Finding Success in Succession: Merging Goals, Passion and Personalities into Succession Planning

Siblings often have different opinions and priorities, which are a normal part of family life, especially if there are large age gaps between siblings. But those differences can become a source of uncertainty for employees and middle management when it comes to running a family-owned business. Owners with different views, commitment levels, and personal situations can cause concern when there isn’t a succession plan in place.

Such was the case for the Strauss brothers, owners of Miller’s Smorgasbord, Plain and Fancy, and Amish View Inn & Suites among others. Miller’s Smorgasbord has been in the family since Tom Strauss, Sr. purchased the restaurant in 1947, after his return from World War II. Though the family didn’t have enough money at the time to change the name, the restaurant became the foundation for the Thomas E Strauss, Inc. legacy. Now, decades later, the corporation is owned by three brothers, Don Trout, Tom Strauss, Jr. and Dan Strauss, each over the age of 60.

The brothers have a hands-off approach to the business, trusting Al Duncan and his team to manage and grow the businesses. Al Duncan is the President and Treasurer for Thomas E Strauss, Inc. and is responsible for leading the company and business development. While the strong leadership team and empowered middle management infrastructure laid the groundwork for a successful business, there needed to be a plan for succession. “For about seven or eight years, I was saying they needed to have a plan. You don’t want an event to force you to make the changes you need to make,” related Duncan. Dan Strauss recognized the wisdom of this advice, and knew that the brothers needed an advisor that could handle the dynamics unique to family-owned businesses.

Thinking Outside the Box

Thomas E Strauss, Inc. had a longstanding relationship with another local accounting firm, which, according to Duncan, was both a good thing and a bad thing for the owners. “Sometimes you can be with someone so long, you’re not thinking outside the box. They needed a clean slate,” Duncan explained.

The owners knew they had a big undertaking ahead of them, and Strauss didn’t believe their current firm had the strategic thinking they needed to best position their business for the next phase. “They were good with the nuts and bolts,” Strauss said of their previous accounting firm.

Duncan’s sentiment was similar: “When we were looking to go with a different firm, we needed a firm to think outside the box. A firm that really could advise the owners and be willing to take a risk with the owners.”

Most importantly, both Duncan and the Strauss family wanted a team that would match their company values. “We have a lot of passion for what we do. And if someone’s just there to send a bill, that’s not the kind of people I want to work with,” outlined Duncan. When Dan Strauss brought the Walz Group in as a possible accounting partner, Duncan felt the firm would match the attitude of their client. He explained, “My feeling was that the Walz Group would be able to do good things for their client, and if they didn’t think they could do it, they wouldn’t want you as a client.”

Meeting Challenges Unique to Family-Owned Businesses

As an outsider to the Strauss family, Duncan could provide a unique insight to what it means to work closely with a family partnership. Duncan enjoyed high levels of trust with the brothers, being trusted to grow and leverage their assets on their behalf. But, regarding the future of the company, Duncan needed someone to bring the brothers to a consensus on their succession plan. “They each have a different perspective,” said Duncan, “and that’s why it took someone like the Walz Group to get these guys into a room and to agree.”

Duncan explained that part of the value the Walz Group brought to the group was their integrity in delivering advice. While some might be hesitant to deliver recommendations the brothers wouldn’t want to hear, the Walz Group held firm to their convictions. Duncan had this endorsement to add: “I think that in a family held business, the Walz Group is going to give their best professional advice, and sometimes that’s risky. People might hear things they don’t want to hear, and you could fire [the firm] and hire someone who will tell you what you want to hear. I don’t think the Walz Group is risk adverse, and I like that.”

Dan Strauss was also quick to admit the family needed the direction. In the past, the owners weren’t as connected with the business, and did not adjust for changes in the economy. Now that they were setting the course for the future of the business, they wanted to avoid some of the experiences they had in the past. As Strauss put it, “Experience is what you get when you don’t get what you want. And we were getting a lot of experience. And the Walz Group took the rough edges off all that.”

The Process

The Walz Group became an intimate member of the Thomas E Strauss, Inc., team, and for the first several months, Brett Tennis met with the partners to understand the businesses and the owners’ roles within them. Tennis began to challenge the partners to consider what would happen to the business if an event suddenly changed their ability to be the owners. Rather than having an event determine the future of the company, Tennis sought to rally the partners to one course of succession.

