Family businesses can be found in every industry across North Carolina. Building a successful one isn’t easy. It takes plenty of dedication, cooperation and sacrifice. That’s not to mention navigating the unique challenges presented by being related to your co-workers. Business North Carolina magazine and New Bern-based Ward and Smith PA assembled a panel of experts to discuss family businesses, their importance to their communities, the challenges they face and the rewards that make them worth it.
The discussion was moderated by Ben Kinney, Business North Carolina publisher and family business veteran. Support was provided by Quality Builders and Ward and Smith, whose Raleigh office played host. The transcript was edited for brevity and clarity.
What role does family play in your work?
HARRIS: My mom founded TradeMark in 1984. I grew up with it, going with her to look at properties. It was part of our family, like a sibling. We managed five or six properties through my teens. I started as a general broker, doing commercial leasing and sales, and moved into management, adding other services to the company.
DOUGHTY: I was raised in a family that owned a small business. We sold it about a year ago, when my father retired. As an intellectual property and business lawyer, I’ve become part of the team at many family businesses. It’s great to see how decisions are made.
CAPEL: My grandfather started Capel Rugs in 1917, so we’re celebrating 100 years this year. He started with braided rugs, which are still made in Troy, a tiny town in the middle of North Carolina. I didn’t start out in the family business. I attended UNC Chapel Hill and worked in New York’s fashion district before my dad asked me to join it. I started in our New York showroom, and I’ve been in sales since. My dad was in sales. I have always been around it. I grew up with Smitherman Mills and Capel Rugs. We don’t employ as many as we did 15 years ago. It has been a tough row to hoe the last 10 years, especially for textile companies. We think about how to keep the business rolling. We care what happens to our employees. They are our extended family. Some have two generations working for us. If Capel wasn’t there, it would be a big hurt on our little town.
BIERSACH: I grew up in New Bern, where my father was a legal adviser to family businesses. They took a lot of his time, which I wanted. But as I got older, I developed an appreciation for what makes family businesses special and valuable. After earning a law degree and MBA at UNC Chapel Hill, I was hired by a New York-based family business as part of its succession plan. UNC’s business school recognized there were many students from family-owned businesses, and it realized it wasn’t teaching them the wonderful nuances, challenges and opportunities that come with family-owned companies. So in 2008, I was paired with Steve Miller, who had been teaching a family business class, to launch the Family Enterprise Center. I do some outside consulting, but I primarily help next-generation leaders go on the lifelong succession planning communication journey.
CONRAD: We’re a fifth-generation business that started in East Germany. My grandfather’s grandfather was a pattern-maker. He taught his son, and they taught my grandfather, who immigrated to the U.S. in 1929. After success elsewhere, he settled in Weaverville. The business has been a part of my life since an early age. The factory is next to where I grew up. Every day when I was just a kid, I would open and read the company’s mail with my grandfather.
NAGLE: I work with my brother-in-law, Paul Conrad. Our company makes embroidered patches for Boy Scouts, Girl Scouts, police departments, U.S. military and others. We’ve made them for NASA since 1971, and we also stitch the one on the green jacket given to the Masters golf tournament winner. I’ve been with the company since 1991. My wife was pregnant when my father-in-law called, seeing if she wanted to work in the family business. She said no, so he asked her to hand me the phone. We’ve been in Weaverville ever since.
BARNES: My grandfather started Carolina Biological Supply in 1927. We’re in the third generation of ownership. I attended a family business conference, and the presenters were discussing how family businesses in the U.S. struggle to survive multiple generations. European and Asian markets sustain them, though most are sold under the third or fourth generation of ownership. I was passionate about that not happening to our company. I don’t have children but do have nephews and nieces. If they’re passionate about the company, like my siblings and me, I want them to be able to pursue it. We frequently receive offers to buy it. Our president, who isn’t a family member, knows to put them in the circular file. Selling would be a disservice to our 500 employees. The corporate culture would change, and it would become Carolina Biological in name only. It wouldn’t represent the blood, sweat and tears they invested.
MARSH: My husband, Ron, started Qualified Builders 21 years ago. Its niche is one-story outparcels such as restaurants, gas stations and truck stops. He brought on our son 10 years ago. I came on five years ago. We grew a little more than 300% in four years, so we’re tired and preparing to hand the reins to the next generation, including our daughter-in-law, who started about a year ago. We’re going to use a 10-year transition period to teach them, and then it will be their choice to continue or not.
How does your business affect family dynamics?
HARRIS: It takes a lot of passion to start a company. Sometimes there are sacrifices as a kid growing up, but those instill you with a strong work ethic.
BARNES: You’re resentful of the business when you’re young, but when you eventually realize that 400 or 500 people and their families depend on it, you understand it isn’t taking your parents away but rather giving us great things. I love to sleep at 4 a.m., but that’s when I need to use my computer or do paperwork. Life is juggling and prioritizing responsibilities until you work it out.
MARSH: My husband asked me to keep my corporate job, which had benefits, while he started the business. You have to be there for the business. Those first few years we had enough to make payroll. Our son will never deal with that, wondering if there is enough in his savings account to make sure everyone is paid. I hope future generations appreciate what we planted.
How do you train the next generation?
BARNES: It depends on the business. Every situation is different. Some family businesses insist that you go and work somewhere else first. And if you don’t, the family says you followed the easy road. I hate to hear that because everything is work. What fits my business like a glove won’t necessarily fit yours. Family dynamics play a big part in decision making.
