Next Generation of Remodelers

One thing most of our Young Leaders have in common is that they have taken over, or are getting ready to take over family businesses.

In that way, they're not different from many remodelers. In an industry dominated by family businesses, transitioning to the next generation can be one of the biggest challenges companies face. Those who have successfully made the transition say years of planning and preparation make the difference.

For Thompson Remodeling in Grand Rapids, Mich., the process started seven years ago when president and owner Ben Thompson was still in college. Thompson knew he wanted to own a small business, but hadn't planned on purchasing the company his parents had founded in 1980.

“I kept saying, 'I want to do that like Mom and Dad do it,' or, 'I want a business like Thompson Remodeling,' and it just kind of clicked with me that this would be a good fit,” Thompson says.

Once he decided he wanted to take over, his parents had to decide when they wanted to leave the business. The first step, six years ago, was for his mother, Sandie, to pull back from her leadership role in the company. That allowed the company to focus on making the transition from only one leader: Ben's father, Pat.

“Clearly, the leaving generation has to know when they want to be out and put that timeline down,” Thompson says. “They really had a desire to leave, so that made it very easy.”

During the last several years, Ben has played a variety of roles in the company, from working in the field to budgeting to sales and marketing. For the last two years before he took ownership a year ago, Ben served as general manager, making the major day-to-day decisions. His father moved away from management to focus exclusively on sales as the company made the transition. Pat spent 2008 as the company's sales manager and this year is working simply as a salesperson.

“We defined those roles, and we defined the compensation ahead of time,” Thompson says. “We wrote down what I wanted to do and what he wanted to take away from the company. That was probably the most important part of making this succession work.”

Communication is incredibly important to a successful transition, says Michael Tenhulzen, president of Tenhulzen Remodeling in Redmond, Wash. Tenhulzen and his brother, Brian, purchased the company from their parents in 2008.

“If there's something that's really burning, you need to talk about it,” he says. “We have had so much success in these knockdown-drag out discussions where, in the end, we just end up hugging, and it's a big release.”

For example, when the Tenhulzens were first discussing the transition, his parents envisioned a 50/50 split in ownership between Michael and Brian. Michael felt his years working in the business and his management role meant he should get a larger share.

“Those types of discussions become very difficult, but after talking it out and making sure we understood each other, we were able to agree,” he says.

If they hadn't been able to discuss issues like that, the transition probably wouldn't have worked, Tenhulzen says.

Like Thompson, Tenhulzen spent the last few years of his father's ownership running the company.

“It gave us the opportunity to actually run the company by ourselves for two years with the owner basically removed,” he says. “That gave my father the validation that we were able to carry the reins without any major liabilities.”

Help is out there

The most important thing to remember about succession is that you don't have to reinvent the wheel, Thompson says.

“The beautiful thing is that businesses are bought and sold everyday,” he says. “There are plenty of people out there that have been through this.”

Thompson Remodeling is a member of Remodelers Advantage and found the other members to be a tremendous resource. Thompson talked to other family business owners inside and outside of the industry about the challenges they faced.

In addition, Thompson worked with the Family Business Alliance, a local partnership between the Grand Rapid Chamber of Commerce and Grand Valley State University that is dedicated to making family businesses work. He also brought in an executive coaching team to help his personal development.

Tenhulzen also spent a lot of time talking to other remodelers. He considered hiring a family business transition coach and even went so far as to interview him, but opted not to bring him in.

“We decided there wasn't a whole lot of value that person was bringing to the table that we didn't already have,” he says.

Less-than-perfect timing

The downturn in the industry added another potential challenge to the transition, with both companies making the move in the midst of the worst economy in decades.

“The month that we bought the company we had only seven leads in the door and we were accustomed to getting about 30 a month,” Tenhulzen says.

Before finalizing the purchase, the Tenhulzens did have a brief discussion about what the alternatives would be to Michael and Brian's taking over. To make sure the company had value to a potential buyer, they would probably have to continue to work for the company under somebody else's ownership.

“We just didn't feel comfortable with that, so that was a really short discussion about what that would mean for the legacy of the company and our work,” Tenhulzen says. “Once we made that decision to move forward, everybody really stepped up, and we've been able to increase market share during this downturn.”

How two young remodeling leaders are managing succession