When the sibling owners of Glenroy Inc. were considering a recent building expansion, they faced an important question. What kind of business did they want the Menomonee Falls-based manufacturer of flexible packaging to be? Their facility was at capacity. They could be content with the business their family had built over three generations, but that
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The third and fourth generation of Glenroy at the groundbreaking for the company’s expansion in 2019.[/caption]
Glenroy doubled its manufacturing space despite not needing all of the room immediately.
“What it’s doing now is affording us the opportunity to continue to plan farther out,” Juehring said.
Growth is good for a company, generally speaking. They say if you’re not growing, you’ve started dying. But there are also many ways to grow. More sales. More profit. More employees. More investment in your community. And there’s different timelines, whether it’s quarters, years or generations.
At the same time, even as the headlines are filled with growth stories, there are also cautionary tales of businesses that went too fast, did too much, pushed too far and ultimately crashed and burned.
“Growth isn’t always, especially if you’re just focusing on top-line growth, that is not always the best thing,” said Jeannie Cullen Schultz, co-president of Janesville-based construction firm JP Cullen, adding it is easy to focus on growing quickly, especially if the market is in your favor, but it is important to grow the right way for the right reasons.
“It can go the other way pretty quickly,” she said.
Growing doesn’t require the business’ financial metrics to look like a hockey stick climbing off the chart, but it does mean pushing the boundary of what seemed possible.
“It’s healthy and we’re all better as human beings when we’re stretching ourselves a little bit and we are a little bit uncomfortable, I think we’re all more productive in that kind of situation,” said Mike Moore, president of Menomonee Falls-based Moore Construction Services.
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Mike Moore, right, with his son Austin, vice president of Moore Construction Services.[/caption]
“If you start running a business without growing the business, you change the culture of your company and you don’t provide the opportunities for your employees to grow with the company,” said Jerry Weidmann, president of Wolter Inc., a Brookfield-based provider of material handling solutions.
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Jerry Weidmann[/caption]
How family businesses grow
Ownership structures can also dictate a lot about growth. Public companies have quarterly earnings and Wall Street analysts. Venture-backed firms have investors pushing toward a big exit. Private equity-owned firms may be on a timeline for the next sale.
Family-owned businesses can be set up to focus on building a multi-generational legacy. When run with an eye to the future – and the right mix of structure and compassion – one generation of family members can set the next up with options. That next generation can take the reins, bring in outside management or even sell all or a portion of the business.
To understand the specific advantages and challenges family firms have when it comes to growing, BizTimes spoke to more than a dozen family business leaders and bankers.
“In short, family businesses get to play a game other ownership structures do not get the opportunity to play,” said Matthew Powell, CEO of Pewaukee-based Century Fence Co. “If families choose, they can play the infinite game of optimizing for relationships and trust with a timeline of eternity, which builds moats … most ownership structures optimize for current profits, with time horizons of up to five years. It’s a common and crowded game.”
Anne Cookson, president of Waukesha-based Baker’s Quality Pizza Crusts, said family business owners have a different level of personal investment in the company.
“Your business becomes a member of the family and so everything you do is with that in mind,” she said. “I don’t think that non-family businesses get that same level of attention.”
Successful families are able to strategize together as they look to the future.
“When you are thinking about the next decade, at least in our business, it’s really easy for us to be like, ‘Yes, we’ve talked about this, we know exactly where we want to go,’” Cookson said.
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Ivan Gamboa[/caption]
Ivan Gamboa, senior vice president and chief commercial lending officer at Oak Creek-based Tri City National Bank, said family businesses tend to have a more centralized decision-making process, making it easier to build and maintain relationships.
“Family businesses are very invested in their business from both time and family resources,” he added. “They have a lot of skin in the game, and they’ll do whatever it takes to be successful. I think that helps a business to become successful, but also helps build their brand in the community.”
But running a family business also comes with its own unique pressure.
“As a generational leader, you’ve got this thing that you’ve been given control of, and you want to do it justice. You want to live up to the expectations of the generations that came before you,” Cookson said.
Family business challenges
Broadly, the challenges for growing family businesses fall into three categories: Ownership related, financial, and people and culture.
At the ownership level, there’s the possibility of different shareholders having differing appetites for risk, either because of how they view the market or where they’re at in life.
