Melody and Grant Smith, majority owners of Taneytown Drywall Inc., a small family-owned drywall company with annual revenue between $1 to $5 million, have overcome numerous challenges in their 42 years of wedded life. Early financial strain, three-hour commutes, multiple relocations, broken vertebrae, housing market vagaries, regrettable employees, unpaid receivables, and most exhausting, rearing three children. Yet in the last year, they confronted what, in some ways, was their most daunting dilemma, one that weaves its way throughout their family fabric.
“Without question,” Melody, the Vice President, Chief Financial Officer and secretary of the company affirms when asked if the decision to relinquish absolute control of their company to her sons proved difficult. “Grant (President of the firm) and I incorporated Taneytown Drywall 22 years ago, only a handful of years junior to our youngest son. It was, and remains an important part of our life. But …” Her voice trails off as she looks at her grandkids’ picture gallery and her heavily scheduled calendar. “We lived with the company for many years and while our hard work has earned a generous return, we now want less aggravation and hassle.”
Letting Go Is Hard To Do
Grant, a soft-spoken lifelong drywall mechanic whose slight southern drawl reveals his southwest Virginia roots, noddingly agrees. His body aches from a lifetime of labor yet he still points-up and finishes bottoms, but only if he “feels like it” he stresses with a knowing grin. It’s the aforementioned aggravation and hassle that he’s happy to hand over to his sons, noting the increase in both over the past five years.After much deliberation, they decided to give their two sons 49 percent of the company while retaining 51 percent, at least for now. “We wanted to do something, but handing over ownership of the entire company seemed a bit much. We still want to be involved, but the boys have de facto taken over operational control already. So, we’ll see.”
As for their generosity in giving away part of their company, Melody offers almost apologetically, “We wouldn’t feel right charging our sons. They’ve worked for us since they were 12 years old, stippling with Grant over their summer vacations and have helped the company prosper. That being said, I can certainly understand if others accept or expect payment for ownership of their business; it is their business, though it’s just not something we feel is justified.” Noting possible tax implications, Melody recommends that any family considering changing ownership involve an accountant in the decision.
Melody and Grant, in addition to their two sons, have a daughter, which presented them with another difficult deliberation when considering ownership gifts. “Our daughter successfully manages life outside drywall, thank goodness for her,” explained Melody as she acknowledged the cyclical nature of homebuilding and recognized Shelley’s compensated skill in concocting pastries.
“Grant and I feel that children without business involvement shouldn’t be given ownership, regardless of the amount. We view ownership as a serious responsibility, one earned through long hours and a complete understanding of the business, operationally and financially. We don’t want to purposely unsettle the workings of the company by promoting lack of knowledge.” Does this seem less than motherly?
Separating Business and Family
“We love our daughter very much and I suppose I could say business and family need to be separated, but a family business doesn’t work that way. Our family meals, phone calls, emails all find ways to mention drywall. It’s unavoidable. Yet there is a line for family members not involved with the company and that line is ownership. Others may encourage family solidarity by giving each child ownership, but I imagine that may cause as many problems as not giving each child ownership.”Their sons, one 31, the other 27, are highlighted when Melody speaks about the operational control of their company. “We believe,” she starts, “that seniority is meaningful. It’s not the end-all, but in the case of our sons, our oldest has four more years of work experience, people experience, and business experience. He is more qualified to run the company. Is our youngest competent? Yes, which allows those two to work well together. But you can’t operate with two in control, there must be a final-say voice and our oldest has that voice.” Did this cause consternation? “Of course,” Melody replied, “but our youngest is involved more with the finances of the company, the money side, in addition to working in the field. Our oldest retains a great memory and is better at tracking and ordering the day-to-day operations in the field. They work well together, but it’s taken time for them to find their roles and for us to help them in that respect.”
Did their daughters-in-law figure in their succession planning? “Well,” Melody started, hesitating slightly before answering, “We love our daughters-in-law, and we’re fortunate to be able to say that and mean it. That being said, we’re certainly aware that when we give away part of the company to our sons, it’s also going into the hands of their wives. It’s a consideration, but in our case, not a concern. I doubt either one wants to be involved anyway, considering they have children, jobs, and schooling to occupy their time.
“Ultimately, we view the company as a tangible product of our hard work and perseverance; an entity built by conducting business in an honest diligent manner. If our children hadn’t revealed similar qualities then we wouldn’t hesitate in refusing to give up ownership. It’s not their birthright, one handed to them only because of relation. Our expectations are high and they’ve met them, over many years, many houses, and many discussions. At times arguments and fights occurred. But, like most families, we worked through it.”
Melody paused before ending the interview with an appreciative sentiment. “We’re glad they’ll continue the business, in the same manner we did.” I’m glad as well.