BEAUDOIN: A certain amount of paying your dues is required. Then when it’s your time to run the show, the other employees are more likely to respect you. If you don’t, then it’s going to be like “Billy Madison,” the movie where the playboy comes in once a week to get his paycheck. In some businesses it can be sweeping the shop floor. At others it could be earning an MBA and then learning the industry elsewhere before returning to the family business. Both create value.
CAPEL: I have a daughter who recently turned 16. She has gone with me to the High Point Furniture Market for the past three or four years. She works in our showroom as a runner, taking customers’ information, getting a salesperson or whatever is needed at the moment. It’s important to show her what I do. She sees what the business is about, like I did working summers in the office or retail store when I was in school. I am one of four from the third generation in the business. She would be the fourth, but she’s a ways off.
MARSH: Our son would sort nuts and bolts in the back of the pickup truck when he was about 4 years old. He learned work ethic and the business from the ground up. So it was an easy transition for him, but it’s [still] scary for the first generation. We didn’t pressure our son to go into the business. He tried other things. We were surprised when he told us he wanted to go into construction. It ended up being a good fit. His exposure to other industries, such as banking, will help our company.
DOUGHTY: The family business culture offers many benefits, even for family members who choose not to work in it. I’m in the legal industry, but I still use the work ethic that I learned when I was young, sitting on the floor helping my dad disassemble and reassemble machines.
BIERSACH: Most family business books or consultants say to send your next generation into the world to work. That can be great, particularly if the business has become more complicated and skills or confidence need to be developed. But our research has found that’s not necessary for success. The real differentiator is giving children appropriate roles with real responsibility and accountability as they grow up. I know family businesses where the kid earned an education and worked elsewhere but was shielded from the consequences of actions and responsibility after returning. The child couldn’t grow into the leader the company needed. I know others where the child was responsible for tough work. That made the difference.
What challenges are unique to family businesses?
HARRIS: As a family, we spend too much time together and not enough time together. I recently did some succession planning. It was stressful. I may not be eating Thanksgiving dinner with my mom and dad for the first time. [Laughs] There’s nowhere to hide, emotionally or financially. Everything is wound together. You need balance.
NAGLE: Finding that balance is the challenge. You’re always told that you have to do what you’re capable of doing, not what I’m capable of doing. I have a 25-year-old kid and an 18-year-old kid. Paul has a 12-year-old. And Paul’s other sister has four children. You only need so many leaders, but there are seven grandkids. Each has to find a way to pull their weight.
CAPEL: Everybody brings their view to a job. We’re in a great groove, where we each are in the best position for the company. That’s the hardest thing to probably figure out. Many times you hear so-and-so is not pulling his or her weight in a family business. We’re four equals, and our president and CEO isn’t a family member. That is working for us. If we encounter issues, we go to him. You don’t always get your way, but we’re able to understand the other person’s views and ideas. We defer to the expert on that issue.
DOUGHTY: Many family businesses over-look valuable intellectual property assets, including reputation, brands, business strategies, software, client lists and employees. That can result in a loss of rights or liability for unknowingly violating a different company’s rights. Intellectual property rights are the least understood and underappreciated asset of a company, despite the fact that they are vital for the future of many companies.
BEAUDOIN: I see three big challenges among my clients. The first is family members in the business that don’t get along. Then there are businesses where some family members are in and others are out. Thirdly you have next-generation family members that want nothing to do with the business.
Why is succession planning important?
BEAUDOIN: Everybody who has formed or grown a business wrongly believes they will live forever. If you don’t have a succession plan in place, then those who are left — including the IRS and state — will decide what happens to the business. So to ensure the business’s survival, it’s vital to get everybody on the same page sooner rather than later. Relinquishing control is hard, but you can give up ownership without losing control. The generation before has to trust the generation that is accepting control.
NAGLE: Most of my father-in-law’s business peers are gone from our industry. We recently attended a trade show, and he walked the floor, where attendees were all my age. That hit him, and then we had the discussion. You can be part of the solution now, but it’s going to happen with or without you. The business is only in your hands temporarily. We have to be flexible and recognize the end game. It’s in our hands for a short period of time. We often say we’re just trying not to screw it up for the next generation.
BIERSACH: The skills that are required to be a successful entrepreneur run counter to what’s required to be a mentor. That makes it difficult to develop the next generation so it’s ready to accept the baton pass. It takes a competent, trusted adviser or peer who’s a couple of years older to get them to think about that. It’s a tough task, and there’s no practice. Most people do it once.
BEAUDOIN: Cooper Biersach’s father — who was one of my mentors — would say fair is a thing that happens once a year on the side of U.S. 70. It’s not about what’s fair. It’s about the vision and having everybody on the same page. And if not, how do you accommodate them to let them feel like they are still part of the family yet move on and do other things.
How are family businesses changing?
BIERSACH: All industries are changing. Family businesses have a unique opportunity because if they are communicating well internally, taking a long-term view and sharing an end goal, they can have patient capital and can make quick decisions. Many companies are slow to respond to changes in their industry, but family businesses can react fast.
CAPEL: My grandfather had three sons and a daughter. My dad and two uncles came home from the Army and college to work with their dad. Eventually they each received 33% of the business, and my aunt got 1%. My grandfather didn’t believe women should work. It’s a different time. My father always assumed that my brother would take over at least his part, but he didn’t. For him it has been a growing and learning experience over the past 10 years, having his daughter running sales. It has been great for our relationship.