When Joseph Evans suffered a fatal heart attack in July 2005, he left his 25-year-old son to till 1,200 acres alone at the height of the season.
“I didn’t have that person I counted on all my life,” Kevin Evans said. “There was many a night I worried until I got confidence built up. I had always had that safety net before. No matter what, I could go to Dad.”
Luckily, Kevin had his father’s friends and the benefit of eight years of working at his father’s side. He was able to keep the family farm operating, grow it to 2,000 tilled acres, build a watermelon-processing plant, and start direct-to-stores sales of his vegetables.
Succession is an oft-ignored factor in family-owned business. Just over one-third of the family businesses surveyed by Pricewaterhouse Coopers (PwC) last year had an appointed successor, and slightly more than a quarter had a written succession plan.
The overwhelming majority of family-business owners surveyed said they hoped their legacy includes keeping their companies profitable after they leave.
Experts say the best method of grooming a successor is the one the late Joseph Evans followed. He gave his son limited authority at 18, enabling him gradually to sign deals, buy equipment, and market grain. “He kept me on a tight leash, but he also let me make some big decisions,” Kevin Evans said. “If he hadn’t done that, I’m not sure I could have kept things going.”
Whether they are thriving or just surviving, Delaware’s family-owned businesses all share the American dream of passing a company they created to their heirs.
“It’s a great way to plan for your family’s future, right down to the great-grandchild you’ll never see,” said Paul O’Connor, owner of the Newark conveyor-belt company that bears his name. “They’ll never know who I am, but they’ll know I started a business strong enough to survive through the next generations for them.”
O’Connor is slowly teaching his sons Eric and Paul Jr. to take over his factory, with $9 million in annual sales worldwide.
From the smallest mom-and-pop shop to Walmart, America’s largest family business, 2014 was a good year. Three quarters of the country’s 27 million family businesses grew their sales.
That means it was a good year for the U.S. economy, because family businesses account for 64 percent of the U.S. gross domestic product and generate 62 percent of U.S. jobs.
And more than half of all family-owned businesses in the U.S. said they are very confident they’ll continue to grow in the next five years, according to Pricewaterhouse Coopers’ biannual survey of family-owned companies. They told PwC that they expect that growth to be steady rather than fast, though.
U.S. entrepreneurs surveyed were the most optimistic about what the future holds for them, citing government regulations as a barrier fewer times than their counterparts in other countries last year, said Alfred A.
Peguero, a partner at Pricewaterhouse Coopers, which surveys CEOs of large family-owned businesses in 40 countries.
PwC statistics clearly show U.S. family-owned businesses are bulking up in 2015.
Some Delaware companies, like O’Connor’s, are growing through exports and expansion. His shipments to Africa jumped 15 percent last year, and he’s building a plant in Oregon to serve his West Coast customers. Sixty percent of U.S. family firms earned export revenue last year.
Some family-owned businesses are pushing out new products, like Kevin and Katey Evans on their third-generation farm. They will soon debut two Frozen Farmer outlets that will sell juices, smoothies, sorbets, and crème ice made with farm-fresh fruits and vegetables and no added sugar. Sixty-five percent of U.S. family-business owners say the need to innovate continually is a major challenge.
Others, like Brad and Cynthia Winemiller of Greenleaf Services in Wilmington, are taking advantage of free government coaching to grow their business. The Winemillers snagged the lawn-maintenance contract for 670-acre Arlington National Cemetery after working with the Department of Defense’s Procurement & Technical Assistance Center, which coached more than 1,000 Delaware businesses last year, with counseling available in all three counties.
“I think everybody’s smarter from the painful period we all went through in 2008 to 2009,” Peguero of Pricewaterhouse Coopers said. “I think people are being smarter about their business plans and expansion plans. They don’t want to be too far out there, so they’re going to take everything cautiously.”
The top challenges family-business owners mentioned in the PwC survey were recruitment and retention, technology, market conditions, price competition, government policy, and the need to innovate.
Almost half the family-owned businesses flagged the impact of government regulation, legislation, and public spending as a concern – up 34 percent from two years ago. Part of the uptick may be connected to the health care legislation that went into effect last year.