Wolter had its own version of this challenge that it addressed by bringing on a minority investor in BBH Capital Partners, a private equity firm that specializes in working with growth-oriented middle-market companies.
Internal capital was enough to fund a series of acquisitions in recent years that helped Wolter meet its goal of growing 10% per year, but the company increasingly faced multiple points of pressure on that growth.
For starters, customers and suppliers increasingly want companies like Wolter to be larger, more sophisticated and able to handle more complicated equipment and automation, Weidmann said. Those dynamics are pushing the company to increase its growth goal to 15% per year, potentially doubling the business in five years.
At the same time, Wolter’s second generation of owners is nearing retirement and would potentially be looking to the business’s earnings to support the next phase of their life.
The result is competing demands on the business.
“Looking at a second generation beginning to retire, if you slow the business growth to take care of that particular financial objective, you now have the challenges of what’s going on in the market where you’re no longer growing … and you’re not building the business for the future, you’re focused on the present,” Weidmann said.
To solve the problem, Wolter developed specific criteria for a minority investor to provide liquidity to family members while also providing growth capital to the business.
Since forming the partnership with BBH earlier this year, Wolter has been able to continue its search for acquisition targets, signed a number of letters of intent and expects to close four to six or even more deals per year to sustain its growth trajectory, Weidmann said.
“The reason for that method was not to stress the business by attempting to do both using just bank financing and internal equity, but rather to be realistic about the amount of capital it was going to take to do both objectives,” he said. “It really was the best way in our view to balance the needs of the family and the legacy issue and the needs of the company to grow.”
Working on relationships
Relationships matter for any ownership group, but they can be even more complicated when family dynamics are at play.
Well before the Glenroy owners faced the decision of whether to expand, Juehring and her siblings were working on their relationships. One of the early steps was for each to think about what they wanted their life to look like and if the business would be part of it, acknowledging it was OK if someone didn’t want to be in business with their siblings.
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The second and third generation of Glenroy gather with employees to celebrate winning an award for safety.[/caption]
“Really taking time to think about that and all three of us, we came to the table and said, ‘No, I want to be a part of this business, and I want to continue the legacy that our grandpa and grandma and dad started.’ It’s powerful,” Juehring said, adding that knowing and caring about employees and their families was a motivator.
Glenroy’s family business advisor reminded the siblings they were coming to the table as three equal owners, all bringing their own unique “flavors,” and they’d have to “respect each other through that,” Juehring said.
Regular quarterly meetings and a commitment to working through tough issues helped the group navigate challenges over the years. Techniques that helped include arguing from another sibling’s point of view and encouraging spouses to get information from a family member they’re not married to, Juehring said.
Financial considerations
At a financial level, it is possible family businesses may find it more difficult to access capital, if for no other reason than it is not the way their business is built.
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Patrick Lubar[/caption]
“That’s not what they do day in and day out,” said Patrick Lubar, vice president, Milwaukee commercial lending at Ixonia Bank. “They’re focused on growing their own business, not the capitalization of it. Private equity firms, they spend a large portion of their time developing relationships with lenders and sub-debt providers and other sources of capital on a regular basis and that’s what they specialize in doing.”
Austin Ramirez, CEO of Waukesha-based manufacturer Husco International, highlighted that a family business model is built to take a long-term view on shareholder value creation and inherently aligns company culture and values with the leadership and ownership team. He said “the only downside” is accessing capital to fund growth or acquisitions can be more challenging than they are for a public company.
“This may limit growth in the short term but tends to lead to smarter decisions over the long run,” Ramirez said.
Gamboa noted family businesses are well positioned to take advantage of lending programs that may require personal guarantees or longer-term promises to the community.
Family businesses also have the flexibility in choosing how they will reinvest in the business, potentially bypassing a dividend in favor of investment in employees or equipment, said Cullen Schultz. Lubar noted his grandfather, Lubar & Co. founder and chairman Sheldon Lubar, will frequently remind him that retained earnings represent the cheapest form of capital.
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Jim Popp[/caption]
That flexibility stands in contrast to businesses backed by private equity or institutional investors, which Jim Popp, president and CEO of Racine-based Johnson Financial Group, said are more prescriptive.
