Passing the family business on to the next generation comes with its own set of advantages and challenges.
These landscape professionals share their experience of taking the helm and advice for others considering this exit strategy.
Pricing the Company
One tricky aspect passing the business on to family is handling the discussion of how much the business is worth.
Dean DeSantis, owner of DeSantis Landscapes, based in Salem, Oregon, says they had a professional valuation done and then worked with a team of advisors including their CPA and attorney to develop the buy/sell agreement.
Adam Frederico, owner of Frederico Outdoor Living, based in Lehi, Utah, says when they did the valuation for his father’s company it was valued for a lot less than his father hoped for.
“As in most buyer-seller arrangements, the buyer thinks it’s worth less than the seller does,” Frederico says. “So that took the longest. We were in discussions for probably 10 months before I actually moved from Chicago to Utah to buy the business.”
Frederico says his father prioritized the business’s continued growth and staying in the family rather than the price tag of the company. They discussed in detail what mattered most to each of them.
Chris Ahlum, president of Ahlum & Arbor Tree Preservation, based in Columbus, Ohio, says they hired an outside firm they didn’t have relationship with to do the evaluation so they were very unbiased.
“When they submitted the price I thought it was low and my dad thought it was high and so we went with it because we both were happy with the valuation,” Ahlum says.
Experiences as A Second-Gen Owner
Ahlum says his favorite part about being a second-gen owner is the continued legacy and maintaining the relationships his father started years ago.
“I love working with people and reminiscing about the good ole days with clients whose father and mother were our clients and worked with my dad,” Ahlum says. “We have many multi-generational clients now and it’s special to look at a tree and be able to say, ‘My father worked on that, I worked on that and now our team is working on that tree’ and the ability to preserve some of these large massive trees for multi-generations is a real pleasure.”
Peter Pazmany, president of Pazmany Bros. Landscaping, based in Los Altos, California, also finds it satisfying getting to work with long-time clients they’ve had for 20 to 40 years.
“To be able to come back over the decades, and see how their family is changing, see how the use of the yard is changing and to still be a part, it’s really satisfying,” Pazmany says. “I cherish those long-term relationships with clients.”
DeSantis says he loves the impact their family has made on their team members and community over the years.
“We’ve worked with some clients and team members for over thirty years, and obviously, that started with my dad and continues on with me and our team,” DeSantis says. “We’ve built some great relationships.”
Frederico enjoys the shared commonality with his dad and keeping the tradition going.
“I think growing up, I didn’t really appreciate or know a whole lot about his business or how it worked,” Frederico says. “Now it’s fun just to share stories and to give him updates.”
Taking on the family business also has specific trials. A major challenge can be stepping into the shoes of the previous owner. DeSantis says he’s always felt a lot of pressure to prove himself and that the business wasn’t just handed to him because he was the boss’s son.
Frederico says he feels a weight on his shoulders to do right by the brand and everything his father built. He says there’s always a whispering voice in his mind asking what his dad would do and whether they are upholding the standards of quality and reputation.
“It’s nothing that my dad said or that the market has said, but it’s just me and my own internal motivation to say, ‘How do I just really make the business proud, make the family proud and make sure that I don’t screw things up the business to last another 40 years?’” Frederico says.
Ahlum also says his worst fear is failing his parents and seeing the company they built go under.
“I want to continue our values, and as we grow and move into today’s economy and market, sometimes that’s one of the biggest struggles,” Ahlum says.
Pazmany says another challenge is dealing with long-term clients who are accustomed to a certain way of doing things and resist change.
Advice for Others
Frederico says the best way to set the next generation up for success is to document your processes more.
“I think every business owner’s nightmare is documenting things, and certainly as you’re trying to transition to somebody else, whether it’s private equity or a family member or anybody,” Frederico says. “They’re going to want to know what processes are in place, what software is used, etc. Just having that actually written down is beneficial.”
Pazmany advises having a strong business plan, budget and team in place that can come alongside the next generation and help steer the ship.
“The more you have numbers to analyze, I think the easier it is to pass it on and give somebody a really good foundation,” Pazmany says. “The next generation or owner can look at this data and really understand it and use it for making decisions.”
Frederico notes it’s important to ask questions and have a dialogue between the buyer and seller.
“Don’t let things go unsaid,” Frederico says. “Just get everything out on the table. It’s a lot easier to deal with it when it’s out in the open than when it’s hidden in a closet.”
Frederico and Ahlum advise the older generation to listen and be open to the new owner’s ideas.
“For the younger generation, be patient,” Ahlum says. “I wanted it, and I did get it, but I’d do anything to have my dad back and be able to work with him for another year.”
DeSantis encourages tapping into advisors and consultants. Ahlum agrees that mentors or peer groups can help.
“There are experts out there that specialize in helping family businesses work through issues of family dynamics and history, assessing capabilities and motivations, and working through the financial aspects of a major transaction like this,” DeSantis says.
DeSantis adds that, in some cases, passing the business on might not be the right fit, or a road map needs to be developed first to create a successful succession plan.
“Treat it like the strategic business plan and strategy that it is and not simply a continuation of family history and dynamics,” DeSantis says.
