Passing the Baton

In the landscape business, as in life, nothing is as simple as it seems.

You work your tail off getting your business started in the hopes that it will earn you a comfortable living. Yet you find that with growth comes more staff, more equipment, and more headaches. You hope that your headaches will be offset by greater profitability. Then, as you settle in for the long haul, it’s still a constant challenge to run your business efficiently.

Very few landscape contractors who started their business 20 and 30 years ago had any formal training in the business end of the business. They had to learn the hard way—by doing. In recent years, consultants who know our industry have become available to help.

There are times when you’re buffeted by conditions beyond your control. (Ask anyone who was expecting to do snow removal last winter but saw their plow-equipped trucks sit idle). For better or for worse, customer economics become your economics.

In the best of all possible worlds, you’ll reach the point where you’ve got a successful business and you’re ready to slow down a bit. You might even be ready to pass the operational baton to the next generation. That next generation often turns out to be our sons and daughters who’ve worked with us and want to run the company when we’re ready to hand over the reins.

Alas, this is not as simple as it seems. It’s certainly not a matter of tossing the keys to the kids and walking out the door. There are major issues to consider: financial, operational, and emotional.

There are a number of firms that can help contractors with structuring the business side. One company, LandOpt in Pittsburgh, Pennsylvania, can help in the transition. They are a service organization that helps landscape contractors implement proven business systems.

Following are the experiences of two landscape firms now making a generational transition...

{::PAGEBREAK::}The first company is Miller Landscape, Inc., in Orion, Michigan. Now in its 46th year of providing landscaping services in the Detroit metropolitan areas, founders Bob and Bill Miller are preparing to sell stock in the company to Bob’s sons Jeremy, Marty and Doug.

Miller Landscape is a very different company from the one the senior Miller brothers started in the mid- 1960s. Then, they had a single pickup truck. Now, they’re running 35 vehicles and generating $3.5 million in sales.

The younger Millers always suspected that one day it would be their turn. “Growing up, I can remember a teacher asking about career aspirations,” said Jeremy. “I told her that I wanted to turn our landscape company into a multi-million dollar operation. That was something I truly felt was possible and decided to work toward.”

The senior Millers also envisioned a hand-over of the reins. “Bob and I were considering a transfer of ownership, but we didn’t know how to go about it,” said Bill Miller. “LandOpt’s expertise really helped us get our business on solid footing, so we could start the transition process.”

Among the tools that they brought to the table were an enhanced annual planning process, and a structured sales system to generate new business consistently. They also helped Miller Landscape develop and define the roles of the various players at their company, including how to shift responsibility from the senior Millers to the new junior regime.

“Once we defined what we were good at and put people in place, Bob and I could see the potential for the business to move on without us,” said Bill Miller. “It’s crucial for the next generation to see that we are willing to step aside and give them authority and the responsibility that goes with it.”

To aid its transition, Miller Landscape adopted the concept of acting as though the owners were no longer everyday players in the company. “The biggest transitional tool LandOpt implemented was monthly GMowner meetings,” said Jeremy. “Once a month, Bill and Bob take off all their hats except as owners, and I present them with sales goals and budgets as though they aren’t here on a daily basis. They’ve stepped far enough away from the financials that they truly don’t know everything we’re discussing, and it helps us get a feel for our organizational structure once they have retired.”

According to Bill Miller, the emotional component of the pending transition was such a prominent factor that it took about a year of ongoing coaching to work through the challenges he and Bob were feeling.

“LandOpt helped us separate out the emotions, so we could look at things in a black-and-white way,” says Bill. “We still don’t know exactly what retirement holds. It may be a case of not entirely walking away; perhaps I’ll work 30 hours a week versus 65 or 70.”

Discussion and planning—while critical—are only stepping stones to the ultimate transition. “At some point, you have to take concrete action to get the ball rolling,” Jeremy says. “Day-to-day operations will always get in the way, but you have to allocate the time to get it done. On top of that, you have to commit the financial resources to get it done properly.”

“This transition has been a long process,” adds Bill. “We’ve kept everything transparent. We’ve had bi-annual family meetings to discuss direction and make sure that everyone is on the same page. The reality is that a huge percentage of second generation businesses don’t make it, and we wanted to change the odds. So we’ve taken our time to deal with the little things and do our homework. We’re about to sign the final papers to make the transition.”

The same upbeat philosophy that helped the Millers start the business is helping them turn it over to their kids. “I’ve made a career of building backyards and landscapes that hopefully make people’s lives more enjoyable,” Bill declares. “To have that career wind down in an enjoyable fashion is pretty special.”

{::PAGEBREAK::}Another company in the midst of a generational transfer is PROCARE Landscape Management, Inc., based in Byron Center, Michigan. PRO- CARE is a full service, year-round landscape and snow-removal company that has grown to five separate divisions, with one hundred full-time and seasonal employees at peak season. It was founded in 1989 by Dirk Bakhuyzen Jr., who runs the business with his sons Dirk III and Kyle.

As with Miller Landscaping, a hand-off is in the offing. “Having realistic expectations for the transition is key,” said Dirk, Jr. “I didn’t start PROCARE until I was 35, so I’m not going to take myself completely out of the picture. I need to ensure that our transitional plan takes everything into account—health benefits, retirement, you name it.”

The boys have been working in the business since they were old enough to hold a rake. Just like the new generation at Miller Landscape, they are in line to run the show when the founders are ready to pass the baton.

“My dad instilled strong work values in us,” comments Dirk III. “Since I started at PROCARE, I’ve had the view that if the company succeeded, then I succeeded. That’s driven me to learn everything I could and naturally led to a desire to own the company one day.”

In evaluating how day-to-day organizational roles played into the transfer, Dirk III is blunt. “We would have failed even trying to transition prior to having our roles clearly defined,” he said. “It’s not an easy topic to raise.”

“Communication is the biggest thing,” adds Kyle. “It’s important to address everything. Don’t leave any unanswered questions.”

One way that consulting firms can help in a generational transition is to make sure that all the right questions get asked in the four major portfolios of any landscape business: sales and marketing, human resources management, operations management and business management. Yet even with the right questions, getting good answers is more easily said than done, particularly when the founders see the end of their lifelong labor.

“I need to realistically understand what the company’s value is and what the boys can afford to pay, as well as what the business itself can sustain without crippling it,” Dirk, Jr. notes.

PROCARE is at an earlier transition stage than Miller Landscape.

“We’ve only recently started strategic planning meetings and engaged a lawyer. We’re now figuring out real dollar figures,” says Dirk III. “My dad has been generous in gifting over a percentage of ownership to Kyle and me. It’s all part of an open dialogue to make sure our individual goals are being factored in as we assess the business and start the transition.”

Just as with Miller Landscaping, the issues are emotional, as well as organizational and financial.

“As I’ve been downsizing my book of business, I’ve realized the handoff is not as hard and devastating as I thought it might be,” said Dirk, Jr. “I know when I do retire that my customers will stick with PROCARE because they’re being cared for by a trained account manager. It’s actually been quite liberating—I smile a lot these days.”

With all the headaches of our industry, smiles can be as rare as turf that never needs cutting. Both PROCARE and Miller Landscape demonstrate how, with the assistance of an insightful and helpful advisor, the passing of the baton from one generation to the next can happen in a way where everyone wins. Now, that’s something that should bring smiles to everyone involved.

EDITOR’S NOTE: Mike Crummy is a technical writer for The Promersberger Company.