About 70 percent of business owners in the St. Louis area are or will be retiring soon, according to a recent survey, but only about 25 percent have specific plans for how they will transition from the businesses they established opinion polls.
These results alarmed Jim Maher, CEO and founder of JF Capitalthe private wealth management firm that sponsored the survey.
“This is a regional problem that we identified with this study,” he said. “We kind of need to get everybody on board and look at this and say, ‘How do we help these businesses start thinking about transformation?'”
The survey focuses on “closely related businesses”, Companies that employ a dozen to a few hundred people within 150 miles of St. Louis. Lewis, Maher explained. Such companies employ about half of the region’s workforce, he said.
Maher’s main concern is that many small and medium-sized companies will end up going out of business in the near future because their aging owners don’t have a clear succession plan or family members who want to keep running the business.
“We can’t let this be an awkward conversation,” he said. “We need to be helpful and help this business owner make it a traditional company.”
But planning the next step can often be uncomfortable. Shayn Prapaisilp, COO of STJ Group Holdings, knows this from his own experience and from conversations with his peers in similar multi-generational family-run businesses.
STJ is the parent company of restaurants and grocery stores including The King and I and Jay International Foods.
“Succession planning is difficult, and sometimes the toughest topic, from what I’ve seen, and that’s my experience,” Prapaisilp said.
The pressure, Prapaisilp said, is to relinquish control of how the company will operate in the future.
“It’s not an easy conversation. A lot of times these people are founders, or their identities are very much about the business,” he said. “The owners want to make sure a receiver is ready.”
He said it was important for Prapaisilp to emphasize that the transition was not hostile, but a natural next step in the legacy of a much-loved regional business. But those conversations can be delayed, sometimes until it’s too late, Prapaisilp added.
Many businesses close their doors years after an illness diagnosis, divorce or even death, Maher said. In these cases, the lack of succession planning has the most impact, he added.
“One day we’re all going to get out of our business,” Maher said. “I don’t care who you think you are, it’s not optional.”
Gregg Winn realized this when he started Centralia-based powder coating business Fabcoatback His previous business was acquired in early 2020.
“My plan is to take a step back sooner or later. Over the next year and a half, I’m going to build the customer base and the infrastructure,” he said. “The foundation I’m building now will be the foundation upon which the company will operate and grow for decades to come.”
Winn hopes his employees will eventually be able to buy the company through an employee stock ownership plan.
“It would be nice if I could pass that business over to the employees and still make some money at the end of the day,” he said.
It’s the kind of forward thinking Maher is promoting for more companies across the region, he said.
“If someone is willing to accept the fair market value of their company and is willing to transfer that to someone who has been running the company or is familiar with it, then that’s not a high-risk thing for the bank to do,” he said. “They’re a hallmark of our community.”
Prapaisilp agrees, highlighting how banks and other professional advisors can make long-term investments in such clients.
“There’s something unique about St. Louis. Louis DNA, we really work hard to build and grow and maintain these family businesses,” he said.
Eric Schmid is responsible for economic development in St. Louis. Lewis Public Radio.