Meet our client:
The Tannenbaum Family
Frank and Cathy started their architecture firm 38 years ago. Their two kids, Tom and Sarah, joined the firm shortly after college and it became a family firm. Mom and Dad were thrilled to have son and daughter come aboard and it was smooth sailing until Tom and Sarah had ideas of their own. They were in conflict as to how to grow the firm, who to hire, how to manage current employees and what projects to bid on. Suddenly, Frank and Cathy were not in alignment with Tom and Sarah, but they were all equal owners. They were stuck.
After an unsuccessful tax planning meeting with their CPA, their CPA quickly realized the family dynamics at play, we were introduced to the family. Frank and Cathy had specific ideas they wanted to implement regarding employee retention, growth, and succession planning. Tom and Sarah had general ideas regarding recruitment, growth and transition planning that didn’t necessarily line up with their parents. However, all four agreed that the company should remain with the family.
Frank and Cathy wanted to use equity as an incentive for long term employees. They felt the long-term employees had earned it. Tom and Sarah didn’t want more owners at the table. 1st Generation was at an impasse with 2nd generation. While this was not the first impasse, nor will it be the last, both generations knew they needed some guidance.
We started our work centered around helping Frank and Cathy determine their readiness to leave (both financially and emotionally) as well as how strong was their desire to step back vs counting to have active roles in the business. As we see with most family business, at some point, the 1st Generation must create room for the 2nd Generation to grow, try new ideas out, fail and succeed.
Ultimately, we designed a way for Tom and Sarah to become the controlling owners, set aside a pool of stock to be used for key employee motivation and retention and helped Frank and Cathy achieve their financial freedom. Not so coincidently, once Frank and Cathy met their retirement objective, they were happy to immediate take a step back and step out of the business.
If you would like to learn more about selling your business to a child or children, please contact us today.
Plan Facts
Frank and Cathy, 71 and 69 respectively
2 kids involved in the business, Tom and Sarah
4 key employees
8 critical, but not key, employees
35 employees
Revenue of $15MM
EBITDA of $1.8MM
Results
Developed employee recruitment and retention program
Increased EBITDA to $3.2MM
Created a pool of stock to be used for Key Employee retention
Ensured business continuity
Frank and Cathy transitioned to Board of Directors
Family company remained harmonious