Fraser Murray, Becky Ekert | BCBusiness
When Fraser Murray and his fiancée, Becky Eert, took over his parents’ wilderness resort, they redefined its offerings to keep business booming.
Succession planning is a challenge for any small business, but family dynamics can quickly complicate even the best-laid plans
The departure of a business owner can create significant challenges for the leadership of any company. When the company is a family enterprise, succession can become a full-blown crisis involving a clash of personalities.
Judi Cunningham, executive director of the Business Families Centre at UBC’s Sauder School of Business, explains that when changes occur in family businesses, those involved often focus on the future of the business and take family for granted. It becomes the blind spot, and sometimes the missing piece of the puzzle they’re trying to work out.
“They’re so focused on their businesses, and that’s what they’re passionate about and that’s what they feel is urgent,” she says. “They look at their family as a non-urgent part of it. They think that it will go forever because you trust that your family is always going to be there. I don’t think families sit there and think, ‘Well, if I don’t take care of it, I might lose my family.’ But they do think, ‘If I don’t take care of my business, I could lose my business.’”
With baby boomers beginning to retire, Cunningham is starting to see growing demand for advice from a generation disinclined to relinquish control, yet asking increasingly sophisticated questions about how to pass on their business to a new generation. The sudden concern about succession is not limited to family businesses. A recent BMO Financial Group survey found that a growing number of small-business owners have drafted a succession plan; according to the report, 37 per cent of small-business owners had succession plans in 2012, up from just 15 per cent in 2010.
Looking back on the path that led to his assuming management of Nimmo Bay Wilderness Resort, in 2011, Fraser Murray concedes that everything worked out for the best, but he notes that the challenges facing the business were daunting enough without a changing of the guard thrown into the mix.
When Murray’s father and the business’s founder, Craig Murray, first began discussing the business’s transition with his son, Craig was in his early 50s and Murray was in his early 20s. The business was 20 years old and about to be hit by the turmoil that rocked the global travel industry following the terrorist attacks on New York City and Washington, D.C., in September 2001.
“I was trying to take over at a time, after 9/11, when tourism was really poor,” says Murray, now 34. “We didn’t know what we were going to do, what direction we were going to go, what we were doing wrong, what we were doing right, or how our competition was doing.”
Tourism businesses were confronting significant change, which only accelerated as border controls and airport security increased in the years that followed. It wasn’t an ideal environment in which to articulate a vision for Nimmo’s future.
“He wasn’t ready to let go; maybe I wasn’t ready to take over,” Murray says of the tension, as he and his father wrestled with the changes taking place both outside and inside the family business. But he adds: “Communication is everything.” The tug-of-war went on for eight years.
Murray’s younger brother, Clifton (one of the Canadian quartet The Tenors), and his sister, Georgia, were pursuing their own careers as Murray was growing into his role as successor to his father. But without a definite plan in place, neither side had the security needed to relinquish or assume control.
The turning point came when Murray’s long-time acquaintance, Becky Ekert, opened his eyes to the potential of the business he had grown up with—doing every job but cook since the time he was seven years old. “We wanted a marketing venture together and once we were on that marketing venture we started realizing that what the clients were looking for was a little bit different than what we were offering,” Murray says. Murray and Eert began marketing Nimmo Bay as an adventure and wilderness tourism venture, rather than just a fishing lodge offering helicopter expeditions into the freshwater lakes in the mountains overlooking the B.C. coast. The repositioning of the resort garnered inquiries and media exposure across the continent, as well as from Europe and Australia. Murray expects the lodge to post 30 per cent growth by the end of the year—not bad for a nine-cabin resort.
“It wasn’t until I got together with Becky that we were really able to make a place for ourselves and take the resort in a certain direction,” Murray says. “She began taking over certain aspects of the business that I wasn’t good at and I kept focusing on my strong points. At that point my parents realized that this is something they could let go and give to me and Becky, and we could take it over and make a success of it.”
Now, with Murray and Eert sharing responsibilities for operations, Craig Murray and his wife, Deborah, are pleased. All their children have an ownership stake and the senior Murrays are free to enjoy retirement. Fraser Murray, meanwhile, is free to pursue what he had long anticipated doing.
“There was always the plan for me to take over, but it wasn’t really when or where. There was no secure plan,” Murray says. “Once I had a partner in my life to take over the business with me, then it started to be a success.”
Image: Adam Blasberg
Shayna, Geoff, Chris and Sara carry on a
business that’s been in the family since the
The challenges facing the Murrays stemmed from a specific set of circumstances, but they’re far from unusual, says David Bentall, who worked for 20 years in his family’s real estate business, the Bentall Group, and today is principal of Next Step Advisors, a consulting firm serving business families. Bentall experienced first-hand the trials of a family succession plan gone awry, and knows how hard it is to get it right.