“They’re built to be businesses, they’re built to access capital, they’re built to be capital efficient,” Popp said, describing family businesses as having been nurtured and evolved.
“The plus of that in a family business is you’re not beholden to a metric or a dynamic or a specific outcome within a specific timeframe,” he added.
Popp said it is possible for a family business to be a great community partner and have a great culture while still being intentional and develop rigor around metrics and outcomes.
“Boy, there’s a really great fine line between being very prescriptive and being only about the soft stuff,” he said.
A focus on people and culture
Many family businesses pointed to their people and culture as one of their strongest advantages. However, if a business is going to grow, it is likely going to add people, and adding more people to the mix is a recipe for the company culture changing.
“The most important capital in a business is human capital, and employees generally prefer working for a family-owned business who has shown that they treat their employees right,” Lubar said.
But treating employees right doesn’t mean losing sight of business objectives.
“This is where you must tread carefully,” said Clifton Phelps, vice president of business development at Milwaukee-based JCP Construction. “When you say ‘family-owned business,’ people are focused on ‘family-owned,’ but it’s a ‘business’ at the end of the day. Sometimes we have to make tough decisions to ensure profitability and take steps to curb outside emotions. It’s definitely a balance to maintain company culture and still be stewards of our own legacy.”
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Paul Bostrom[/caption]
Paul Bostrom, president of Waukesha-based seating manufacturer H.O. Bostrom, said the company has worked to retain its family business culture even as he brought on new members of the leadership team and a greater commitment to strategic planning.
That means everything from profit sharing to company-provided snacks every Thursday, a tradition that dates back three decades, Bostrom said. There are also employee cookouts and raffles with tickets to local events.
“We can create more loyalty with our team members, and we can flex a little bit,” Bostrom said, noting the ability to help with a down payment or provide a cash advance on a paycheck when needed.
On the other end of the spectrum, there is accountability, although Bostrom said there may be a little more flexibility depending on the situation. The key is a consistent application of policy.
“If you create loyalty with team members, if you don’t hold everybody accountable to those basic rules, then strong team members look at us like we’re not doing our job,” Bostrom said. “I think they expect us to push all team members to work within the guidelines and the expectations.”
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H.O. Bostrom’s original facility from 1946.[/caption]
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H.O. Bostrom’s current facility in Waukesha (right).[/caption]
H.O. Bostrom managed to have a record year for revenue and profitability last year, but it wasn’t until this year that Bostrom started to see – and hear – the strategic plan his team put in place take hold.
“I am hearing people talk about a specific aspect of our plan that they probably wouldn’t have talked about three years ago,” he said.
Bostrom took over ownership of the business from his dad in 2021. He brought on a new director of human resources who, in turn, helped bring on other top leadership that has worked to develop the strategic plan.
“You have to have a plan, and you have to have good people to execute the plan or you just won’t do as well as you could,” Bostrom said.
He said in the past the company has tapped into available support resources to develop a plan, but the work didn’t continue or wasn’t consistent.
“I would say the key is to get everybody in agreement on the plan that you create because one person can’t push it,” Bostrom said, adding that different portions of the plan are reviewed on a monthly basis and changes made as needed.
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JJ Stanwyck[/caption]
Investing time and energy into becoming more process-driven, organized and structured has helped Jackson-based Refractory Service Inc. see strong growth since 2020, said JJ Stanwyck, CEO of the industrial high-temperature construction firm.
Around the start of the pandemic, the company lost a number of employees due to retirement, Stanwyck said.
“Looking around, it was kind of like, well, what are we going to do here?” he recalled.
It offered a bit of a blank-slate opportunity, but Stanwyck said he also had to leverage the talent that did remain in the business. Getting buy-in from employees and overcoming a change-resistant mindset was a key part of the
success.
“That was really critical, not having sticks in the mud to moving forward,” Stanwyck said.
For many family businesses, it can be easy to develop resistance to new ideas especially with long-tenured employees and leadership from an older generation that built the business.
Stanwyck worked to cut through that attitude by offering a clear vision and spelling out how changes would benefit employees.
“It really was a lot of cheerleading and constant reminders to everybody and conversations,” Stanwyck said, adding that it became easier after he got a few people on board. He hesitated to call it a “constant battle,” describing the work instead as a journey.
