The Strength of Family Business in a New Market

CHRISTOPHER LENNEY / NNY BUSINESS
A door is fitted into it’s frame at the Vintage Doors workshop in Hammond.

BY: Marc Heller
Erica Garlock studied business at Clarkson University, but she says classrooms didn’t fully prepare her for the next big goal staring her in the face: taking on the family’s custom-made door business in Hammond.

                “Transition planning is something that’s spoken about very little, said Garlock, 33, who runs Vintage Doors LLC with her parents and her 35-year-old brother. “You’re kind of left to figure out everything on your own.”

                All over the region, family businesses are contemplating their future and whether — and how — to shift control to the next generation. Millennials are gradually taking the reins in business ranging from retail to farming, sometimes with a minimum of formal training in how to do that.

                Family business owners and professionals who work with them say the challenges are emotional as well as practical or financial but that the younger generations brings opportunities, too, embracing new technology and ways to think about managing transactions.

                At Vintage Doors, which sells handcrafted wood doors made in Northern New York, Garlock said the family splits responsibilities for daily management, each taking on certain departments — she handles sales and marketing, her mother Rosemary the shipping and accounting.  Howard Demick, her father, started the company in 1990. The shared work has been going on for more than a decade, she said, and the longterm goal is for her and her brother Ryan to keep Vintage Doors going after her parents retire.

                As with many businesses mapping out their future, details remain to be worked out and will require sometimes difficult conversations about passing the efforts from one generation to the next.

                “We need to know how to work with two key individuals not in place,” said Garlock, who comes from a farming family in St. Lawrence County. “I think any conversation’s tough for people, to have to figure that out, and get everyone to sit and talk about it.”

                She added, “I think it’s more emotion than anything. Also, we live in an area where theres’ not a lot of others to talk to about it, so you’re left to yourself.”

                The emotional side of passing businesses from one generation to the next can have a real business impact, according to the AARP. In a report on family business transitions, the organization advised making good relations a high priority.

                “Every family has a hierarchical order, and not respecting this order inside the company will cause friction. If someone feels they are being disrespected or not being heard, it’s a recipe for resentment and conflict,” the AARP said.

                Younger family members should be given a management role before any shift in ownership, the report said, so they can train in place. Documents such as wills and plans for how shares of stock are to be transferred are critical. Another must: a detailed plan for what role the parents will play after the business is transferred, whether that’s advisory or otherwise.

                Some north country organizations are working to help families with transition plans. The Adirondack North Country Association is launching a North Country Center for Businesses in Transition, which will connect local chambers of commerce and other organizations in an effort to give family businesses more information on how to manage the change. A recent study showed that as many as 16,000 family-run businesses in ANCA’s 14-county region are nearing the owners’ retirement, said  Danielle Delaini, the group’s regional advocacy project assistant.           

                “It’s really just tough for folks to know where to start,” Delaini said. The project should be fully up and running in January, Delaini said.

                Among other challenges: giving the transition time to work out. Planning should start at least three to five years before the change arrives, Delaini said, which business owners sometimes don’t realize. “They’ll think it’s an easy handoff.”

                The new center will help put business owners in touch with organizations or professionals who can guide them through the process, including working out issues like reducing the bite of income taxes as much as possible when a business passes from one generation to another. Simply knowing where to find help can make a big difference, Delaini said. And giving up control to the younger generation is hard for some owners, she said. “So much of it is part of their identity.”

                Drafting Millennials into management brings opportunities, said Michelle Collins, business advisor at SUNY Canton’s Small Business Development Center. The younger generation is more digitally aware and more attuned to social media, including its usefulness in a business setting, she said. They’re in a good position to show their parents that social media isn’t just a “time suck,” for instance, she said.

                With two generations running the business, Vintage Doors is taking on new technology, such as a laser engraving machine to help expand product lines, Garlock said. The family is working on design options to allow for special logos or insignia on the doors they order, she said.

                In the north country’s biggest business — agriculture — family transitions have long been a regular part of life, as well as a big concern for the region as a whole. The dairy business swings from profitable to barely profitable or worse, depending on milk prices, and keeping the younger generation interested in farming is fundamental to the industry’s survival, agriculture experts say. The average age of farmers has climbed to nearly 60 as the older generation hangs on, according to the U.S. Department of Agriculture.

                At Porterdale Farms in Rodman, Casey Porter, 22 and fresh out of Cornell University, is beginning to think about how her responsibilities could grow over the years. “I’m sort of learning,” said Porter, who’s in the fourth generation on the farm her family started in 1938.

                “Nothing’s set in stone. We agreed I’d come back as an employee for a few years,” Porter said.

                There’s a saying in agriculture that farmers are eternal optimists, given their reliance on the weather and what it can do to crops. Porter said she maintains a positive outlook even in the mixed picture for dairying. With milk prices low the past couple of years, she said, “Right now is definitely not the best time to be coming home.”

                But farmers are becoming more creative at cutting costs, Porter said, and she draws lessons from her father, Greg, who told her the farm took 14 years to turn a solid profit after he returned home as a younger man to help run the operation with his father, David G. Porter.

                A full transition is likely years off at Porterdale. A cousin, Steve, 37, is heavily involved in management, and Porter’s father is 57, which is about average in the dairy business. “She’s very much in the observation phase,” said her mother, Lisa Porter.

                While the plan is certainly to pass the farm along, eventually, Lisa Porter said, the family is lucky to have more than one generation — including a 30-something with youthful enthusiasm — running the business.

                With 2,000 cows, Porterdale is one of the region’s larger farms, and it’s had a reputation in farming circles for adopting new herd management techniques. So bringing on the next generation may not be a huge in transformation in farming, Lisa Porter said. But new practices always carry risk, she said. “Sometimes being the earliest adapter can backfire. You’ve got to work out the bugs.”

                Agriculture, especially, is a unique business that’s fertile ground for good planning, said Kelsey O’Shea of the north country regional ag team at Cornell Cooperative Extension. Passing down farms, gradually, from one generation to the next is a way to minimize taxes and to make buying a farm more affordable — or even financially possible — for a relatively young person, she said. The older generation has an incentive too, as long as the family makes a solid plan. With the average age of farmers climbing, she said, it’s critical that Millennials find a way into farm ownership.

                “Farms of all sizes are extremely complex to operate successfully. In addition, it is paramount that the junior generation succeed so as to generate the earnings needed to “payout” the senior generation,” O’Shea said.

                Typically, she said, the junior family member will leave for college or work off the farm for about two years, before returning with an arrangement to eventually take over ownership. The junior member can be made part of an operating LLC, possibly with a percentage of ownership, O’Shea said, and the process plays out over a period of five to 15 years. Developing a transition plan, typically with professional help, can cost anywhere from $2,000 to $10,000, she said.

                The complexity of estate and tax planning for agriculture means farming families could use more help in mapping out their business’s future, O’Shea said. “If there were more firms that provided a “one stop shop” option for transfer planning and coordinated and helped deliver the plan for a set price, that farms would be a bit less intimidated by the process,” she said.