For Bentall, succession means “thoughtfully agreeing on a plan for who will own the company in the future and then thinking through, wisely, how management leadership will transition.” But many families are reluctant to detail a transition plan in the first place,and then when economic challenges occur, there’s extra pressure to get things right.
“There can be this Mexican standoff,” he says, where neither the older nor the younger generation can take an objective approach to what has to be done for the survival of the business. This can sometimes trigger a family dynamic that compounds the issues. “It becomes a power struggle,” Bentall says.
He recommends including an independent, non-family member among the company’s board of directors (which should have at least three people) to ensure the executive decisions and the company’s overall direction are not dominated by family dynamics.
Being able to articulate a vision for a business’s transition is equally important when drawing on outside help to manage the shift between generations—or even to set the business on sound footing prior to making the transition.
Stephen Cipes launched Summerhill Pyramid Winery in Kelowna in 1992 as a landed immigrant to Canada from the U.S. Summerhill originally provided tax deductions that offset income from U.S. ventures Cipes owned, but priorities for the business changed as he thought about the future.
Summerhill operated as a sole proprietorship, but Cipes is the first to admit he’s not cut out for the day-to-day management that a winery requires. The hassles of the business tapped his worst management traits and prevented him from implementing the vision he had for a sustainable, earth-friendly winery.
“I’m short-tempered; I get upset easily,” he says, noting that seeing things out of place or any clutter, not to mention shrinkage due to employees, particularly baffled and offended him. “I couldn’t believe they would steal from us when we were doing something good in the world and trying to make the world a better place,” he says. “I was glad to give up or let go of the day-to-day management.”
To put the company on firm footing, Cipes originally sought outside assistance from Kevin Blucke, a certified management accountant who previously served as CFO of Langley-based Dryco Building Supplies Inc. After Blucke was appointed president in 2005, he began making changes to management that seemed in line with Cipes’s vision, working to place people in areas of the winery that best suited them. “I’m a big believer of putting people where they’re gifted,” Blucke said at the time, in an interview with Country Life in BC magazine. “If someone is truly passionate about what they’re doing, they will succeed and help me run a better business.”
He brought in two colleagues he knew from Langley and hired people to focus on specific parts of the business. Renaissance Wine Merchants was contracted to handle distribution, and banking was handed to Interior Savings Credit Union, which Blucke described at the time as a “strategic partner.”
(From left) Gabriel, Ezra,Stephen and Ari
Cipes of Summerhill Pyramid Winery in
But the shift didn’t sit right with the family. Touring as part of the Vancouver alternative rock band The Way Out between 2001 and 2003 with his brother Ezra, Cipes’s son Gabe had kept an eye on the business. He didn’t like what he saw when he returned to the winery in 2004.
“Gabe felt something was not right,” Ezra, now Summerhill’s president, says. “We were selling over 30,000 cases of wine a year at that time and we were losing money doing it.”
The brothers set aside music, returned to Kelowna and began taking a hands-on role in the business. Another shakeup of management followed and consultants were contracted to help the winery refine its vision and codify its identity, but family remained in control of executive decision-making.
“We dropped, in two years, from 30,000 to 15,000 [cases] in sales,” Ezra says. “We lost less money selling 15,000 cases than we did selling 30,000 cases. The realization was to know who we are and focus on who we are.”
A marketing company helped identify Summerhill’s key attributes, a process that helped distinguish the company and the brand from the personalities running the company. It in turn gave staff a clearer understanding of the company, as distinct from the family running it.
“[It] gives us tools like training manuals and things like that where we can write down what this company is about: this is our vision, this is how we play,” Ezra says. “It gives the employees a grounding in the culture, [and] it starts to create its own culture.”
By defining what makes the company unique, Summerhill was able to pass along positive aspects of the Cipes family dynamic, too, including the all-important ability to communicate in an open fashion. “[What] we learned the hard way is that the employees are your business. It’s more than family; it’s the employees. They become family,” Stephen says.
Ezra’s assuming control has given the company the best of both worlds: decision-making from within but a strong team of outside managers overseeing staff. “Those communication tools, which really just come from being loving parents and nurturing a loving family, are what is making it possible for us to work together as a family to transition the business,” Ezra says.
Structurally, the Cipeses will establish a family trust to facilitate Summerhill’s transition from sole proprietorship to ownership by the next generation. The planning aims to let the family choose a tax-efficient solution on Stephen’s death, and not be subject to outside pressure during a time of personal stress for family members.
The changes at Summerhill are significant, but Ezra Cipes takes a pragmatic stance. Owners can only make the best decision based on actual circumstances at a given time, rather than a future rooted in speculation; the fact is, no one has a crystal ball, and adaptation is always needed. Some companies simply face greater adjustments.
“When you start the business, you’re in one situation in life and you structure it for a purpose that makes sense at that time,” he says. “There’s an expense to changing course, and to changing plans—a real dollar expense to doing it, whether it’s transferring assets or just paying lawyers, accountants and so on.”