Stanwyck was also willing to ask what people needed, what would help them do their job and then make investments accordingly.
“It was that comfort level of asking, too,” he said. “I couldn’t predict what everybody needed or wanted.”
One part of Stanwyck’s message to employees was that he was not trying to take the family aspect out of the company, rather his goal was to make everyone’s life easier.
The result has been an enhanced family culture as employees have organized more Friday lunches and other small, impromptu activities that have helped build rapport and camaraderie, Stanwyck said.
Growing the business, and making operational changes to allow for that growth, also serves a larger, long-term purpose. Stanwyck said it will help set the next generation up with options.
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An example of the theme park construction work done by Cost of Wisconsin, another family business Stanwyck leads. The two companies share some overlapping services.[/caption]
A model for growth
From a business model perspective, Mike Moore saw an opportunity when he started Moore Construction Services in 2007 to offer pre-construction services, helping customers know what is feasible and get a better handle on costs.
Then, having the right project managers and on-site superintendents allowed the firm to meet customer expectations, helping to foster repeat business in the future.
“We’re not out buying work just for growth purposes,” Moore said. “Part of it is our capabilities, our recognition, the development with ourselves and our customers that bring us that repeat business; it’s just like a snowball effect, it just keeps growing.”
“Now, you have to deliver or that growth will go away,” he added.
A snowball rolling downhill may keep getting bigger, but a growing company needs to add staff to execute. Finding the right people helps the company meet customer expectations, which in turn helps land repeat business that fuels growth. Hiring the wrong people could mean the snowball may slow down or even shrink.
“The whole premise here is maintaining the culture so that (when) we’re hiring people they know what’s expected, how we operate and that they’re a right fit, they’re buying into our culture,” Moore said.
He also said family businesses have the opportunity to understand “it’s not just all about
the dollars.”
“We’re looking in more of a long-term perspective, which helps feed into that repeat business as opposed to having to have to drive just the numbers,” Moore said. “In general, I feel a family business, if it’s run properly, has more of a personal feel to it than a numbers-driven organization that’s looking at purely EBITDA.”
Listening to customers
Delafield-based Evans Transportation landed the top spot as the fastest growing company in the region, as part of BizTimes’ 2023 Future 50 program, and this year is projecting 24% growth. It’s not just growth without a mission. Evans donates 10% of its net income to charitable causes nominated by employees.
Six years ago, after buying out a business partner, the father-son duo of Charlie and Ryan Keepman made it a point to not be “the jack of all trades, master of none.” Instead, they focused on managed transportation and building relationships with less-than-truckload carriers.
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Charlie Keepman[/caption]
However, that focus and execution led to customers asking for the same in truckload service. A growing truckload business led to the launch of a project division for more complex freight. Then, as the post-pandemic economic boom gave way to a downturn that led to layoffs in the industry, Evans decided to keep investing by adding a parcel division.
“We have a really good way of communicating and building trust … nothing more important than trust when it comes to doing business with one another,” said Charlie Keepman, founder and chairman of Evans.
“Listening to our clients and then being able to execute,” added Ryan Keepman, CEO of Evans. “I think that’s a big, big, big piece to it, but a lot of it was very strategic in nature as well.”
Ryan explained the company has its plans in place and leadership teams meet quarterly to make sure they stay aligned and revise them as needed based on customer feedback. He pointed to a new business announcement planned for this summer that was the result of listening to clients.
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Ryan Keepman[/caption]
“Was it in our original budget? No, but we’re finding space for it throughout the year to make sure it can fit and we can service our clients to the best of our ability,” Ryan said.
The kind of growth Evans has experienced poses an inherent challenge for any business. People, culture and relationships have been at the center of the company’s growth, but growing means adding people, creating a potential threat to the very thing that has propelled the business forward.
Ryan said the answer is in leaders using their time effectively and being very intentional about focusing on the company’s people.
“Whereas in the past it might’ve been a lot more focused on execution, but hiring more and better leaders that are in alignment and rowing in the same direction we are is the only way that we’re going to be able to grow and retain that same family feel to the business,” he said. “It’s hard. It takes a lot of work. It takes a lot of time that sometimes it doesn’t feel like you have, but at the end of the day, you’ve got to make it because your people are what’s most important.”