Few St. Louis-area business owners have a transition plan despite nearing retirement
Around 70% of business owners across the St. Louis region are at or nearing retirement, but only about 25% have concrete plans for how they’ll transition from the enterprise they’ve built, according to a recent survey.
These results alarm Jim Maher, CEO and founder of Archford Capital, the private wealth management firm that sponsored the survey.
“This is a regional issue that we’ve identified with this study,” he said. “We kind of need to get all hands on board and look at this and say, ‘How can we help these businesses as they start to think about transition?’”
The survey focused on “closely held businesses,” ones that employ from a dozen to a few hundred people, within 150 miles of St. Louis, Maher explained. This class of company employs roughly half of all workers across that defined region, he said.
Maher’s primary concern is that many small or mid-size companies will end up closing in the near future because their aging owners don’t have a clear succession plan or family members who want to continue operating the business.
“We can’t let this be an awkward conversation,” he said. “We need to be forthcoming to help that business owner be able to make it a legacy-type company.”
But planning for what’s next is often uncomfortable. Shayn Prapaisilp, chief operating officer of STJ Group Holdings, knows this well from his own experience and from talking with his peers in similar multigenerational, family-run businesses.
STJ is the parent company to restaurants and grocery stores like The King and I.
“It’s been my experience from what I’ve seen and heard that succession planning is hard and it’s sometimes the stickiest topic,” Prapaisilp said.
The tension comes from giving up control over how the company should function into the future, Prapaisilp said.
“It’s not an easy conversation. A lot of times these are founders or their identity is very much wrapped up into the business,” he said. “Owners want to make sure that the person who is taking over is ready.”
To Prapaisilp, it’s important to emphasize that a transition isn’t hostile, but a natural next step in the legacy of a well-regarded regional business, he said. But these conversations can get put off, sometimes until it’s too late, Prapaisilp added.
Many businesses wind up closing a few years after there’s a diagnosis of a disease, a divorce or even a death, Maher said. These are the situations where a lack of succession planning hits hardest, he added.
“We’re all going to exit our business one day,” Maher said. “I don’t care who you think you are, it’s not optional.”
“My plan is to step back sooner than later. For the next year and a half, I’m setting up the customer base, the infrastructure,” he said. “The foundation I’m putting together now is the foundation that will run and grow the company for decades.”
Winn would prefer if his employees could eventually purchase the company in an employee stock ownership plan.
“It would be wonderful if I could transition this business to the employees and still make some money at the end of the day,” he said.
This is the kind of forward thinking Maher advocates for more companies throughout the region, he said.
“That’s not a high-risk thing for a bank if someone is willing to accept fair market value for their company and willing to transfer that to people that have been running that company or know that company intimately,” he said. “They’re hallmarks in our community.”
Prapaisilp agrees, emphasizing how banks and other professional consultants are investing in these kinds of clients that last into the long term.
“There’s something unique to St. Louis DNA, where we really strive to build and grow and maintain these family-held firms,” he said.
Correction: An earlier version of this story incorrectly identified the parent company of Jay International Foods.
Eric Schmid covers economic development for St. Louis Public Radio.