© Dmitriy Shironosov | Dreamstime.com

Last May, I attended a sales meeting for one of our principals. The company had been founded in 1968 and enjoyed a long, successful history of using and supporting manufacturers’ reps. During the course of the meeting I noticed that the sales team had really begun to “gray.” As I thought about it, I realized many of the owners and reps in the room were my father’s contemporaries. They had begun representing this company in the mid to late ’70s. For most this relationship resulted in a long and profitable career; but unlike my father, many had not charted their succession path and were still active in the business.

Our agency, Lupton Associates, completed our succession plan in 2003 with my father’s retirement. I did not realize how long or extensive the planning process had been until I found myself immersed in the discussion. In fact, it all probably began while I was still in school, but certainly started in earnest at the beginning of my career.

I joined Lupton Associates in 1992. It was a 15-person sales agency which my dad had started in 1969. I was hired to develop business in New England. Our headquarters (and my dad) were located in Western New York State, which left me reporting to and supported by Ron Martin, one of the company’s veteran field salespeople. Being located 300 miles away from the home office and learning from someone other than my dad allowed me the space and ability to develop my craft. It was not easy.

Challenges of the Job

Our products have a long sales cycle and even when working on a new program, we needed to make the argument to displace the current supplier or to change the manufacturing process to fit our principal’s capabilities.

The sales cycle was tough and I often thought about how much more difficult it must have been for my dad in 1969. Unlike when my dad started, I had mature, financially solid principals to represent; and I knew that other salespeople before me had succeeded. If I worked hard and was persistent, history told me, I would win my fair share of work and I would be successful. This proved to be true. I demonstrated my abilities, my work ethic and the fact that I was not afraid to use new technology to help me organize and improve my sales effort.

As I began to take on management responsibilities in the late ’90s, my style and application of technology proved to help others on our team as well. Over time, I assumed a leadership role in the organization, while my dad remained the president and sole owner. This provided him the confidence and ability to see how I would conduct myself as the owner. The demonstration of my operating style proved to be a critical element of an effective succession plan. As I would have a large financial obligation to pay my dad for the business in the following years, it weighed on me that if I was unsuccessful in my new role, the transition would have failed and he would not have received his ROI for a business which took 35 years to build.

Creating the Plan

Creating a viable succession plan was very difficult for both of us. Being part of a family business meant there was also an emotional component to the plan. We had several outside advisers, led by Graham Smith, a veteran with our company for more than 25 years, who assisted us in determining the value of the business, the best tax strategy, types of insurance to guarantee the transaction, and the most appropriate language to protect all parties during and after the transaction. That part was easy. The hardest part for both of us was figuring out whether the deal was fair. Neither of us wanted to short change the other, and we were both in uncharted waters.

He was selling his life’s dream and a career’s hard work, while I was taking on a great opportunity and an enormous financial burden. Our transition occurred just after the Y2K melt down, which made valuing the business even more complex. I wanted to do the right thing, but I also did not want to financially fail and become a statistic.

When he started the firm, it grew gradually over 35 years and was generally debt-free. I would be starting a new chapter for the firm and debt would be a big part of the equation. We finally both agreed that we had done our best and moved forward with the deal. Ten years later — it has all worked out for our employees, our principals, my dad and me. We are both grateful for all the valuable advice we received in developing and executing our plan.

I realize that not everyone has a next generation that they might entrust with their life’s work. Either there is not an apparent successor, or the next in line might be great at selling but lacks the financial and management strength it would require to run a sales agency. This skills deficiency ultimately puts the income stream at risk for the generation that is selling.

Sharing With Others

Knowing that Lupton Associates is a large agency with aspirations to expand in the Midwest and Western States, I have come to realize that we might provide a great solution to the one-three person agency that has not yet found a succession path. By leveraging our balance sheet, our business/financial systems, our marketing resources, the synergies between our combined lines and the acquired agencies contacts in the local territory, we may find a great opportunity for our principals and both rep firms to WIN. By acquiring a small agency, we would create their succession path, allowing them to reap the benefits of a «soft landing.” The acquisition would reward their long, successful career, while helping our agency gain access to a new market. Ultimately, our agency would build from their very strong foundation and the knowledge base that they already possess.

If you find yourself without a succession plan and approaching the end of your career, contact Lupton Associates. We may find that a great opportunity exists for everyone to win. Visit www.luptons.com or e-mail us at: [email protected].