by jason_cramp | October 18, 2016 4:05 pm
By Scot Hunsaker
Before employees bought Counsilman-Hunsaker (this author’s former business) in 2012, the firm was in the same difficult place many long-time pool and hot tub business owners find themselves today. Like Counsilman-Hunsaker, a large number of companies in this industry were founded in the ’60s and ’70s by individuals with strong personalities, who spent many years working in the business—not on the business. These companies often involve family members or employees who are like family.
As patriarchs of these family firms consider retirement, one of the many questions they ask themselves is, “How can the company’s legacy be maintained while at the same time taking care
of employees and customers?” This is an even more pressing question when it comes to small family businesses.
Consider the following statistics from the Family Business Institute:
The prospects of a successful transition are just as poor when trying to sell to a third party. Why? The institute shows:
As a result, owners are rarely prepared to successfully transition their business—and realize its full value.
In a ’50s management style, where all decisions were made at the top and products were manufactured by a machine, selling a company was often a formula. This legacy remains with book value, earnings before interest, taxes, and amortization (EBITA), and revenue formulas for company worth.
But for service-oriented businesses, it is harder to successfully transfer to a third party and more difficult to accurately value than a machine making a product.
As a result, today’s company owners may need to create their future owners. This process requires going beyond the transactional business preparation with legal and accounting and, instead, teaching and mentoring the team to successfully lead the organization going forward.
That said, how can a lifetime of intuitional knowledge and business savvy be transferred to the next generation? Fortunately, there is an answer to this question that protects a company’s legacy, grows its liquidity, and makes employees (especially tough to please millennials) more loyal.
In general terms, this method involves turning employees into owners. This process goes beyond the employee stock ownership plan (ESOP) financing model, which often does not allow employees to make informed decisions and may rely too heavily on third-party appraisers and trustees.
Turning employees into owners actually gives them the skills and information they need to think and act like entrepreneurs. These same entrepreneurs end up being the best people to take over the company when the owner is ready to retire. Harnessing the collective energy of all employees does not happen overnight, however. Creating an employee succession plan can take three to five years to develop, depending on the business owner’s priorities and the guidance he/she receives.
Many owners make the mistake of underestimating how much time this transition takes. Too often, they do not put any effort into a succession plan until it is too late. Time frame aside, turning employees into owners comes down to a shift in mindset that the value of the company is not in what it produces, but rather in its employees and the amazing things they can accomplish through collaboration. The following three-part strategy can help make this transition:
This first step is often the hardest for owners accustomed to running the business. Owners
can start by having authentic conversations with employees about how they make knowledgeable decisions. This includes:
Some exercises that work to accomplish this task include:
Now it is time to start the strategic planning process. This is often done through a workshop away from the office. It is important to select candidates for this process on their willingness and ability to lead, not titles.
After selecting the team, start having authentic conversations and prioritize what matters most for the future of the company. Remember to let the employees lead these conversations. Owners at this point should be more like mediators and wise counsellors. This will be especially appealing to younger employees, or so-called millennials—and create new loyalty.
This stage is also an opportunity for the owner to test the candidates. Who has the will and the ability to lead and get things done?
During this phase, owners transfer the institutional knowledge out of their heads into the organization for all to access. Sharing information openly is critically important because employees need to be involved and reassured that what they are doing really makes a difference for the company. Remember, knowledge is not power. Sharing knowledge is power. The following steps can help accomplish this task:
ο Specifications
ο Design details
ο Engineering calculations
ο Estimating
ο Co-ordination documents
ο Contracts
ο Fee schedules
ο Marketing materials
Over a 10-year period, the team at this author’s former company made more than 2500 refinements to the system, improving quality, performance, and efficiency. They also formally developed a corporate knowledge base comprising more than 240,000 documents that are searchable and editable so when questions arise, they can be accessed and consulted.
In this stage, owners really begin to see the transition process take hold as employees embrace the tools of leadership they have been given over the course of the first two steps. At this point, every employee should be working under the shared-fate philosophy, meaning all employees share in the company’s success. These tips will help in this process:
ο What should be the criteria for an owner?
ο Who should decide who gets to buy stock and when?
ο Who should run the company when there is not a majority owner?
ο Should owners personally guarantee debt when required?
ο Who should not be allowed to buy stock?
ο What decisions should the owner expect to make or be consulted?
Ultimately, these steps—and working with a knowledgeable partner—will help business owners turn the most difficult transition of their lives into a rewarding experience for employees, customers, and themselves.
[6]Scot Hunsaker purchased a small engineering firm operating as a sole proprietorship from his father. That firm, Counsilman-Hunsaker, has designed aquatic facilities all over the world, including Olympic venues. During his tenure as CEO and owner, he increased company revenue, quadrupled the number of employees, opened four new offices in the U.S., and went from being licensed to work in 10 states to operating in all 50 plus three Canadian provinces. He sold Counsilman-Hunsaker to the employees for cash in 2012. Hunsaker has presented numerous seminars on business succession planning and is also the author of 30 published articles. In 2013, he formed Ardent Consulting to help CEOs and company owners prepare for these transitions with a particular focus on teaching employees how to think like owners. He can be reached via e-mail at scot@ardentgroup.com[7].
Source URL: https://www.poolspamarketing.com/trade/creating-an-ownership-culture/
Copyright ©2025 Pool & Spa Marketing unless otherwise noted.