Moving and Storage
FAMILY BACKGROUND
(All family and business names are fictional; all the facts are accurate.)
The family moving and storage company (Smith & Sons) was started and based in Illinois by Max Smith, the father of 4 sons, listed oldest to youngest: Alex, Barney, Colin and Don. Alex had one son, Luke. Barney had three sons: Tim, Dave and Ernie. Colin and Don had no children.
The narrator of this career story is Dave, a son of Barney. (The existence of Max’s grandchildren becomes important as the family business ownership transitions from generation to generation.)
Confused yet? Another way to organize this information is to think of it in generations:
First generation – Max Smith, founder of the family business Smith & Sons.
Second generation – Four sons of Max: Alex, Barney, Colin and Don.
Third generation – Four grandsons of Max: Luke (son of Alex), Tim, Dave and Ernie (all sons of Barney).
Fourth generation – One great grandson of Max: Roy (son of Dave).
When Max died, his four sons (Alex, Barney, Colin and Don) inherited equal ownership shares of the family business Smith & Sons. Each brother was full-time involved in the business as their sole career. By informal arrangement among the brothers, the oldest, Alex, took over day to day management of the business but he often conferred with Barney about most issues since they were closest in age and shared judgments.
Although Dave Smith was also father of a daughter, Susie, note the absence of any reference to females involved in ownership of the family business, which Dave attributes to several reasons: (1) Among most males of the first and second generation who matured to adulthood before the 1960s, it was assumed that “A woman’s place was in the home,” taking primary responsibility to raise the children, prepare meals, clean the house and shop for the family; and (2) To be involved in eventual ownership of any moving and storage business, you should start as a laborer to earn the respect of your co-workers while learning the business by sharing all the hard work moving furniture and equipment within homes, offices and warehouses.
Ironically, Dave’s mother was an exception to the conventional male and female expectations among adults raised before the 1960s: she was a full-time nurse who worked the night shift at a hospital; when she was home and not catching up on sleep, she was active with all her traditional mom responsibilities.
Dave’s sister Susie worked within the family business as an employed secretary. She appreciated having no responsibility to get involved in the physical work while having steady employment within the office where she could stay in touch with her brothers.
FAMILY CAREER INFLUENCE
While growing up, Dave observed that each of his parents worked very hard to meet their separate, daily responsibilities. During Dave’s working career, he felt guilty “If I didn’t give it my all every day.”
Dave’s father was totally dedicated to working hard within Smith & Sons, but he never mandated or even hinted that any of his children should follow his path into the family business. Instead, to his credit, Dave’s father recommended to each child that they “consider all types of jobs, try one or several which seemed interesting and if it didn’t work out, you could always come into the family business.” Looking back after an eventual long career in the family business, Dave believes that his father knew how hard it was to work as a mover and especially within a family business, so he didn’t want to push his children in that direction if they wanted to do something else.
HIGH SCHOOL AND COLLEGE YEARS
Dave was an above average student while he achieved his academic goals to graduate from both high school and college, as did each of his brothers. His college courses were essentially “liberal arts” (writing, history, basic math and science) but also included business focused courses such as introductions to accounting and economics.
FIRST ADULT JOB WITHIN THE FAMILY BUSINESS
Dave never rebelled against joining the family business. During his high school years, grandfather Max died so his father and three uncles were all involved in equal family business ownership, often driving the trucks and moving furniture and equipment. When Dave’s school classes were not in session, he devoted his time to the moving business. His college classes didn’t convene on Fridays, which gave Dave the long weekend opportunity to get involved in distant moving assignments across many state lines.
FAMILY TENSION BREAKS UP THE FAMILY BUSINESS
As Dave was about to graduate from college, while already working as a moving and storage laborer in the family business, he learned from his father that the obvious tension he sensed among the second-generation brothers was real and serious, due to different expectations of whether the third generation could ever achieve a share of ownership with the second generation. Alex and Barney, who each had sons interested in joining the business on a path toward shared ownership, of course believed that the family business would be best served and continue to grow by bringing the third generation aboard.
Colin and Don, the younger brothers with no sons, firmly believed that the third generation should wait their turn to get involved in family business ownership, just as they had waited until their father, Max, had maintained full ownership until he died. Meanwhile, the younger brothers said that the sons of Alex and Barney could work as moving and storage laborers until the second generation was totally ready to retire. Their position was not negotiable.
Not wanting to contribute to family tension, Dave found employment with a different company involved in warehouse distribution, where he worked for two years immediately following his college graduation, during which time his hard work earned promotions to superviser and then manager.
