All in the Family

How marine businesses manage relationships and plan for the future

At the “A Contrarian Strategy for Preserving Wealth” session during the Marine Dealers Conference and Expo in November, Tom Deans, Ph.D., provided some potentially concerning statistics: Only 12 percent of family owned businesses successfully transition to the third generation and only 4 percent successfully transition to the fourth.

In an industry with a large number of family owned and operated businesses, these numbers can be a bit unnerving. What can boating businesses do to chart their course to long-term success?

Many marine business owners and managers are also juggling several different family relationships within the company: spouses, parents, children, siblings and more.

Dealers and manufacturers have offered their insights on managing these relationships and planning for the next generation to take over the business. While there are certainly a number of challenges, these marine professionals agree that with open communication, mutual respect, trust and immediate action, the experiences will ultimately be rewarding.

Know and respect each other’s strengths

Trust. Communication. Honesty. These are all attributes within a strong, healthy marriage and within thriving business partnerships. And when your business partner is your spouse, they are more important than ever.

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Bill Fulton founded BMC Boats in 1998, the same year he and Paula Fulton met. At the time, Paula was working at Sea World but she began working at BMC Boats just before the couple was married in 2000.

Similarly, Sherry and Larry Tague of Lake Viking Marine purchased their marina in May 1988 and were married in July of the same year. Larry was already working in the marine industry at the time and Sherry was working on a gas dock. Sherry is the CFO and Larry is the president, having recently transitioned ownership to his son, Randy.

It’s important to set boundaries for when to talk about the business at home, but a huge benefit of working together is understanding what is happening in each other’s jobs and being able to bounce ideas off one another.

“That’s how we work through problems,” said Paula. “We’re able to talk about it. It helps both of us to figure out what the solutions might be.”

At BMC Boats, employees often treat husband and wife Bill and Paula Fulton as the dealership’s “mom and dad.”

At BMC Boats, employees often treat husband and wife Bill and Paula Fulton as the dealership’s “mom and dad.”

The Fultons also actively maintain expectations on where everyone stands within the company. In the case of BMC Boats, Bill is the original owner and he ultimately has the final say on any business decisions. The Fultons believe someone has to take charge – husband or wife, depending on the circumstances of that individual business.

“If you both try to [take charge], you’ll butt heads all day long and you’ll never make the business work,” Paula said. “I’d hate to see a couple get together and both of them have headstrong ideas and they could never compromise with the other. Because if they don’t, they’ll never make it.”

Ultimately, spouses should be able to trust each other in their areas of the business and rely on each other to help make decisions despite any “pecking order.”  This mutual respect is paramount.

The Fultons do try to “turn it off” as much as possible when they are home. They schedule a number of vacations throughout the year, usually in the spring and in the fall around their anniversary. These vacations are almost always cruises because their phones won’t work and it allows them to truly step away.

“We work all the time so we look forward to those times together,” said Bill. “It’s important that you have those quality times together where you’re really just relaxing, and truly [the business mode] is turned off and you’re enjoying each other.”

Trusting your partner completely and communicating any issues is advice you’d hear in a marriage-counseling course, but it is also integral when working with your spouse.

“The first time you hold something in, the problems will begin,” said Sherry. “And if you can’t trust your partner in personal or in business, it won’t last.”

Front row: Larry Tague, Sherry Tague, Randy Tague (Larry and Sherry’s son) Back row: Robert Heldenbrand (Larry and Sherry’s son-in-law), Haleigh Heldenbrand (Larry and Sherry’s daughter), Meagan Threlkeld and Luke Threlkeld (Larry and Sherry’s granddaughter and grand-son-in-law)

Front row: Larry Tague, Sherry Tague, Randy Tague (Larry and Sherry’s son)
Back row: Robert Heldenbrand (Larry and Sherry’s son-in-law), Haleigh Heldenbrand (Larry and Sherry’s daughter), Meagan Threlkeld and Luke Threlkeld (Larry and Sherry’s granddaughter and grand-son-in-law)

Sherry believes there are definitely advantages to those relationships blending. She never has to worry about trusting her manager because two couple supports one another constantly.

“We decided when we made this choice that we were going to be there for each other in both personal and business, and there wasn’t going to be any fighting. ... We were going to come across to the customer and the employees as a united front,” said Sherry.

Paula’s strengths are with marketing and people-based skills, whether it’s customers or employees, and Bill is budget-oriented. Trusting each other’s strengths has been a huge component towards the success of BMC Boats.

