As he contemplates his and his agency’s experience over the course of developing and executing a succession plan, Corbin Gunstream reflects on the importance of the four Ds — Death, Divorce, Dissolution and Disinterest. While not the only guiding principles for an agency owner contemplating his or her exit strategy, they remain important considerations.

Gunstream, a partner in Engineered Industrial Products, Inc. (EIP), Santa Fe Springs, California, began working for the agency in 2005 and has been responsible for territory management in Northern California and Northern Nevada. He became partners with Kurt Fisher in 2017 and serves as CFO for the company in addition to his sales territory.

Gunstream, 35 years old, maintains that planning for the future is an absolute necessity. “No matter where you are in your career, you’ve got to be looking ahead. What are the variables that could occur that would cause me to leave the business early? Family considerations can affect your decision. How about if in the future your interests shift so that you want to do something else with your career. What if for some business reasons the agency has to be dissolved? What are your plans then?”

In making those plans, he explains that while his goal has been to make himself as valuable as possible to the agency, “I want to make myself replaceable, I don’t want to be the face of the agency. If something happens to me and the entire company fails, what have I accomplished? Any succession plan must affirm the value of the other people in the organization, that they are capable and have the skill set and are as engaged in the business as I am.”

He notes that his predecessors, Duncan MacDonald and Kurt Fisher, “did a great job of that over the years they’ve been in business.”

Career Path

In order to appreciate how and why Gunstream got to this point in his career, it should be noted that he began his career as an independent manufacturers’ rep right out of college where he was a double major in music and business. “I was as green as could be. I didn’t know a ball bearing. I didn’t know what a rep, distributor or OEM were. I did, however, know Duncan MacDonald on a personal level and learned that he needed a sales guy. Even in hiring me, he knew that while I had a strong interest in the job, I would take a lot of training — and I did. At the end of a couple of weeks of training he asked me what I thought. ‘Is this something you’re truly interested in? If not, we can call it quits right now with no hard feelings.’

“I let him know I relished the opportunity to work with a small company and found this whole new business world interesting.”

On the subject of training, Gunstream explains that wasn’t all that difficult. What was an eye opener, however, was the travel schedule. “While I was told from the outset that 50 percent of my time would be spent traveling, it turned out to be a bit more than that. That’s something you’ve really got to be okay with. For me, I was green, young, just out of college and married with no children. While that amount of travel might seem a negative, there’s a positive and that’s the flexibility. Basically, you get to decide when and where you’re going to travel to meet with customers.”

Planning for the Future

With that as his career background, Gunstream addresses the subject of the agency’s succession plan. “When I joined EIP 13 years ago, both MacDonald and Fisher were in their 40s. While they weren’t necessarily thinking about succession at that time, that changed by about 2009-10 when I had gotten more involved in the business. Our business had changed quite a bit. We had lost some large lines, gained others, but the economic downturn certainly affected us. I had become a bigger part of the planning for the company and was the treasurer at that time.

“The question came up about planning for the future. Duncan and Kurt weren’t ready to retire. The plan was still somehow off in the distance and there wasn’t a major emphasis on it. They’d occasionally make a comment such as ‘One day we’ll probably sell the business,’ but that’s as far as it went. At that point I left the company owing in part to the fact there really wasn’t a plan.”

Following a relatively brief three years with another company, Gunstream opened his own agency in 2016. “After about two-and-a-half years I had reached a point where I was going to make an investment in hiring another person to join the agency. That’s when I met Duncan and Kurt at a PTRA conference and the subject of succession planning came up. We decided at that point to merge our agencies and developed a plan that would allow me to buy out Duncan. Now Kurt and I are partners.”

According to Gunstream, thankfully EIP had two previous buyouts in its history. “Duncan and Kurt purchased it from a previous owner and that owner had purchased it from his predecessor. Duncan and Kurt knew how it was done before and I was brought up to speed with the process.