One provision of a written agreement among the four, second generation brothers was that none of them could ever be involved in a competing business. So, Alex and Barney, despite the unresolved disagreement with the other two brothers, were not legally free to depart from the family business and start their own moving and storage business. However, the “non-compete” agreement between the four brothers of the second-generation ownership did not apply to – or restrict – the third generation (Luke, Tim, Dave and Ernie) from owning and operating a competing moving business.
BREAK-UP LEADS TO FORMING A COMPETING BUSINESS
If a nearby, small moving company had not suddenly been available to be purchased by the third generation, they could have started a new, competing moving and storage business. The young, third generation didn’t have the accumulated cash savings or available credit to normally be able to purchase a significant business but two circumstances coincided to permit the third generation to complete the purchase of the small competitor, which they renamed “Capable Moving and Storage Co.”: (1) The purchase price was luckily minimal since the small competitor’s profitability was modest and its owner was old, desiring a quick sale; and (2) older brothers Alex and Barney covertly used their well-established business financing relationships to persuade friendly banks to assist their sons to qualify for the modest financing necessary to purchase and operate the business during its initial phase until it could grow with the new energy of the four cousins. Of course, the two fathers of the four cousins were available for business guidance.
While “Capable Moving and Storage Co” was getting started, the four brother owners of Smith & Sons were also unable to agree on other serious business issues, which led to Alex and Barney to decide to withdraw from the original family business, requiring Colin and Don to buy their shares, which the two younger brothers were able to do by refinancing the family business to receive a cash infusion sufficient to purchase Alex and Barney’s 50% of the business.
Colin and Don were fortunate that the business income numbers submitted to the refinance bank were an accurate reflection (Editor’s note – It is unlawful to submit significantly false financial information to secure a loan) of the family business when it was well managed by essentially Alex and Barney. However, as Alex and Barney predicted, within a few years of assuming total ownership and management of Smith & Sons, the lack of business judgment and less than full attention to the business by Colin and Don, led to decreasing profits and debt which would require them to find a buyer to bail them out of debt, which they had personally guaranteed to repay if the company’s assets were insufficient.
COMPETING BUSINESS SUCCEEDS
While owning and operating “Capable Moving and Storage”, the four cousins sharing ownership and labor utilized the original formula for success of Smith & Sons: they each worked hard every day, available for business responsibilities 7 days a week. Accordingly, over the next ten years, they grew Capable’s annual business revenue from $170,000 to $3,500,000.
All was well within the growing business of Capable Moving and Storage ………….until it wasn’t.
PERSONAL ISSUES CONFLICT WITH BUSINESS DEDICATION
Human nature being what it is, there is a reason that every person is known as an “individual” because even family members – despite having the same parents or same uncles – often have different personalities, behaviors, and career goals. It is not unusual that differences arise where before, there had been calm and cooperation among the family members. This had happened within the second generation and now was happening within the third generation, though for different reasons: Tim became entangled in his divorce and child custody issues which affected the cousins’ business when they had to produce income records for Tim, who had unwisely bragged to his wife about keeping some cash tips from customers for his personal, untaxed use. Then Ernie simply wanted to depart the moving business toward a sales career. Tim remained in the business, but Luke and Dave had to take over co-leadership.
FAMILY BUSINESS 1 MERGES WITH FAMILY BUSINESS 2
While brothers Alex and Barney remained in the background for any involvement with Capable Moving and Storage to comply with their non-competition requirement, Capable, under the actual management and daily hard work of Luke and Dave, continued to grow, adding a major storage facility to their expanding business. Meanwhile, second generation brothers Colin and Don, who by then retained sole ownership of Jones & Sons, had proven correct the prediction of their brothers Alex and Barney: that Colin and Don would be incompetent businessmen, losing business and revenue and eventually have to sell their complete ownership interest in the original family business.
Fortunately for the two oldest brothers and their sons, Colin and Don were so deeply in personal debt that they needed a quick sale to obtain the cash to pay off the company loans and their related personal guarantees. Alex and Barney already knew the details of the original family business and with their prior business reputations, accumulated savings and now the assets of their sons’ newly successful business, Alex and Barney were the most likely and able buyer for Jones & Sons. So, with minimal haggling and no disruption to the daily moving and storage business of either the old or new family businesses, it was quickly agreed that Colin and Don would sell their ownership to merge Jones & Sons with Capable.
The merged family businesses retained a new warehouse constructed by Capable and was able to return to their original base of operations at Jones & Sons. Each of the merged companies had built “good will” with extensive customers so the new owners (Alex, Barney, Luke and Dave) wisely retained both names for their merger: “Jones & Sons, Capable Movers.”
