Planning for succession in the bus business

It should be a point of pride: In an era in which the federal government's Small Business Association reports that fewer than 30 percent of family businesses survive into a second generation (and only 15 percent make it to a third), it's not uncommon for motor coach operators to pride themselves on being second, third, or even fourth-generation business owners.

Yet planning for succession can be a time of indecision, potential family conflict and risk — and a task too often simply put off.

We've gathered up sources, talked to operators who have gone — or are going through — the process, and gathered a few suggestions:

1. Decide if succession makes sense
   Owning a business, even a family business, isn't for everyone. If you have no interested heirs or appointed successors, you might be better off selling your business. Even if you don’t plan to sell, going through the valuation process may help put things in perspective for you and your heirs.

   Still, it's a good bet that most family-run businesses want to stay that way.

   "Everyone says, 'Have you considered selling it?'" says Crystal DeLorenzo, fourth-generation president of Wade Tours in upstate New York. DeLorenzo, who runs the business alongside her younger brother, is looking forward to stepping back a bit now that the youngest of her four children has stepped into the business. "Selling is not even an option. This is a gem that's been given to us, an heirloom. There's a lot of pride you take when it's your name on it."

2. Decide when
   The SBA suggests taking time to write down your thoughts: Would you like to spend more time with your spouse or on the golf course? What do you want to accomplish over the next 10 or 15 years and how much money do you need? What personal goals might you want to achieve once outside of the business? Do you want to head happily into early retirement after a gentle transition to a younger generation, or do you want to hang onto all company control until it's pried from your cold, bony fingers? Most family businesses will benefit from a slow transition.

   In his book "Passing the Torch," author Mike Cohn suggests setting certain "target dates." Among them are the days that you will begin transferring ownership to others, when majority control will shift, when the process is to be complete, and when you will formally retire.

3. Decide who will run the business
   Generations ago, it was generally assumed that family businesses would be passed from father to son. Today, it's just as common for daughters like DeLorenzo to aspire to the executive office, or for several siblings or cousins to covet leadership of a successful business. And it's one of a leader's most important responsibilities to select the person or persons who will run the business.
   
   
   

   DeLorenzo, who, as the oldest of four siblings, took over the business from her father, is clearly pleased that her son, at the age of 26, has already grown the business considerably in the year that he's been there. None of her other three children is currently involved in the business, though she says that there's "a place for everyone" who wants to put in the work.

   In family motor coach businesses, it's often easy to see who has the right aptitude and attitude. Many kids grow up in the business, learning to drive or repair the coaches, lead trips and handle the front office. Still, many experts suggest making sure that heirs apparent go to college and spend a few years outside of the business, both to learn new skills — and to appreciate what a gift and obligation an inherited business is.

   Jim Thrasher, part of the famous Thrasher Brothers band and president of Thrasher Trailways, officially retired in June and has largely handed over the reigns to his son Alan and his daughter, Alyce Thrasher Davidson. He jokes that he's an unpaid "volunteer" at the company, coaching from the sidelines. His advice? "Be real sure your children or heirs are heavily involved and want to succeed in the bus business."

   Both DeLorenzo and Thrasher urged their heirs to go out, go to college, work on the outside — and come back if they wanted to. They did.

4. Have a long-term strategy
   This can be a real opportunity to do some self-examination and revise your business plan — or even create a new one. The SBA suggests getting together with your successors and talking out future plans, including possible new services, expansion, acquisitions and competitive positioning, as well as an honest assessment of where the business is currently.

   Most corporations and partnership agreements address what will happen in terms of shares of stock, assets or ownership if one of the owners or principals retires, dies or becomes disabled. The more specific, the better.

5. Weigh various power- and wealth-transfer tools
   This may be especially important for businesses in which not every heir is going to participate in the business. The Family Business Center of Ohio suggests considering a Limited Family Partnerships, which will give you (or the appointed executor) control over any assets placed into the FLP but will still give others (children, grandchildren or other heirs) an ownership interest (as large or as little as you choose) as limited partners.

   Various other trusts can be useful as well, helping to sort out eventual ownership, provide for spouses and protect family members from many liability issues. There are several types of buy-sell agreements you may want to consider to ensure that assets are handed down in a manner that is both good for the business and good for the family. You may also want to appoint a board of directors to help guide the company.

6. Give your successor the space he or she needs to succeed
   If "semi-retirement" is what you're aiming for, you can save a lot of headaches by making sure you give your successor the reins of the company as well as the title on the door. Many employees can tell tales of intergenerational conflict, complete with slamming doors and shouting matches. If you've laid out your strategy correctly and can maintain a level of mutual respect, you may be able to avoid much of the drama. And realize that a next generation will want to do things differently as technology, equipment and markets change.

   John Miller, of Miller Transportation in Louisville, Kentucky, is also part of an ascending generation, along with siblings and cousins. "We're all on the same team. As long as everyone's happy and making money, ownership isn't an issue."

7. Hire consultants if need be
   Even an heir that knows how to fix coaches, hire drivers, read spreadsheets and create marketing plans may have a weak area or two. Don't be afraid to bring someone in from the outside who can provide you with the skill sets you need and objectivity that can benefit any business. And good lawyers can be invaluable.

In the end, it's all about keeping businesses running and families together.

The FYI from MCI editorial staff values your feedback. Please e-mail any suggestions, comments, or ideas for future articles to fyi@mcicoach.com.