No matter what the size of your business, you have to put the succession plan in place.

 

Sandra Westlund-Deenihan admits she wasn’t sure whether she’d be able to keep herself from getting too emotional at the recent InKnowVision Institute’s semi-annual conference at the University Club in Chicago. It was the first time she shared the story of how she had saved her family owned company, Quality Float Works Inc. of Schaumburg, Ill., from bankruptcy after a 10-year struggle due to a lack of an airtight succession plan.

“I put everything on the line and took all these risks,” Westlund-Deenihan says. “I could have ended up on the street because I put everything I owned in the business. That is how much I believed in the business. It had a history, we knew the customers and we knew the business. To me, it seemed like a sensible risk.”

Quality Float Works was founded as Chicago Float in 1915 as a manufacturer of metal float balls for liquid controls. Westlund-Deenihan, president and design engineer, was in line to inherit the company from her father when he died in 1994. She assumed he and his outside management team had a solid succession plan in place in the event that he died.

However, Westlund-Deenihan found out the hard way that the plan included vague terminology and had large holes in it, especially the lack of a buy/sell agreement that left the business in the hands of her father’s estate.

“My dad never understood and never explained it to me,” Westlund-Deenihan says. “I never had a copy and I trusted what my dad said. He told me what I had to do, what role to take in the transition and had talked it out with the attorneys.”

Once everything was laid out, however, it was obvious the transition would not be as smooth as Westlund-Deenihan or her father had expected. Without the buy/sell agreement, the company was destined for the auction block. To save the business, Westlund-Deenihan said she liquidated all of her assets to buy her family’s company back from the state. “I don’t want anyone to go through that tragedy because it really took its toll, emotionally and financially,” she adds. “We know so many family owned businesses will be transitioning in the next five years, so it is really important that people start thinking of their [own] succession planning.”

Once the business was safely in her hands, Westlund-Deenihan acted swiftly to ensure her son, Jason Speer, someday wouldn’t have to endure what she did. She relaunched the company as Quality Float Works and now has a new “genius” accountant, who brought in a “common-sense” attorney to help make sure Speer and, eventually, his children, would be in a good position to lead the company into the fourth and fifth generations and beyond.

And Quality Float Works is back in the black; it earned $2.2 million in 2007 with 26 employees and, through the growth of its export business, is looking to hire more people. “We’re persevering, and it’s from hard lessons,” Westlund-Deenihan says. “I want to be very clear: No matter what the size of your business, you have to put that plan in place.”