“Find your strengths and use those strengths,” said Paula. “If you’re determined that your strengths are exactly the same, it’s going to be quite a hassle.”

A whole different playing field

It can be difficult to work with your children and manage family relationships, but know that if you’re feeling stressed you’re not alone.

“I used to think that … we were the only ones experiencing the challenges of having four family members in the business. I have come to realize in getting to know other families in the marine industry and talking with some of the parents and the younger generations that it really is across the board,” said Nancy Smith, owner and vice president of Colorado Boat Center.

Smith and her husband and co-owner Tom have two adult children working in the business: Eric and Ashley Smith. They have worked at Colorado Boat Center for nine and eight years, respectively, not including the many years they spent washing boats.

Josh Vallely, general manager at Vallely Marine, believes it is impossible to keep those relationships 100 percent separate.

“Most of us play in this industry when we are not working, so our family hobbies are also engrained in the business we do,” said Vallely.

Vallely highlights the importance of establishing relationships amongst family members in areas that don’t involve business topics.

“Spouses, kids, or family members not associated in the business don’t need every family gathering to be a business meeting,” said Vallely.

Larry works with his spouse, his son, his son-in-law and his grandson-in-law, and he says it’s a whole different playing field when it comes to managing business relationships with your children.

“Sometimes that [parenting aspect] still gets in the way even though they’re 40 and on their own,” said Larry. “Sometimes you have to say stuff that boy, you wish there was some way you didn’t have to.”

Managing expectations across generations has helped the Smith family work well together.

Managing expectations across generations has helped the Smith family work well together.

Colorado Boat Center recently dealt with some difficult decisions regarding their children. Eric Smith was previously in position to work toward ownership of the business but became unhappy in the role. He left the dealership for six months and eventually came back with an expressed interest to not be in an ownership role. He is now the office manager.

Smith described the experience of Eric leaving as “really tough.” There was some initial apprehension about his return but it has worked very well for the business with Eric in a role that makes him happy.

“It took a while for everyone to realize he wasn’t coming back in the same role,” said Smith. “Once there was enough time to see things in the different setting, there was a lot of ease for everyone’s part.”

Even and especially when times get tough, communication is critical to keeping the relationships working. The conversation can be hard to initiate but it’s important to be direct.

Carly Poole, operations manager at Buckeye Marine, comes from a different point-of-view as she works with her mother in the dealership and previously worked with her father and uncle. However, she also views the communication between family members as crucial and stresses the need for both generations to understand from what perspective they’re speaking when working in a family business.

“Are they speaking as a … mother-daughter, mother-son, father-son … or are they wearing the boss/co-worker/manager hat?” said Poole. “Because those are very different conversations.”

Whatever the case, having very clearly-defined roles that all generations understand is exceptionally important, said Poole. This goes as well for family members’ positions within the business.

“It’s not always the best decision to have a parent manage their kid. Sometimes it is. My mom is my manager and that works fine,” said Poole. “But our sales manager is my brother’s manager and that works fine as well.”

Managing cross-generational relationships in the dealership also means managing expectations.

“Don’t expect any more from your family members than you do from the rest of your employees and vice versa,” said Smith. “The family members should not be expecting any more of the owners [too].”

Vallely, his uncle, Tim Vallely, and his dad, John Vallely, split duties amongst the owners to cater to individual strengths. For instance, Josh and his uncle split the responsibility of managing boat brand relationships.

Having multiple generations in the business drives growth, energy and change, say Josh and John Vallely.

Having multiple generations in the business drives growth, energy and change, say Josh and John Vallely.

The Vallely family is able to learn from each other’s expertise and experience to make decisions for the business.

“Having multiple generations in the business … drives growth, change and energy throughout our business,” said Vallely. “The next [generation] comes into the business and provides new ideas, a new set of eyes on current operations and brings new energy into the organization.”

A mutual respect across all generations helps keep any family business fresh, stable and thriving, said Smith.

“No matter what your current family structure is, prepare for the possibility of having family members working in the business by having a plan that has been well-thought out and includes expert advice.  The plan should include clearly defined roles, expectations and progression,” said Smith. “Without such a plan, you are going to be flying by the seat of your pants and adding unnecessary challenges to family relationships.”

