Succession Case Study: Kelly’s Port

Randy Kelly, it seems, had a big jump on most small business owners. Unlike many of his colleagues, he began thinking about succession planning when he first bought the property for his dealership, Kelly’s Port.

That was 1977, and because of the 30-some years he’s had to think about and plan for the succession of his business, Kelly’s Port has been transitioning to the next stage of ownership quite successfully. While Randy still genuinely enjoys the business, he’s at the point in his career where, “the years of working six days a week, 10-12 hours a day are done.

“You get to a certain age, and you just don’t have the gas tank you did when you were a kid,” he explains.

That’s where Kelly’s two sons, Kyle and Ryan, come into the picture. Practically raised in the business, they graduated from college (2006 and 2008, respectively) and immersed themselves in the dealership. Over time, they’ve moved naturally into their respective roles on the sales and business management side (Kyle) and the service and operational side (Ryan).

As if Randy’s 30-plus years of wisdom weren’t enough, the educational process for his sons has been aided significantly by the company’s sales manager, Frank Petrizze, and service manager, Alex Chisholm, who has 30 years of experience with the company himself.

In fact, Petrizze, a 16-year employee, is now in a position in the years to come to earn/purchase a small amount of stock in the business. The idea behind this strategy, beyond rewarding Petrizze for his hard work and loyalty, is that when Randy and his wife, Jane, pass on, and Kyle and Ryan inherit equal shares of the business, as is outlined in their wills, Petrizze will have a tie-breaking vote, should they get stuck on any decisions.

In addition, life insurance plans have been purchased for both Randy and Jane to ensure that the business will be able to continue as usual financially and to cover any and all estate taxes.

Ultimately, for those who, like Randy, are looking to keep the value of the business — along with the business itself — “in the family,” there are a limited number of options when it comes to transferring power from one generation to another.

“If you build a business up to a certain point, you’ve only got about three exit plans, short of dying and leaving it for everyone else to worry about,” he explains. “One is to sell it for a bunch of cash and by the time you pay the taxes on it, you may or may not have enough to get by on. The second is take some money down and owner finance, but five years could go by and you could have the thing back in your lap in a lot worse shape than you left it. The third is to have heirs and pass it along to your kids.”

For close to 30 years now, option three has been in Randy’s plans.