Last month in this space, I reviewed a series of market projections for 2014 from Harvard University as well as the industry’s leading associations.
Managing the transition from one generation to the next
F.H. Perry Builder is figuring out what comes after succession
|The F.H. Perry Builder management team of (standing, l to r) Bill Cosman, Allison Perry Iantosca and Brad Gardner and founder Finley Perry (seated) are working through succession.
Photo by Tim Gray/Getty Images
Coming up with a succession plan is actually not that difficult. Whether it's selling the company, passing it to family or transitioning it into an ESOP, there's plenty of advice out there for setting up a solid blueprint for the transfer.
But what comes after the business transaction is done? How does a company make the most of a founder's expertise, but still move on so the next generation can take over? That's the challenge facing F.H. Perry Builder, an award-winning full-service remodeling firm in Hopkinton, Mass.
Finley Perry incorporated F.H. Perry Builder in 1989 but has been running the business in various forms since 1973. This past January, Perry sold the company to three of his former employees: daughter Allison Perry Iantosca, vice president of sales and marketing; Vice President and Project Executive Bill Cosman; and Vice President of Production Brad Gardner. The three are equal partners and have a five-year loan with Perry that, if everything works out, will be paid off in 2013.
“What has really surprised me is that I thought I could keep running it and just change the names of the owners, and everyone would go along working the way they always have,” Perry says.
It wasn't until Perry returned from his annual summer vacation this fall that he realized that model might not work. Over the course of the last few years, the sale has been in the planning stages, with the new owners making more and more decisions, especially when Perry was out of the office.
“That's really contributed to the overall success of the business in a dramatic fashion,” Perry says. “The negative side is at the end of the day, all of a sudden I began to feel like I was a person of relatively little significance around here, and that's been hard for me to deal with emotionally.”
Perry and Iantosca agree they want him to play a role in the company — they're just not entirely sure what that role should be. That's reflected in the fact that Perry has no official title at the firm beyond “founder.” (“Got any ideas?” Iantosca jokes.)
They see his best role as being one of sales, especially to new customers, and business development. Perry is exploring ways the company can expand into new markets and products. As long as the new owners want to grow the business, there's a role for Perry in that arena, he says.
“If at some point we decide the business should just stay what it is, I become an expensive piece of overhead, and I need to move on and do something else,” Perry says. “So we're trying to figure out just what that answer is.”
Perry doesn't want to worry about day-to-day management of the company. Being free of that responsibility has allowed him to take long periods away from the office and pursue activities such as his love of sailing.
Those frequent sailing trips were actually one of the drivers of succession for Perry. He was concerned that something could happen to him on one of his trips that would leave a “messy situation” for the people left behind at the company. He also wanted to resolve the situation from an estate-planning standpoint. With one daughter that works in the business and another who doesn't, he wanted to figure out how to have something of value for both of them.
“A way of doing that was to turn the asset that the family owned into a loan instead of this sort of amorphous, hard-to-value business entity,” Perry says.
One of the most important parts of preparing for succession was creating value in the company beyond Perry. For the last several years, the management team has been focused on separating the image of F.H. Perry the company from F.H. Perry the man.
“People have this great image of the company that Dad has developed over the years,” Iantosca says. “Now it's taking the story and the identity that he's created about the company and turning that into something larger than him.”
The first step in that effort was working with a marketing consultant to talk to past clients, architects, suppliers — anyone who had worked with the company in the past. The company even contacted prospects who didn't hire F.H. Perry to find out why.
“We wanted to learn from people who love us and people who had been challenged by us,” Iantosca says.
This process helped the company identify that it was the experience the Perry team offered that mattered to clients; it wasn't just about improving their homes, it was about improving their lives. It allowed the company to focus the marketing strategy for the high-end niche the team really wanted to reach.
“It was about taking that story and turning it into something that we can put out to the public through advertising, through brochures — sort of matching our culture to the culture of advertising vehicles that are out there,” Iantosca says.
“The materials we put out are more experiential than architectural like our competition is putting out there,” Perry says. “Now, when the phone rings here we're not getting calls for decking, re-roofing, the kind of calls we used to get.”
Another important part of a successful transition was that the three new owners also spent a lot of time putting together an operating agreement ahead of the sale.
“I've had any number of people ask me if I was crazy to go into a partnership, but there's this wonderful dynamic in how we operate,” Iantosca says. “It was really important for me to be an equal partner with them rather than take the opportunity of being a family member to hold on to a larger chunk of the company.”
Each of the owners has their strengths. Iantosca brings her sales and marketing experience to the table, while Cosman and Gardner have both worked in construction for more than 20 years.
Many companies don't survive the first few years after an ownership change. For Iantosca, that challenge isn't one she takes lightly.
“There's this legacy that I'm responsible for carrying on,” she says. “We have to make sure the legacy stays intact and has momentum moving forward.”
Perry says he also feels some responsibility for the company's success. He wants the new owners to succeed and continue the Perry legacy. Their success also helps them pay off the purchase loan.
“The whole idea of staying in and doing business development and sales is to create value,” he says. “If it doesn't work it's going to be all of our faults.”
The company needs to identify future movements so they can stay ahead of what the market wants, Perry says, citing trends such as the wave of hotel/condo developments that sprung up over the last decade.
The most important part of future success will be keeping a simple focus on the basics of delivering quality work to a targeted niche. It's a method that has allowed the company to continue to succeed in a down market.
“At the end of the day, you can analyze the market all you want, but if your product is not good, you're missing out on 50 percent of what drives the business,” Perry says.
Allison Perry Iantosca is on the Professional Remodeler Advisory Board and also writes about sales and marketing as a regular columnist. Read her archived columns at www.proremodeler.com.