Passing the torch: How to maximize your business succession plan

MANSFIELD — Jake Penwell spent more time at the funeral home than the average teenager.

The Shelby native was just 14 years old when he got a part-time job at Turner Funeral Home. After school, his parents would drop him off or his employers would pick him up.

By the time he could drive himself to work, Penwell knew he’d be taking over one day.

“The Turners were always very forthcoming,” he said. “They wanted me to own the funeral home.”

Penwell continued working for the Bob and Catherine Turner, learning every aspect of the business. He went to college, obtained his funeral director’s and embalmer’s license in 2013 and bought the funeral home five years later.

This month, the business officially took on a new name — Penwell Funeral Home.

To this day, Penwell calls himself the product of a good succession plan.

“They just took me under their wing. They taught me everything,” Penwell said. “They wanted me to be successful as much as I wanted to be successful.”

Good succession planning ensures a business owner can comfortably retire and the enterprise can continue operating under new leadership.

Barrett Thomas, director of economic development for the Richland Area Chamber, recommended business owners start thinking about succession at least five to 10 years before they aim to retire.

Waiting until the last minute may mean accepting a less-than-stellar offer or having no time to groom a successor.

Sam Van Cura of Total Performance said he’s seen several local business close for that reason.

“Good will is a big part of selling a company and good will has to do with name recognition,” he said.

“It’s worth a lot of money when you sell a business, but it’s worth nothing if you don’t have a succession planned. I just feel sorry for people that work their whole lives, build up a business and don’t get to sell it.”

A strong succession plan benefits other employees and gives entrepreneurs the chance to get the highest return on the investment.

But the impact also ripples beyond the people earning a paycheck.

Strong succession strengthens communities

When small businesses continue to operate for generations, it benefits not just customers, but employees and communities at-large.

“We’ve seen the results of businesses that leave the community,” said Jessica Gribben, an economic development manager at the Richland Area Chamber.

“Either the (owner) retires, has no plan and the business ceases to exist, or ownership transfers outside of the community.”

While a business may survive financially with a non-local owner, the benefits small businesses bring to a community often diminish.

“Things tend to just leave the community — that wealth, decision-making, philanthropy, jobs — all those things,” Gribben said.

Planning ahead can help prepare small businesses for a smooth transition between owners, but Gribben and other experts say it’s easy for entrepreneurs to put succession planning on the back burner or ignore it entirely.

“They don’t want to think about life after they’re out of their business. Maybe they don’t think their business can run without them or they’re so invested, it’s part of them. So it’s just a really hard topic,” Gribben said.

For others, it’s simply a challenge of finding the time.

“It’s not easy. It takes a lot of resources to do it well,” Thomas said.

“You need your accountant, your lawyer and your financial planner all together to work on this thing, and that is expensive to get time from all of those people. When it’s not the primary thing you’re trying to get done, it’s tough to dedicate that much time to it.”

Nevertheless, business owners and experts repeatedly told Richland Source that planning ahead is worth the time investment.

“A lot of businesses are sold at the end with no plan and and maybe out of just complete exhaustion, maybe frustration,” Penwell said.

“Businesses can always be sold. But I think successful business transactions happen because there’s a plan ahead of time.”

We asked several area business owners for advice on how they navigated this transition.

If you’re selling your business to an employee, hand over responsibilities gradually

Jay Miller has worked for DRM Productions for 18 years, working his way up from software engineer to CEO.

An eighth-generation entrepreneur, Miller realized by his mid-20s that he wanted to be his own boss. It was something he discussed early on with DRM founders Bob Jones and Dave Damron.

“When I came on board here at DRM, Dave and Bob were kind of towards the end of their careers,” Miller said.

The trio ultimately decided to map out the company’s succession plan years in advance — Jones would retire first, followed by Damron five years later.

“I couldn’t afford to pay (Miller and his business partner, Jonathon Pierce) what they were probably worth at the time,” Damron recalled.

“So I said, over five years, you can have one quarter of the business, and then after that, they could buy out (the rest) from Bob and I over time. We did it slowly, and so they knew the business.”

According to plan, Miller and Pierce took over DRM Productions in 2019 — each with a decade of experience at the company under their belt.

Put other companies leaders in the forefront

Chaz and Austin Schroeder have been the co-owners of Black River Group for just under two years.

But the brothers and third-generation business owners were primed to take over long before their father and his business partner retired.

“Probably nine to 10 years before we actually took full control and bought them out, we were basically stepping in and assuming the majority of their role overseeing and running the entire company,” Schroeder said.

Giving future successors more responsibility leads to a smoother transition within the company and for customers. It also reduces stress for the business owner.

“If you start planning and putting people in place to take over for you, then you get to go on vacation, you get to have more time outside of that office,” Thomas said.

“You also get the benefit of knowing if you get hit by a beer truck, then there’s someone to take over.”

Prepare on more than just a business level

Conversations around succession often focus on keeping the business running. Dorman said sellers should also be thinking about what the sale means for their own lives, both financially and personally.

“It can be very, very emotional. You’re detached from your professional community, all your contacts, your networks, your relationships — particularly for men,” he said.

“Oftentimes, their whole identity and sense of self is wrapped up in their business and next thing you know, nobody needs them anymore.”

If you can’t fathom retirement, consider scaling back instead

One major obstacle to succession planning is that a business owner genuinely enjoys their work and doesn’t want to give it up completely.

Thomas suggested that business owners who feel this way find a middle ground. It’s possible to stay involved without staying in charge.

Bob and Catherine Turner continued to work at the funeral home for more than a year after they sold it to Penwell. Damron still helps out at DRM Productions with big projects.

“Rick Taylor of Jay Industries is doing the same thing,” Thomas said. “He’s not the CEO of Jay Industries anymore. That’s Paul Boggs.”

“I asked Paul, ‘What’s Rick doing? And he said, ‘Whatever Rick wants … he’s still involved, still knows all the things and gets to go do the parts that make him happy.'”