Valuing the Agency

“Bottom line, we’re a service business and you can value us similar to how you’d value an attorney’s or doctor’s practice. Our challenge was there are no guarantees in our business. We have 30- or 90-day contracts in place. And your lines are a bit of a mixed bag where some of your partners are stronger than others. What we decided on was to value the agency based on one year’s growth revenue.”

He describes the entire succession planning process as relatively easy. “We were all on the same page because we were all in favor of the action. No one felt rushed and no one was left feeling this was something that they were forced or didn’t want to do.

“We sought counsel through our accountant and had our respective attorneys look over the paperwork. Basically, we were able to make 90 percent of our decisions over dinner. That remaining 10 percent (i.e., checking details with attorneys), however, took a good six months. That was the only frustrating part for everyone.”

All along, Gunstream emphasized that the agency’s manufacturers were on board with the process. “They were overwhelmingly in favor of what we were doing. We didn’t speak with our customers all that much until the transition had taken place. What we did was to make sales calls with each other to alert them to the merger and let them know what was going on. Altogether we got very favorable responses from both manufacturers and customers.”

With the new plan firmly in place, Gunstream was quick to note how important effective succession planning is to an agency. “Regardless of industry, age or stage of ownership or even potential owners, succession planning is absolutely critical. Remember there are no guarantees in life. You never know how the stock market is going to behave or when a death will affect ownership. The rep firm owner who operates with no plan could be faced with a catastrophe if people make assumptions in the absence of a solid plan.”

---

The Important Role of Rep Associations

As a 35-year-old, Gunstream positions himself firmly as a millennial when he makes the following observations about rep associations. “I really feel the millennial generation isn’t a joining generation. We don’t form groups. That’s a mistake. Rep associations such as PTRA (Power‑Motion Technology Representatives Association) and MANA have been mainstays of our profession for decades. The comradery, transfer of information and sharing of best practices is irreplaceable.

“When I made my decision to start my own agency one of my first calls was to PTRA to ask them to allow me to attend their annual conference. I was invited as a guest of the association’s board. The result was I renewed contact with so many individuals I had known before. As a side benefit, I walked away from the meeting with additional lines.”

He adds that the benefits of joining and participating in an association can’t be replicated by simply visiting a website. “I have to admit that in just the last two months I’ve had two manufacturers contact us because of our presence on the MANA website. But that success doesn’t diminish our need to interact face-to-face with people. And while we’re a part of an association I’ve always been told that you only get out what you put in. If you just show up at a meeting and don’t contribute and participate, you’ll never get the hoped‑for return.

“In another 20 years there will be a new rep generation. If (my) generation chooses not to participate, there is going to be a huge gap. Those younger than I in the industry have to be made to feel welcome and learn the value of association membership.”

---

The Engineered Industrial Products File

Established: 1958
Location: Santa Fe Springs, California
Employees: Nine
Customers: Distributors, OEM, Integrators and End Users

• Distributors — The agency has long served bearing and power transmission distributors with the finest products in the industry as well as applications expertise and the experience to train in‑house personnel and customers. The agency’s history and expertise has earned it a place in sales and strategic planning with many of its distributor partners. Our goal is to make our lines the most profitable a distributor can sell.
• OEM — EIP calls directly on OEM customers whether they buy through distribution or direct. The agency feels it’s important to understand their needs and be able to provide the latest in technological advancements that might improve their product offering.
• Integrators — Contract integrators can function like an OEM, but often produce one-off machines that require a special level of care and partnership when specifying electrical or motion control components. EIP’s in-house design and applications expertise is unmatched in the western states. The agency’s principals typically consider them their West Coast applications engineering support as well as their sales force.
• End Users — End user sales are supported through EIP’s distributor partners who are assisted via driving new sales as well as in support for long-term existing customers.

Website: www.eip-inc.com

MANA welcomes your comments on this article. Write to us at [email protected].