Pass It On

There’s no script for the interplay of family and business that surface when a company is in transition from one generation to the next. There’s no single formula for success because the cast of characters involved is so complicated, so different at every business. Sure, there are succession theories and best practices. (Unfortunately, many pest control operations are in the dark, says industry consultant Lloyd Smigel.) Still, you just can’t plan the conversations, and even the smoke that will rise, when a business is being passed on.

But you can prepare.

“Every company needs a mission statement, and family values should be written down,” Smigel says. Owners should detail what type of education the children should receive if they want to pursue ownership in the business. What checkpoints are necessary from a training standpoint, beyond running a route for X number of years? How about taking a leadership course, or a conflict resolution seminar (which comes in handy when working with family)?

Without a roadmap and systems in place at the business prior to transition, the asset a senior generation worked to build could turn into a liability for future generations. And, the retirement nest egg could crack. Employee turnover could deplete service quality and tarnish the company’s reputation.

Without a plan, “destination succession” looks foggy for all parties involved. “It’s like a parent saying, ‘You have to drive from San Diego to New York City,’ but they don’t give the child a road map,” Smigel relates. “The parent says, ‘Just follow me.’ Then one day the child is still not there and the parent is ready to retire and says, ‘Go ahead and complete the trip now.’”

Here are stories from three pest control businesses that have been down that road successfully. Families share how they navigated the journey toward succession.

Owning It

SOS Pest Control

Kansas City, Mo.

Darryl Franke, owner

Founded: 1989

Employees: 15

Services: Pest control, bed bug, termite, thermal treatment

2014 Revenues: Almost $1.8 million

“I want to buy you out, or I’ll find someone else to buy.”

Darryl Franke finally had to make his request in simple terms. And his father finally got on board when Darryl riled up the confidence to state he was ready to take over the family business that they started together in 1989, after Darryl Franke graduated from college. The operation had remained modest yet had a hold in their Kansas City, Mo., market. With five employees and about $550,000 in revenue, Franke saw an opportunity to grow the operation.

In the early days, Franke and his father, Don, split the work. Franke was the service technician and sales arm, and Don managed the financial end, including ordering products. Over the years, Franke took on more responsibility until by the early 2000s, he was essentially doing it all and Don was checking his work.

“I would make comments like, ‘You know, at some point in the near future, I’d like to buy you out,’” Franke says. “That was something they weren’t quite ready for at the time, which was fine.” Then, Franke was in his early 30s, and he and his wife were preparing for their first child. “Let’s wait until after the baby is born so you don’t have these two big events going on in your life,” Franke’s parents suggested when he broached the ownership topic again.

By late 2004, Franke wanted to control his own destiny. “I felt like I knew enough, and I probably felt like I knew more than they did — which I probably did not — and I didn’t feel like I was going where I needed to go in my career,” Franke says.

That’s when Franke finally “put his foot down,” he says. Don was ready to hand over the reigns. “My mom was not fine with it,” Franke says. “She did not want to give up control or quit work. She thought that she’d be cut free, but that was never my intention.” Franke’s mother, Suzan, had managed the office since day one.

Meanwhile, over the years Franke had gradually assumed all operating and financial responsibilities. Suzan was still working in the office. His father was overseeing the process. What needed to happen was the actual ownership transition, and Franke wanted that done as if he were an outside buyer — no cutting a casual deal with family.

“I wanted to make sure the I’s were dotted and T’s were crossed,” Franke says. “It was really important to me that my parents were treated fairly.”

Franke wanted to protect the asset his parents had owned for 15 years and were about to sell as a retirement nest egg, and he wanted to secure the business he would take into the future. A new corporation was formed with Franke as owner.

The idea was that Don and Suzan would continue working in the business for an undetermined amount of time, as long as they wanted. Franke was surprised when his father stepped out a few months after the transaction. “He just stopped working and retired,” Franke says. His mom stayed on board for three years managing the office.

Franke immediately took a different approach than his parents had with the business. He saw growth opportunity. “I enjoy new customers and having new people working here, I like change,” he says.