Soon after the merger was completed, Alex was diagnosed with cancer and died. Barney was close to retirement age so he gradually turned over daily mangement duties to Luke and Dave.
All was well within the growing business of the merged “Jones & Sons, the Capable Movers” until it wasn’t………. And yes, you read this same type of sentence just moments ago within a different context involving the four cousins involved with the Capable company. This time, it was Luke who wanted to depart for a different career in a faraway state. He was entitled to do that but the value of his ownership interest and the terms of Dave purchasing Luke’s interest became such a serious disagreement that litigation was commenced between the two cousins, resulting in their eventual agreement after a court recommended mediator became involved, thus bringing a form of peace among the cousins to enable the merged business to continue while at the same time, ending each cousin’s need to incur legal expense fighting each other.
LESSONS LEARNED FOR A FAMILY BUSINESS
1. Similar dedication – Only those family members with similar work ethic should get involved in business with each other.
2. Legal advice – Hire an attorney experienced in business agreements and disputes to draft a comprehensive agreement covering all known, potential issues of ownership and operation of a family business.
3. Leadership – Co-ownership does not have to mean Co-leadership. As the old adage notes: “Too many cooks spoil the soup.” Choose a leader not by age seniority but the individual with the best relevant experience and overall business judgment. Define the leader’s compensation (so it’s not just “whatever is left over.”) Define the limits of the leader’s authority to make decisions on behalf of all the owners.
4. New blood – Outline the timing and procedures to allow the employment and eventual ownership buy-in of family members and non-family members.
5. Exiting – Outline the required advance notice to withdraw from the family business and then the related procedures to determine the price and terms of payment to the departing owner.
6. Dispute resolution – When a business disagreement reaches an impasse, the disputing parties should pay equally out of their own personal funds (not from the family business bank account), to hire an independent mediator to resolve the dispute either by agreement or by a final, unappealable order, binding upon all those in dispute.
SATISFACTION WITHIN A MOVING AND STORAGE CAREER
In addition to earning ample compensation to support a comfortable lifestyle for his family, including savings for retirement, Dave appreciates the many satisfying, non-monetary highlights of his four decades within the moving and storage business (not listed in order of priority because Dave says they’re all equal); in Dave’s own words:
* I loved every day in the moving business – except the very few days disagreeing with my cousin and now that’s patched up – because every day was different
* Our crews, including myself in the early days of laboring on the trucks and in customer’s homes and offices, always exceeded customers’ expectations
* Many customers became personal friends, with whom I have stayed in contact over the years
* In addition to receiving many compliments from customers, our business earned the respect of all others within the small, local competing group of movers
* We enjoyed hearing how the quality of our packers and movers far exceeded the often impersonal, careless work provided by the national advertising moving companies which lacked our family’s caring culture
* Solving the challenge of diversified logistics was fun
* Getting shipments into and out of the country or across state lines, while avoiding problems with government regulators and inspectors, were challenges we were always able to meet with creative persistence (of course none of our friendly persuasion was ever illegal so it was purely coincidental that taking someone to dinner or helping to build a town playground was followed by authorizations to proceed with our business)
* We employed full-time mechanics to keep our trucks moving but they were not always busy, so we utilized their talents for fun projects like sponsoring and maintaining race cars and building a huge pumpkin shooting cannon to advertise our business during a local shore town’s pumpkin tossing tournament
* Along the way, we were involved in many funny stories; my favorite involved uncle Don (a look alike for every tall, full muscled, movie bad guy like Jack Palance, Charles Bronson, and Arnold Schwarzenegger); one morning while my dad and his three brothers were meeting with our attorney in our warehouse office, an employee showed up for work loudly drunk. Alex said calmly to Don: “Take care of that noise, please.” The office walls were thin so soon after Don left the room, there was heard muffled shouting, an exterior door slamming and then quiet for a few minutes until Don returned, holding a car radio antenna. Don said to our attorney: “I think we owe you a new antenna since this one broke off your car when I threw the drunk out the door and over your car.”
EPILOGUE TO THE FAMILY BUSINESS TRANSITION
As this family business career story is being prepared, daily management of the merged family business has transitioned from Dave to his son, Roy, who is already contending with challenges common to all businesses, including – as a priority – maintaining a sufficient and well qualified labor force to meet customer needs.
Ongoing and future ownership and management of the family business will have to deal with presently known challenges and future problems, both unknown (e.g. national economic depression?) and often unknowable (e.g. another worldwide pandemic?).
Dave will be available to offer his opinion – if asked – but Dave has already entrusted his son to carry on and is pleased to note the skills and judgment which Roy has brought to the family business, now carrying on with the family name for close to 100 years.