“Brett was pretty tenacious,” said Duncan, reflecting on the meetings. He reported the family influence was a factor, and Tennis kept the focus on achieving results. Strauss similarly felt Tennis’ dedication was necessary, saying, “They’re not there just to help the company, but the leadership as well.”

The process was long and detailed: they would plan for an hour-long meeting, and then be there for three. Through Tennis’ presentations, the partners were able to fully understand the value of their company, and the consequences of not having a proper exit strategy. “There was an efficient way to accomplish our end game. And through his presentations, we had a real good example of what needed to be done.”

For example, the brothers wanted to consider opening the business to being owned by the employees through stock ownership. “We were looking at prices,” explained Dan Strauss, “or at a range of prices for our sale. We looked at a sale that would involve employees having profit sharing. There’s a lot of dedication at my company, so it was something we had to consider.” However, Tennis understood the brothers’ needs, and that the structured settlement necessary to provide employees with stock ownership did not match their goals. His work, along with the Walz Group team, saved the partners time and anxiety over trying to make the plan work when it didn’t serve their greater purpose.

“Brett [Tennis] has really been a light,” Dan Strauss said. “Not only since he’s showing us a path forward, but he’s closing the door on considerations we’d made that really weren’t viable. It intensified our focus.” Dan Strauss specified that the hyper focus Tennis was able to provide through his experience in this process enabled the partners to spend less time on it. “Things get resolved quickly,” he added.

Tennis, with the support of the Walz Group, was also able to reveal mistakes in previous business valuations that could have disrupted the entire process. In particular, one valuation previously created for one of the companies came in very, very high, until Tennis reviewed it and revealed it did not include certain expenses. Duncan added, “They’re interactive, proactive, and can see beyond the day-to-day stuff. A lot of firms say they offer that… but we’ve experienced it with the Walz Group. They told us what they could do, and they did in fact get it done.”

Results

Finalizing a strategy is a landmark achievement. Duncan reported that the owners had tried to enact a succession plan in the past. “It’s probably going on 8 or 10 years that I have been working with the owners to get them to do a long term plan,” he specified. “And we got all three guys to agree to the same thing, and to get it on paper. Brett was able to get it done.” Tennis, along with the team at the Walz Group, was able to bring the Strauss brothers into agreement about the future of the business, set up a succession plan, and help them determine the best future for their family-owned business.

Because they were being proactive in creating a plan for their future, the leaders were able to be up front with the company employees, neighbors and the press. The leaders could release information on their terms, starting with Duncan and senior management, then with everyone within the businesses. Within 48 hours, everyone who was directly affected knew about the plan. Then the press was informed, and in very short order, Duncan met with the properties’ Amish neighbors. The brothers were in control of the information release, and they were able to ensure the message was clear, consistent, and delivered in a timely fashion.

Dan Strauss reported being happy with the results, especially in how Tennis and the Walz Group were able to guide the partners through the process of next steps. In relating it to his experience with previous firms versus the Walz Group, Strauss related, “It’s hard to find the convergence of good cost versus results. And we’re getting results. They bring so much experience to the table in an advisory capacity.”

The Walz Group and Thomas E Strauss, Inc. shared comparable values, and that enabled the two companies to work well together. The people of Thomas E Strauss, Inc. live by the credo that “Great service always makes the difference,” and value “creating opportunities to develop relationships.” The Walz Group demonstrated the same values in focusing on their relationships with the family as well as with Duncan’s team. They also lived up to the value, “Do the right thing, even when it’s not easy.” Both Dan Strauss and Al Duncan describe a respect for the Walz Group and their willingness to work tenaciously to get to a point of agreement, and for living up to their promise for results.

Rather than letting an event or circumstance dictate how the brothers would conclude the legacy their father started, the owners of Thomas E Strauss, Inc. took control and allowed the Walz Group to lead them through the adoption of a succession plan. As a result, the owners can feel secure in their strategy for carefully planned exit to their involvement in the company, and the employees can feel secure that the business will follow the course set before it.

Download Full Case Study