Some local business owners are resigned to regulation, but the paperwork is time consuming: “The government regulations are something you just have to deal with. What’s more of a problem for us is the constant changing of the rules and regulations,” said Brad Winemiller of Greenleaf Services. “It doesn’t matter if you have a Democrat or a Republican or an Independent: whoever is in office is constantly making their own rules. That’s the biggest thing, just constant changes.”
Mark Pitrizzi, general manager of fourth-generation Hopkins & Sons, a New Castle moving company, said he sees why it’s important for over-the-road drivers to be regulated, but he said regulation is one of the most challenging aspects for his business.
Over a third of those surveyed said competition was a major issue for their businesses – up from 21 percent in 2012.
Matt Skomorucha of ABC Sales and Service said Wilmington once had 20 individual-brand appliance stores, but the advent of big-box stores and Sears Brand Central in the ’80s made the old system of individual-brand dealers obsolete. “I have to carry absolutely every brand I can get my hands on,” he said.
Skomorucha inherited third-generation customers, many of whom are comfortable enough to order appliances over the phone. “We have such a loyal client base that my father and grandfather blessed us with,” he said. Still, his grandfather didn’t have to contend with competition from the likes of big-box stores, Sears, BJ’s, and Costco.
Skomorucha is amused by the concept of club shopping: “Costco. What a novel concept. We’ll charge you to shop here. My grandfather would be appalled at that,” he said, laughing. “I’m going to call this a club. People can come down and shop whenever they want. There’s no membership fee, but you’re in the club.”
To Kevin Evans of Evans Farms, the American farmer is competing on a world stage and dealing with vagaries like weather. To succeed, he works 6 a.m. to 8:30 or 10 p.m. six days a week, and on Sundays he surveys his fields and manages the operation. “I don’t think people understand the amount of stress and the work that is asked of a farmer every year,” he said. “˜’Consumers want top-grade produce at a cheap price. If you want to put forth a good product, it takes a lot of effort.”
Sixty percent of family-owned-business executives surveyed said recruitment and retention of skilled personnel was a concern. That’s up from 46 percent two years ago. Some local family-business owners said recruitment is rough but retention is not a problem for them.
Mark Pitrizzi said retention isn’t a problem for the moving firm his father and grandfather started with one truck in 1946. Hopkins promotes 75 percent of its helpers and drivers to sales, administration, or management, he said, but finding a new qualified person when an older employee retires is a challenge.
Matt Skomorucha, who runs his third-generation business with brother Stephen, said his grandfather didn’t worry about retaining employees because he could always replace them, but the 22 people who work with them now are more like family. “These people are my friends and colleagues. The people I have with me have been doing this as long as I’ve been doing it. They’re pretty much the same age as I am. As opposed to being owner versus employees, it’s more a group of people who are accomplishing one goal. “
The next logical step in a successful family business is grooming the next generation to keep the operation running with the family’s values intact. The PwC survey showed that 73 percent of family firms believed their culture and values were stronger than those in other types of businesses.
Matt Skomorucha always jokes that a business is about to fail when you see a new Cadillac parked in the owner’s spot. “It’s the difference between trying to get rich and trying to run a good, ethical business and just feed your family,” Skomorucha said. “Dad would say, “˜I’m just going to feed my family.’ “
Almost two-thirds of the family businesses PwC surveyed had no appointed successor, but many of them had loose plans in place.
Paul O’Connor of O’Connor Belting International said he is grooming sons Eric and Paul Jr. to take over sometime in the next five years as he moves to retirement or semiretirement. “I pretty much let them run the operation, most of it,” he said. “I’m just now teaching them the financial parts. They think like I do. I don’t think we’ve ever had an issue where we disagreed.”
Local family businesses, from W.L. Gore and DuPont to mom-and-pop shops, are taking baby steps and giant steps to reinvent themselves and stay relevant, often because of what they see in the rearview mirror.
As Katey Evans said of her husband Kevin, who grew his family farm after his father’s death, “I know he didn’t want to see something that generations before him had worked for abolished because he was unable to step up to the plate. I think that pressure really drove him to make it bigger and better and keep it growing for our children.” ♦