It’s a good thing, because shortly after the transition, there was a big change in the service mix as SOS Pest Control lost 40 percent of its business: termite work dropped out almost completely. (Today, it represents only 2 percent of the company’s revenues.) SOS never performed residential service, so referrals for commercial termite work dried up. “In the meantime, we were noticing a decline in swarms,” Franke says of uncontrollable nature and market forces.

But then SOS got its first bed bug complaint. Franke saw opportunity and threw himself into learning this business. Now, bed bug work is 46 percent of SOS’s business. “I became enmeshed in learning about bed bugs,” Franke says, adding that he also brought on a business coach to help guide him toward growth.

“I had the ambition to grow the company, but I didn’t know how to do it because I had never been involved in a company that had grown,” Franke says. “This business is the only experience I ever had.”

Now he had the freedom, especially with his father retired from the business. (At first that made Franke uncomfortable, but it also gave him confidence.) “The dominant personality that he was, having him out allowed me to grow and define who I was as a business owner and a manager,” Franke says.

In the last 10 years, Franke has steered the business on a growth path, tripling its size. Fifteen employees work at SOS and revenues in 2014 were just under $1.8 million. “We are not a dot-com,” Franke says, “but growth has been pretty good.”

Transition Tips:

• Get it on paper. Franke wanted to ensure that proper documentation was executed so the succession was an official, true sale of the business. He enlisted in a professional business valuator. “I wanted it to be, No. 1 legal, and No. 2, structured in a way that there was no doubt that this was my business,” Franke says.
• Grow your own way. Franke didn’t want to steer a mom and pop op. (No offense to his family, he saw growth opportunity and wanted to chase it.) Buying the business allowed Franke to pursue this dream. “Growth was the main motivator for buying the business,” he says.
• Build a road map. Franke never worked in another business, so needed coaching to develop his leadership and management skills. “I knew what I wanted the results to be, but I didn’t know exactly how to get there,” Franke says. “The biggest thing is knowing what you don’t know — knowing when you need help.”

Continuing the Legacy

Deans Services

Leesburg, Fla.

Ty Jones, owner

Founded: 1991

Employees: 80

Services: Pest control, termite, bed bugs, lawn care

2014 Revenues: $7 million

The Jones family was rounding the corner of a huge transition after growing their family business that began in 1980 by mowing lawns. The firm evolved into a full-service lawn care and pest control company by 1991, and by 2005 grew to nearly 60 employees and $4 million in revenues.

Ty Jones, the current owner, relates that his parents hinted to him and his younger brother, Trent, “Is it time to scale back? Are you sure you want to stay in a company that is this big?”

“Of course, they were getting pretty close to retirement,” Jones says, adding that no, he wanted to keep driving forward.

Deans Services started as a humble family business, and after an irrigation stint following high school, Ty joined full-time. Trent followed suit after leaving community college. The brothers ran routes while dad, John, managed quality and the office. Jones shares a story the family still tells at family reunions from time to time. It’s about asking for more responsibility. Ty and Trent had set up a lunch date with their parents. Their pitch: If they grew the business to four trucks, they could focus on selling rather than treating properties. “We didn’t even know the profit level at that point because we were such a small business,” Jones says. “We only new what we put in our pockets.”

The brothers said their piece. Mom and dad looked at the boys, and each other, with an expression that said, “Here we go.” And before lunch was over, John Jones agreed that if the boys wanted to grow the business, they’d give it a shot. “We’ll keep going and see how far we can take it,” he told his sons.

So they did, and the company went from a lawn and ornamental firm to a full-service company offering pest control and termite services. By 2004, the parents were the ones approaching the children about slowing down. Jones realized, after expressing the desire to drive forward, that perhaps a big change was necessary to move him, his siblings and his parents into the next phase of their lives and careers. At that time, Florida had weathered three hurricanes and employees were depressed. Some weren’t showing up to work and Jones was running routes again, burnt out.