Seeking outside help is an important first step for family businesses confronting succession, but not all outside advisers are created equal.
“Advisers need to be much more equipped to deal with complex discussions, which a lot of them are not,” Judi Cunningham says. “They’ve been trained in very specific disciplines, like tax or insurance or legal or whatever. But they aren’t trained in how to manage all of the family dynamics and how to create collaborative decisions in families and how to get to decisions.”
Often, the onus falls on clients to co-ordinate the advisers and vet the advice being received—hardly an easy task when neither side has a clear understanding of the advice needed for the family’s circumstances.
It’s not that the advisers are ignorant or ill-equipped, Cunningham says. “They’re just disconnected. They don’t understand all the pieces at play.”
Bentall, whose own family ran into trouble as a result, in part, of deficient advice, says advisers must offer solutions that get to the heart of the family’s particular circumstances. While technical solutions that allow for the tax-efficient transfer of shares is good, advisers need to pay attention to the role each family member is going to play in the future business. This makes sense for the health of both the business and the family.
“It’s useful to start with who will own the business, and deal with ownership succession wisely before we deal with management succession,” he says. “Often, the reverse is the approach that is taken.”
The financial interests of family members is another issue to take into consideration, adds David Sung, president of Nicola Wealth Management, in Vancouver. Business families—like business owners, generally—need to set aside capital to ensure financial wiggle room when it comes time to hand the business over to a new generation or outside owner.
Often it’s a simple matter of diversifying one’s financial holdings instead of counting on building the business as a retirement nest egg. Tying up equity in the business can make it too expensive an asset to be easily acquired, or if the intention is for multiple siblings to inherit ownership, it might have to be sold in order to settle competing claims on the estate if one of the siblings wants to cash out.
“The best-laid tax plan can often run into failure if the planning for the family, and the family’s need and the family cohesion, is not addressed,” Sung says. “Proper succession planning is more than just preserving the business; it’s about preserving family relationships. And if it’s not done properly, that’s where family relationships are torn apart and families end up being divided.”
It’s the strength of family relationships that has helped the Jackson family weather the vicissitudes of more than a century of business in Vancouver, as well as point the latest generation toward a more intentional approach to succession planning.
Chris Jackson heads the store now known as Jackson’s Meat and Deli, originally established by family patriarch George Jackson in Maidenhead, England, in 1856. Chris Jackson’s great-grandfather, George William Jackson, emigrated in 1908, and after working in the forest industry saw an opportunity to serve the West Coast’s lumber camps with meat. Opened in 1911 on West 4th Avenue in Kitsilano, the family butcher shop survived two world wars and the Depression of the 1930s, and eventually grew to include a slaughterhouse in Richmond. But when Chris’s grandfather was killed in a motor vehicle accident in 1970, the company’s assets were sold to settle the estate.
What was left of the business fell to Chris’s uncle, Brian, who leased back the business’s original premises on West 4th for a new incarnation of the family butcher shop. Chris’s father, Geoff, a minority owner, opened a second shop on Granville Street in 1991. Chris worked at both locations, but with his uncle’s death in 2002, the Kitsilano store shut down, then in the face of rising property taxes and increasing competition, the Granville Street shop followed suit in 2008.
But before the doors closed, the Jacksons had the chance to return to their old space on West 4th and Chris jumped at the opportunity. Within eight months the Jacksons were back in business; two years later a second location opened on Granville Island under the management of Chris’s sister, Sara (who is also a partner in the Granville Island location, although the overall business is owned by Chris and his wife, Shayna Cooper).
The family had always talked about what they would change if they could start over, and with the new generation there was an opportunity to implement some of what had been discussed through the years. Both shops are different from the previous incarnations of the business.
“People aren’t coming to a butcher shop anymore just to get their meat; they’re coming for an experience,” Chris says. “Everyone has to be pretty knowledgeable.” Keeping things running smoothly also requires planning, something Jackson can’t emphasize enough. It’s an approach he absorbed during regular family discussions at home about the future of the business. “Sometimes they turned into slug-fests, and other times they worked out really well,” Geoff recalls. “We made some key decisions.”
One of those was hiring a manager from outside the family to oversee the business, a move that boosted sales three-fold. The adviser received a larger salary than any of the family members. “A business really does keep a family together whether it’s successful or difficult. And when it does get difficult, we’ve gone without paycheques,” Geoff says.
With a new generation of siblings taking over, a similar attitude is guiding the business. “People have to know where they stand at all times, and if that doesn’t happen things could get ugly, right away,” Geoff says. “What’s going to happen in year one as partners, and what’s going to happen between then and year 10 has to be laid out from day one, otherwise there’s no way it’ll work.”
Small surprise, then, that with two kids of his own—one just two years old, the other eight months—Chris is starting to think about accommodating a seventh generation in the family business.
“I want to work really hard to get a nice, comfortable asset for my children—if they choose to go that way,” he says. “[But] I don’t want to force them, because I wasn’t, either.”