Grow individually, together

Some people could never work with their siblings. The hair pulling and shin kicking of their youth would somehow creep its way back into the adult relationships. For some marine businesses, however, this isn’t the case: working with their siblings contributes to the business’s overall success.

Take Gordy’s Lakefront Marine, for example. You don’t get to be Boating Industry’s Dealer of the Year if you spend all of your time fighting.

Siblings Rallee Chupich, Tom G. Whowell, Tigrr Workman and Steele Whowell have equal ownership in the business. Gordy’s was transitioned to all of the siblings from their father, Tom W. Whowell, who still helps on-site from time to time and is actively social with customers at the restaurant.

Because four siblings, instead of one key person, run the business, Gordy’s established a family council. This allows the family to keep work and family time separate, all the while reducing friction and creating a more harmonious work environment.

The council was developed in 2008 with the goal to meet approximately three to four times a year to discuss specific items and concerns within the dealership.

Tom G. Whowell and Chupich boil it all down to the importance of establishing habits between owners, siblings or not, and the standards for the owners are the same if not higher than they would be for anyone else working at Gordy’s.

“It’s really all about the processes and the meetings, like a normal business would manage,” said Chupich.

Poole works with her brother, Jay Poole, and mother, Debbie Poole, in the dealership. Poole and her brother learned from their father and his brother, who were previously the co-owners of the business, that it’s important to have a distinction between work and family. Unfortunately, their working relationship provided the next generation with a model of what not to do.

“They had very differing views on [running the business],” said Poole.

For example, if a family member needed a job but the business didn’t have a position open, one would make a job because “that’s what you should do” and the other one said “no, the business doesn’t need any more help, so we shouldn’t hire them.”

Making these distinctions ahead of time was a top priority for managing the business when Poole and her mother and brother bought Poole’s uncle’s shares and took hold of ownership. Therefore, they hold family business meetings. Jay is not in a managerial position so their family business meetings are separate from manager meetings and address different issues.

Clearly defined roles across generations have contributed to the success of Buckeye Marine.

Clearly defined roles across generations have contributed to the success of Buckeye Marine.

“That suits the strengths of us as individuals. While we’re all owners of the business, that doesn’t necessarily mean … we all need to be senior management. We’re in positions that help the strengths of the business,” said Poole. “[We address] things that affect us as family members working together in the business so that we can try and avoid any potential problems before they start.”

Poole suggests these meetings happen outside of the business and to make a distinction when you begin working together whether your family business is based on a family-first or business-first mentality.

“Both of them have their up-sides and down-sides, but it’s important that everybody’s on the same page,” said Poole.

At Gordy’s, each sibling has their own teams and areas of expertise. Whowell is the director of sales, Chupich is director of service and restaurant operations and Steele is the director of business strategy development and marina operations. Workman has five children so her work at Gordy’s is on payables and bookkeeping for the restaurant as well as special projects.

“If all three siblings were leading the same team, it may be more challenging,” said Whowell. “Each has a different style and each has a different skill set, and I think we know that, understand it and utilize the strengths to the best of our ability.”

Though the siblings each have their skill sets in separate parts of the business, isolation is never the goal.

“Ultimately, we’re all on the same leadership team and we lead the company as a whole,” Whowell said. “[A] company gathered around a vision, mission, values and alignment is critical.”

The Whowell family at Gordy’s never forgets to have fun together.

The Whowell family at Gordy’s never forgets to have fun together.

Having siblings run a family owned and operated business helps establish a culture of family among its employees, to the point where some customers have assumed non-related employees are part of the Whowell family.

“How do you build a culture? By modeling it at the top,” said Whowell. “I think the family members being there and modeling that culture in the organization sends a clear message throughout the team.”

“Everybody has so much more commitment, dedication and concern for the customer and their teammates on a personal level,” said Chupich.

1959smThe one thing the siblings at Gordy’s never forget to do is have fun. They make time for paintball games and other activities, and of course days on the water.

“We all enjoy this fun business and what it provides for our own family as well,” said Whowell.

When it comes to running a business with your siblings, Chupich cannot stress enough the importance and value of working with a 20 group. Many 20 groups work with outside consultants in areas such as family business consulting.

“There’s a lot of family businesses, as well as perspective, [in 20 groups] that can be huge resources for any family member involved,” said Chupich.