“At that point, I told my dad, ‘Alright, if you want to sell out the [lawn care business], we can talk about where to go from here,’” Jones says.

But questions needed to be answered before moving forward. What would the company look like if the 50/50 owners, John and Leaine, were to retire? Who would steer the organization? At the time, Jones (the oldest sibling) was president, and John was CEO, Trent was vice president, sister Brandi was an administrative manager and the youngest brother, Todd, was a department manager.

Without a roadmap and systems in place at the business prior to transition, the asset a senior generation worked to build could turn into a liability for future generations.

“I proceeded to sit down and pretty much negotiate with my dad,” Jones says.

Prior to this, the family brought in a business consultant to work with the family through growth and to encourage professional development. Jones began attending retreats with other business owners from around the country to learn from their operations. The mom-and-pop business had grown into a sophisticated market leader over the years, and retirement indeed was on the horizon for the owners.

But with four children, how would the parents divvy up the shares? Ownership stock became the linchpin of business transition discussions. Mom wanted to see the children get equal shares of the remaining pest control business. They would sell the lawn care operation, which was 75 percent of the operation’s revenues. The children each owned some shares in that business, so there was a payout involved for them, too. Ultimately that sale would finance the senior Jones’ retirement.

“My mother was the true challenge because she wanted us four kids to split everything equally,” Jones says. This negotiating was happening in 2004. “The struggle was how to convince mom, ‘You can’t really do that,’ and I think my dad understood that, too, and he was in a tough spot.”

Bringing in outside consultants helped level the conversation. And, because the family had worked with a business consultant for eight years, this coach could provide some honest feedback. Jones was always a “driver” in the business, never swaying away from the operation. He was the dominant leader of the siblings. And, in the end, he became owner with the controlling interest, and his siblings also received shares.

Over time, the siblings had fallen into roles that suited their personalities and talents. “I imagine they had some hurt feelings when mom and dad told them I was going to get the controlling interest, but someone has to have the final say [in the business],” Jones says.

Everyone was reassured that with continued growth, the paychecks would keep coming. “My siblings received more shares than they had before, so the goal was to rebuild the company so one day we could sell it and retire if we wanted to,” Jones says.

With the transition official, the Jones’ had a pest control business that was worth a bit less than $1 million, and they retained 35 of the employees. “It was a big ordeal,” Jones says, adding that he didn’t draw a paycheck for the first six months of 2005 following the ownership transfer.

That was OK with him. Keeping strong employees on to prepare for future growth was the plan. And, he didn’t grow up having it all. “We knew to get by and make a living you had to work,” he says. “When we were kids, our treat once a month was to go to a McDonald’s, so that transitioned over to all of us putting forth a good effort as we each came into the business.”

The transition was successful because of ongoing business consulting prior to ownership transfer, honest discussions about how each sibling could contribute to the business, and an understanding among family members about the work required to continue the business. “It takes a lot of trust in each other and we have been a close family all of our lives,” Jones says. “Because we worked with each other every day, the trust grew.”

After the seven-year non-compete agreement expired (they sold their lawn care division to Scott’s), Deans Services got back into lawn care. That was three years ago. “We have almost accumulated what we sold,” Jones says of their growth.

The parents are retired and Jones leads the charge, with Trent managing a business division and Brandi overseeing accounts payable. “We are now twice the size of what the company was in 2005 after the sale,” Jones says.

And, Jones is looking forward wondering if the next young generation in line will show any interest in the business. He’s not sure yet. “Maybe we’ll be having another discussion 12 to 15 years from now,” he says.

Transition Tips:

• Just ask. The first family business transition occurred early on when the Jones brothers decided to approach their father about growing the business so they could focus on sales and not fieldwork. Honest communication throughout the decades unlocked opportunity.
• Seek outside input. When dealing with complex family dynamics — such as which child should get controlling interest in the company — an outside voice or two can bring clarity to the decision. “They helped my parents come to terms with the fact that someone has to have the final say in the company,” Jones says of consultants Lloyd Smigel and Pam Jordan.
• Preserve the business. Smigel’s advice to Jones, and other family operations, is to focus on what’s best for the business, above all. “Every single visit, he would remind us that all of his advice is based on what is best for the company and not any one individual, not even the owner,” Jones says. “The company has to do well, otherwise we can’t move forward.”

