Setting up Your Machine Shop for Succession Success
Here are ways the husband and wife owners of a machine shop in Fridley, Minnesota, are preparing for their son and daughter to take the reins.
Scott and Cheryl Larson chalk up their shop’s success over the course of 20 years to establishing relationships with key people who have helped grow the company and make it more efficient. “You have to know when to ask for help,” Scott says.
The husband and wife team are co-owners of Colburn Manufacturing, a Fridley, Minnesota, shop that serves a range of industries and specializes in CNC Swiss-type turning. The Larsons have reached a point in which they are ready to retire and hand the business to their son Clint (application engineer) and daughter Liz (director of operations). In fact, they are a little more than one year into their five-year succession-planning process.
The process started with Cheryl taking a Small Business Administration class to get a general idea of what steps needed to be taken and how long the transition timetable should be. The Larsons knew they needed additional outside help to ensure a smooth transition of the business to their children, so they turned to Tom Huberty, CEO of the management-consulting firm Huberty Performance Learning. Part of Tom’s strategy in helping to set up the business for succession success and growth is applying Entrepreneurial Operating System (EOS) concepts. Developed by Gino Wickman, founder of leadership team development company EOS Worldwide, EOS focuses on strengthening six key business components: vision, people, data, issues, process and traction. Tom says EOS concepts accelerate positive change within a company in those areas.
The family meets with Tom monthly. Clint says he has helped keep communication open between the family members while ensuring they take time to work on the business, not just in the business. To do this, Tom assigns the family members various transition-process projects. Liz says some of these have included refining the hiring process to ensure that potential employees are a good fit with the shop’s culture, minimizing process waste by using 5S to organize the workplace, and documenting job costing. This last project was designed to capture Scott’s tribal knowledge he draws on when quoting new work by identifying all potential cost elements for any job.
Tom says it is important for shops to identify their niche at the onset of succession planning. “You need a firm grasp of who you are as a business, what customer segments you serve, what your customers’ expectations are and what the core values are upon which your company is founded,” he explains. “I also suggest taking an EOS assessment to get a baseline as to where your company stands relative to the six key EOS business components.”
Clint believes it is also important for Liz and him to maintain open communication with customers during the transition. The two are now part of all customer meetings, and Scott and Cheryl tend to defer to them to answer many of their customers’ questions. That way, customers clearly see the transition in progress so there is no chance of surprises. Customers also see Cheryl and Scott taking more time off (going so far as to take a “practice retirement” month away in January), so they are becoming more comfortable calling Clint or Liz when they have questions.
One bit of advice Cheryl suggests to other shop owners contemplating retiring is to start succession planning early. “I’ve heard of owners planning to make the transition in only one year,” she says. “I can’t imagine doing that.”
There are many hard-won lessons that come from running a family-owned shop, here are a few favorites.
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Leaders of Indiana Precision Grinding describe lessons learned related to succession planning and how the upcoming generation found its commitment to the business.