Whowell suggests looking for business centers and experts who specifically cater to family businesses, not necessarily marine businesses. For example, the University of Wisconsin – Madison near Gordy’s has a family business center the family has utilized in the past. The Family Business Consulting Group in Chicago has also provided useful insights in specific business areas such as sibling partnerships and creating a board of directors.

“[Dealers are] experts in the marine world, but we may not be experts in family businesses and managing them. Use the resources who are,” said Whowell. “Once you start to do some research, I think a whole world opens up of opportunity of resources that are available.”

Poole recommends taking a leadership development program with your siblings to understand each other’s working styles as well as your own. She says she and her brother learned a lot about one another in the process of taking a course through Spader Business Management.

“[We learned] about each other’s personalities, our strengths and weaknesses, areas where we can help each other, ways we can better communicate,” said Poole.

Succession: Talk often and plan early

All of these family dynamics become factors in one key event in the business’s lifetime: succession. How do you manage family relationships while transitioning ownership and keep the business thriving?

Larry Russo, Sr. has inherited Russo Marine and passed it on to the next generation, so he’s seen both sides of the equation. As an only child, Russo’s transition into ownership of the business was a smooth one, but passing it on to his two sons was a bit more challenging.

The transition period began in 1998. Russo turned 50 and his sons Larry Jr. and Alex decided to hire a succession planner for Russo, knowing that planning can often get deferred.

“My kids were pretty progressive in their thinking about protecting the business assets and protecting the value of the business by ensuring that we’d have professional guidance through the transitional period,” said Russo.

Larry Jr. and Alex Russo’s proactive succession planning helped Larry Sr. transition ownership to his sons with ease.

Larry Jr. and Alex Russo’s proactive succession planning helped Larry Sr. transition ownership to his sons with ease.

Russo Marine hired professionals to guide them through the process of transferring the company stock, with tax avoidance as the motivation.  Over the next 10 years, Russo Marine’s accountants annually gifted stock from Russo to his sons. The Russos also obtained cross-purchase insurance and updated the family wills to protect everyone against the unexpected death of any majority stockholder.

“It’s not a singular decision to do something [to transition] and it’s done with. We had to go through 10 years to successfully complete our succession plan, but it kind of goes on autopilot. You don’t think about it every day,” said Russo. “You only think about it once a year actually when [you] have to sign a stock authorization.”

Buckeye Marine recently underwent a succession in circumstances Poole describes, quite honestly, as “horrible.” Her father was diagnosed with cancer in September 2012 and passed away a year later, and the family didn’t have any discussions about what would happen to the business.

“It’s one of the hardest discussions to have and, arguably, the most important,” said Poole.

A legal agreement was in place in the event of an owner’s death but much of this information was not openly communicated to the whole family. Dealing with this transition during the death of her father made the legalese of the event that much more difficult.

“When you’re in an emotional situation … that’s the worst time to learn because you can’t take it all in,” Poole said. “Having a succession plan because you’re forced into it is, I can say, a very difficult situation.”

She notes that many families choose not to think about succession until the older generation knows they are ready to exit the business, and thus don’t believe they need to discuss it. Poole strongly recommends the open dialogue from the very beginning on the direction of the business and its succession.

“The next generation … [needs to] have a very clear outline of what they need to do to be involved in the business,” said Poole. “[Succession] can’t just happen overnight. Mom and Dad can’t just wait until the day that they want to be retired and hand over the key.”

Peter Barrett, senior vice president of marketing corporate development at SmokerCraft, is the fourth generation of the Schrock family to work in SmokerCraft (previously StarCraft before they purchased SmokerCraft). His mother Sara Barrett and his two aunts Cinda McKinney and Susan Graff also work in the business as board members, with McKinney acting as chairman of the board.

His grandfather Harold Schrock exited his ownership role in the business when he was 80 but remained an active member of the board up until a year or two prior to his death at the age of 97.

“[My grandfather] allowed us a lot of freedom and allowed us to run the company as we felt fit. He would guide us here and there and he would definitely let us know if we were headed in what he felt was the wrong direction,” said Barrett.

SmokerCraft reviews and develops new succession plans on a yearly basis to explore several “what if” scenarios and the various backup strategies that come with it. Barrett calls them “revolving succession plans.”

“When you’re in a company as old as ours and you have people who have been involved in the business for 45 years [or more], some of these handoffs aren’t as easy as you might think,” said Barrett. “A lot of it is learning the roles and trying to become comfortable with what that other person had been doing in the past.”