Knowing Your Role

Beebe’s Pest & Termite Control

Foley, Ala.

Barney Beebe, owner

Founded: 1981

Employees: About 35

Services: Pest control, termite, wildlife control, lawn care

Revenues: Not available

Barney Beebe knew he wanted to retire with his wife on the Alabama Gulf Coast, and two of his sons expressed interest in pursuing a career in the family pest control business. But with the way things were running a few years ago, there was no way he could leave the operation.

“It was still running like a mom-and-pop business, and the company wasn’t structured well enough so they could come in and take over and continue to grow it and be successful,” says Beebe, who in 1981 started Beebe’s Pest & Termite Control with a single office in Baton Rouge, La. “From there, the business kept growing.”

Beebe’s expanded into Mississippi with an office in Ocean Springs, and then Beebe bought a small one-man operation in Foley, Ala., in 2000, in the state where he aimed to retire. At the time, the company employed about 10 people and covered those entire three states.

The boys, Ryan and Lee, wore multiple hats in the business: selling, managing, you name it. They did not assume defined roles — there were no real defined roles, actually. That was the problem.

“There was a lot of frustration,” Beebe says. And bickering. And uncomfortable conversations, adds Ryan, relating that there were times when he and Lee would ask the same technician to complete a task in different ways. “The technician didn’t know who to listen to,” Ryan says. “We had two owners telling employees what to do, and at the end of the day they didn’t know who to listen to, but they didn’t want to disappoint either one of us.”

Ultimately, the boys were just operating on a work-hard mentality. They were more focused on getting the job done than sharing responsibilities, Ryan says.

Beebe brought in an industry consultant to help put an organizational structure in place, including outlining job descriptions. “The boys naturally have different personalities, ideas and talents, so we had to focus on that and set some goals,” Beebe says.

Ryan took over sales operations. Lee became the technical expert. “They had to let go of all the other things they did and not cross over one another’s jobs,” Beebe says.

That took some getting used to, but having an outside consultant help implement the process was important. “Lloyd Smigel explained to the boys what their jobs were, and showed them how we could grow if they stayed within those jobs,” Beebe says.

Buy-in didn’t come immediately. The boys had never worked in a corporate environment before, or even a business that had a set organizational structure. Beebe says it took a good nine months to one year working with Smigel for the boys to see how focusing on their roles could propel the business forward in a productive way.

Ryan says that he and Lee have a more “mature approach” to problem solving now that they focus on the niches where their strengths lie. “At the end of the day, we had the same common goals but disagreed on how to get there,” Ryan says. With a roadmap for growth in place and a structure to support their goals, everyone’s on the same page moving forward.

And, the numbers prove that focus is what the boys needed to take the business to the next level, a comfortable place where Beebe could step out of everyday operations and retire. Beebe’s has more than doubled in size in the past few years since the transition process began. Today, the boys run the operation and act as its visionaries; Beebe pipes up when there are decisions to make that involve large capital outlay, but otherwise he lets them run the multi-state show.

“Now, they see the growth and potential,” Beebe says. “Everyone is working together and pointing in the same direction.”

Transition Tips:

• Start early. Beebe’s only regret was not starting the transition process sooner. “I probably would have hired a consultant five years prior instead of waiting until right before I decided to retire,” he says.
• Organize the business. Putting policies, procedures and job descriptions in place positioned Beebe’s to grow to the next level. A consultant helped carve out specific roles for the boys so they could develop and “own” their niche in the business. “Identifying our roles in the business has been the key to getting us to this level,” Ryan says.
• Let it grow. Beebe stepped out of everyday operations about 10 years ago, and though there has been no formal ownership transfer, his sons are managing the operation under the new structure. He stays out of the day-to-day. “I’m just enjoying life,” Beebe says.