownership.

In fact, Transition Point Business Advisors in West Des Moines suggests the best time to begin succession planning is 10 to 15 years before the ownership or management change is expected to occur.

Creating a succession plan typically takes two to five years and involves bringing together a team of professionals to help - business advisers, an accountant, a lawyer, the company's leadership team, family members and a certified financial planner.

Involving family members is critical to the success of the transition because new management responsibilities likely will affect family life outside the office, too.

'When my wife, Kelly, and I first started dating, she pretty much understood what my job entailed,” Rick Miene said. 'I was the son of the owner at first, but as things progressed I was devoting more and more to the business.

'It became a real strain, but I was trying to reach a point in the business where I could delegate things.”

Getting experience outside the family is recommended by Michael Dunn, president and CEO of F & M Bank in Cedar Rapids.

'I graduated from college in 1971 with an English degree,” Dunn said. 'I went to work for Banks of Iowa Computer Systems, where I worked from 8 at night until 8 in the morning four days a week with Wednesday off.

'It gave me time during the day to look. I was hired by Farmers and Merchants Bank (F & M) in Manchester, which was a great opportunity. I worked there for about two years, but I wasn't advancing, so I left to work for a bank in Greene, just south of Charles City.”

Although his father, Cecil Dunn, was president and owner of Security Savings Bank in Eagle Grove, Iowa, Dunn stayed with the bank in Greene for about five years. Cecil Dunn acquired F & M Bank in Manchester in 1977 and asked his son to come work for him.

Cecil Dunn had hired a CEO for the Manchester bank who had a good background, but it became apparent that the bank's board were unhappy with some of his loan decisions. In December 1979, the CEO left by mutual agreement, and Michael Dunn, then 30, became CEO.

Cecil Dunn died in 1996 and Michael Dunn became president and CEO of F & M Bank, which had grown to assets of more than $400 million at the end of 2014.

While Michael Dunn eventually took over the family business, that succession plan may not by the ultimate path for other family-owned businesses.

John and Jill Parham, founders of J & P Cycles in Scotch Grove, near Anamosa, had envisioned their son, Zach Parham, probably would succeed them at the aftermarket motorcycle parts and accessories business. That plan was altered about a decade ago when an investor group purchased the company.

Zach, with a degree in accounting and business from Wartburg College, is vice president and general manager of J & P Cycles. Although he is not the owner, J & P Cycles has continued to grow its vendor and customer base.

In the music world, family-owned businesses also are subject to changes to outside leadership.

Steve West succeeded his father, Pearl West, as the president and CEO of West Music in Coralville. The company expanded under Steve West's direction to include more than 170 employees and six regional locations, offering music instrument repair, lessons and music-therapy services, and several e-commerce websites and catalog departments.

When Steve West retired on June 1, 2008, to became chairman of West Music, the company's board of directors named Robin Walenta as president and CEO. Walenta, a 25-year veteran of the company, had served as senior vice president and chief operating officer.

Similarly, when John Bloomhall stepped down as president and CEO of Diamond V in January 2014 to become chairman of the family-owned Cedar Rapids animal nutrition business, the company's board of directors named Jeff Cannon as president and CEO, with day-to-day management responsibilities.

Cannon, a 10-year veteran of the company, was a partner in an international accounting firm and served as a business adviser for 22 years to domestic and worldwide agricultural companies, including Diamond V.