When business owners consider retirement, the first thing they think of might be the beach they wish to spend time on, or the hobbies they’d like to pursue. What owners should be planning—yet most don’t—is what will happen to the company they leave behind.
As aging entrepreneurs edge closer to retirement—often without a clear plan for what should come next—the inevitability of a sizable shift in generational wealth is being called the “silver tsunami.” Trillions of dollars of business and personal wealth are at stake as companies change hands. In St. Louis, where family-run and privately-held businesses represent a significant chunk of the region’s economic force, research from Washington University underscores the urgency of succession planning for local owners.
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According to published research from the WashU Olin Business School’s Koch Center for Family Enterprise, the metro area’s top 25 privately-held companies generate $140 billion in annual revenue, with a dozen of those organizations being family- or employee-owned. Of course, many large companies have plans in place to account for changes in leadership. But it’s less certain that a smaller organization will, and statewide, almost half of private sector workers in Missouri are employed by small businesses.
A 2023 PricewaterhouseCoopers study found that 66 percent of U.S. business owners over age 55 do not have a robust, documented, and communicated plan for succession.
According to WashU professor Peter Boumgarden, director of the university’s Koch Center for Family Enterprise, the reason for a lack of planning is typically the result of one of three factors. Some of it is the discomfort inherent in confronting one’s own mortality. In many other cases, leaders lack the bandwidth to grapple with bigger-picture problems at the expense of pressing daily concerns. But perhaps the simplest reason—and the one that might be easiest to fix—is that owners lack awareness of the available options.
“You might say, ‘Oh, my kid doesn’t want to go into the business,’” Boumgarden says. “That’s one type of succession, keeping ownership in the family and passing it to a child. But another type might be maintaining ownership and bringing in a professional manager. If you look at PARIC Holdings, that would be their strategy of having Kyle Lopez come in as the CEO, despite ownership still sitting inside the McKee family. Shifting to employee ownership would be another one, or selling to a private equity group or to a search fund.”
Some local companies provide examples of what a succession plan can look like.
- Hoffmann Brothers: “This is a firm that, about 10 years ago, had some pretty intentional conversations between [founder Robert Hoffmann and sons Chris and Joe] about when that transition occurs and who’s involved in it from a sibling standpoint,” Boumgarden says. “There are more siblings than just Chris and Joe, but only the two of them are involved. That had to be negotiated and navigated, and done in ways that the timing was right.”
- MTM: “This is an example of a family business that went through a transition with a gifted leader in Alaina Macia who has found a way to drive that organization forward,” Boumgarden says.
- The Maschhoffs: “When Jason Logsdon came in as a CFO in the mid-2000s or so, they were a relatively small hog farm,” Boumgarden says. “Through some transitions of the family to external leadership, first with Jason and then with his successors, they’re now a $1 billion–$2 billion hog farm.”
On Thursday evening, WashU’s Koch Center will host its 10th annual Family Business Symposium at Energizer Park’s Ultra Club, where leaders such as Enterprise Mobility executive chairman Andy Taylor, retired McDonnell Douglas chairman John McDonnell, and Tugboat Institute founder and CEO Dave Whorton will discuss what it means to be a strategic owner. Each brings a unique perspective.
“I think the big thing for business owners that we hope they get out of hearing cases—from Andy on private ownership, a case from Dave on the importance of being evergreen, and then the context of John at McDonnell Douglass being a publicly-traded firm—is not that one is the best route and the others are the worst, but rather the tradeoffs and choices you make in capital structure,” Boumgarden says. “[It’s important] to be intentional about thinking about your ownership design and how you can have the kind of impact you want to make.”