Harold Schrock stayed involved in SmokerCraft until two years prior to his death, while still allowing his grandson Peter Barrett, daughter Sarah Barrett and other family members room to grow and make their own decisions.

Harold Schrock stayed involved in SmokerCraft until two years prior to his death, while still allowing his grandson Peter Barrett, daughter Sarah Barrett and other family members room to grow and make their own decisions.

Barrett works on succession planning with his human resources department every week for the executive level, preparing for Doug Smoker’s departure. Smoker is pushing more and more day-to-day operations to Barrett and is actively involved in the plan.

“It’s a big step for them to be able to let go and say ‘OK, these guys have been doing this for a long time. I think it’s time to let them make some decisions,’” said Barrett. “I think the hardest thing for the prior generation to wrap their hands around is letting go and allowing the next generation to make decisions and trust in those decisions.”

Vallely has worked with his father at the Bismarck location while purchasing his father’s shares of Vallely Marine as Vallely has taken on more and more responsibility. Throughout the process, the father and son had consistent discussions on who was performing what duties and ensured job clarity for themselves and the whole staff.

Succession conversations are difficult but Vallely believes that once the conversations start, they’re a lot easier than you think they are going to be.

“Often times we all put off the hard discussions, hold feelings in or don’t communicate our wishes amongst each other.  Once communication channels open up, these hard discussions always become easier for both sides,” said Vallely.

Outside help for mediating these discussions has been advantageous for Vallely and he recommends others do the same as they begin the conversation. Whatever third party a family business works with should be well versed in privately held company transitions.

Adrian Spiker, owner of Deep Creek Marina, earned a law degree in 2001. Partway through earning the degree, he began a mobile repair service for personal watercraft and realized he didn’t want to practice law. After he graduated, one of his mother’s partners on a different venture had a marine operation to sell and he chose to buy it.

With Spiker’s legal background, he set up the business as an LLC and made his sister a minority shareholder. She would effectively inherit the business in the event of Spiker’s death. Spiker also has key life insurance on himself so that the business can pay of its debts on fixed assets, which was recommended to him by the bank when he first set up the business and is a practice he would continue into the future, even though it’s not required.

“It is a great way to leave behind a business that can operate without incredible debt hanging over its head,” said Spiker. “I know ... how difficult it is for anything to really be passed from one generation to another if they haven’t already become an owner of the company.”

Not every boat dealer has a law degree in his or her resume, so Spiker recommends talking to an attorney and a certified accountant, preferably someone who is both.

The guidance Russo Marine received was crucial and allowed the family to work through succession without being threatening or doubted. Russo would even go so far as to call the transition “seamless.”

“I was so impressed that they were thinking ahead for me as well as themselves,” said Russo. “It never became an issue. It just became something else we do to protect and advance our business.”

At one point, Poole was uncertain of what her transition into the business looked like before her father was sick. She was also unsure if she wanted to be in business with her uncle, as she wasn’t aware of his position on transferring out of the business.

Poole works with David Spader as a third party source and he suggested she answer a few questions to herself. Those questions include these key points: Would you be comfortable doing the same job you’re doing now if the business was no longer owned by your family? Would you do the job that you are doing – or any job – at another dealership in the same industry? Are passionate about the industry or is it just about this business?

Questions like these are important for the next generation to consider because they can drastically change the outlook of a family business’s succession plan.

“In my case, I would 100 percent … still want to work in the industry because I am very passionate about it,” said Poole. “[These questions] help sort of fish out what your motivation is.”

If you are of the younger generation and you do want to own the business, getting involved in the industry is a huge component, said Vallely. The younger generation needs to step outside their dealership to understand the industry from a broader viewpoint. Vallely’s involvement with the Marine Retailers Association of the Americas, the Young Leaders Advisory Council (of which Vallely is chairman), Vallely Marine’s 20 groups and other industry associations have helped Vallely throughout his transition.

“Be passionate about the business you want to get into.  The marine industry is a hard business,” said Vallely. “Without passion for the industry, carrying on the family marine business will be difficult.”

In running a family business, that first word is critical: family. It must always be the number one priority. Russo says the sooner owners can come to grips with succession, the better, and that it’s important to be sure the children are ready and able.

“When you know they’re worthy, that’s the time to act. Don’t wait until it’s too late,” said Russo. “It’s really the cool part of family business succession when you have a business that’s worth passing on to the next generation. That’s what you do it for, right?”

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