Friend of the Family

Friend of the Family

SUCCESSION PLANNING by Dave Szymanski | Tampa Bay Editor

Tampa consultant John Dufresne has carved a successful niche helping family-owned and closely held businesses grow and make transitions in leadership.

Earlier in his career, Tampa consultant John Dufresne worked with the fragrance manufacturing division of Norda, a New Jersey-based company, that was family owned.

Little did Dufresne know that years later he would carve a successful niche helping family-owned businesses grow and handle transitions in leadership.

"I ended up accidentally running production," Dufresne recalls. "I ended up running everything, except sales and marketing."

Dufresne, a tall, soft-spoken, silver-haired Massachusetts native has been a fixture in the Tampa business community for many years. He founded his Tampa consulting company in 1989.

It is a particularly busy decade for Dufresne because of a key demographic shift. As more and more Baby Boomers edge toward retirement, more family-owned companies are doing succession planning as a way to smooth the management transition to family members or outsiders.

Some are looking to sell their business. About 85% of businesses in America are family owned.

Prior to starting his own firm, Dufresne started as a CPA who went into management.

He began consulting in 1979, starting a consulting firm in northern New Jersey and growing the firm to 30 consultants. Dufrese had a diversity of clients, including banks and technology firms. But he felt he wasn't a technology expert.

"I didn't have a technical background," Dufresne recalls.

Dufresne worked in New York for BDO Seidman, a CPA firm, then as a consultant in New York for a couple of years. He had an opportunity with Coopers and Lybrand and moved to Bermuda.

"Bermuda is a special place," Dufresne recalls. "It was a mix of different kinds of consulting. We had clients like Fidelity and Barcardi and then smaller companies. There were a lot of mini conglomerates. I didn't tend to work at mom-and-pop companies. Occasionally there was a startup business."

Another thing he borrowed from his Bermuda experience was working through strategic alliances, partnering with other professionals to get projects done or serve clients long term. Today, he sometimes uses the same strategy.

Harmonizing family members

Dufresne works in phases for his clients. They can choose to use him for the next phase, or proceed on their own. It's a tool to manage his work.

One of his main goals is preserving family harmony.

"A pure family business may have your typical sibling rivalry, jealousy, personalities, complicated with in-laws, grandchildren and so on," Dufresne says.

One of the dynamics in family owned businesses in transition is that when children come of age and are married and have their own families, their family's interests are in conflict with their parents' family's interest. If it comes down to choosing his wife and children, or his mom and dad, he tends to favor his immediate family.

Things can get further complicated if substance abuse is involved or if a child has a disability, due to an accident, genes or developmental issue, how do you handle it.

"You have a friend with two children," Dufresne says. "One graduates from Princeton. The other has missing genes, with an IQ below 100. She's never able to earn a living. The older sibling feels she has to succeed to care for her younger sister. Those are the kinds of dynamics we deal with. There's some friction. "

In some of these cases, Dufresne works with a psychologist to manage mental challenges among family members. Both he and the psychologist will act as a buffer between family members.

"Often the business will suffer when there's a family conflict," Dufresne says. "If you ask a normal family if you have conflict, they may say, 'No.' If you ask them if they disagree, they'll say, 'Heck yes!' So it's how you ask the question."

Dufresnse has written a detailed questionnaire to drill down to relevant issues. Sometimes potential clients will raise their eyebrows when they see the length of the questionnaire.

"It requires a lot of thought," he says. "We'll then get together as a group to discuss it."

Understanding family dynamics

Why did Dufresne choose this niche? He started doing family business work through a strategic alliance with another consultant. He enjoyed the work.

Growing up, he worked at his father's gas station two days a week and eventually helped his dad with the books. He attended the University of Massachusetts, where he majored in accounting.

Today, his common tasks for clients include business strategies and execution, exit planning, leadership management and effectiveness, processes, systems and people.

Many of the businesses don't have strategic plans. "They say it's in their heads," Dufresne says.

Dufresne has competitors. Most are therapists and psychologists. "I try to bridge the gap between people issues and business issues," Dufresne says.

Dufresne won't reveal revenues because it is "closely held" information. But he says, "We're constantly getting new clients."

A lot of Dufresne's time these days is spent on succession planning.

If the CEO of a family-owned business isn't the business' founder, he is most likely second or third generation. Typically, they don't want to work as long as their parents did at the job. They are tired of doing the same thing. They are burned out.

By asking the right questions, and working with the CEO, Dufresne helps clarify and execute the next steps for such a CEO.

The older family business members are, the less time they can recover from mistakes, so they are more financially risk averse. The younger they are, the more time they have to recover financially.

"If you're 60, you don't want to bet the farm," Dufresne says. "You typically become more risk averse. The majority of wealth is tied up in non-liquid assets, a combination of the home and business. They often don't have a lot of liquid cash. If something happens to the business, now what?"

In cases like this, Dufresne helps businesses pull in expenses, get them under control and protect their investment. But the next steps can be counter-intuitive. For a strong business, economically challenging times are exactly the time to expand market share, to pick up business.

While Dufresne helps businesses watch expenses, he also has to coach family-owned businesses not to blindly cut corners.

"One client wanted to do a single solution for marketing services," he recalls. "In today's world, you can't afford a single marketing solution. You can't reach enough people that way."

Another task he's busy with is getting different family members on the same page in managing the business.

"Think about pulling a stagecoach," Dufresne says. "The horses can go in different directions. But if they're pulling in same direction, it can move quickly, with a lot of momentum."

What many family members forget is that succession or an exit from the business will eventually happen. The only question is how, when and the extent of the problems it causes.

Lack of a clear-cut succession process could lead to family infighting. Dufresne's examples include the Farrior-Coke fortune and the Culverhouse family in Tampa.

"It's not the kind of headlines the business leader wants," he says. "It's ironic that business leaders that want to control their business leave it to chance. About 17% say they won't retire."

Financial concerns always play a role. Younger family members may be looking for a sweetheart deal to sell the business for twice the price. A parent may not have adequately funded their life after leaving the business. They need some money. Then there's the added complication of how long will they live.

There are leadership issues. One of the family members is willing lead the family company. But some of the others don't want to work for him.

Even in the same family, not everyone shares the same values. How many families have a black sheep? There's also an entitlement mentality among some family members.

Faced with these numerous and complex situations, Dufresne does analytical work, meeting one on one with family members and getting them together as a group, usually off site.

"We meet in neutral ground so no one has a psychological edge," he says.

Steps to succession

Here are some tips Tampa consultant John Dufresne offers on successful succession planning:

• Communicate all viewpoints.

• Actively seek creative, fresh approaches.

• Be flexible and open to change, new ideas and methods.

• Set realistic roles, then goals and expectations to minimize the risk of conflict.

• Revive your passion and make sure that the next generation really wants to own your business and is capable of leading it.

REVIEW SUMMARY

Company: Dufresne Consulting Group in Tampa

Industry: Management consulting

Key: Helping family-owned businesses grow and make transitions.