Insider Tips on Successful Succession Planning

Episode Description:

In this episode, host Elizabeth Ledoux is joined by Doug Damon, who is currently the Chairman of Damon Industries. Doug bought this business from his dad in 1979 and built it up over the decades. In recent years, he transitioned the ownership and management of Damon Industries to his children. Tap or click the play button below to listen to: Insider Tips on Successful Succession Planning.

In this episode, Elizabeth and Doug discuss the following question (which many owners who are planning to pass their business onto the two or three kids hear): “Who’s going to be the CEO?” Doug also dives into his personal views on the importance of succession planning and coaching. They also explore what worked and what didn’t work with Doug’s real-life example of transitioning his company to children. 

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Insider Tips on Successful Succession Planning Transcript

Doug Damon: The one big issue that was still hanging out there was, who’s going to be the CFO? That’s always a dicey issue. If you’re, you know, a lot of people say, well, that’s gonna be the oldest son or daughter different ways to look at that

Elizabeth Ledoux: now, or even the one who has worked in the business the longest, right? Because they ever did, or Yeah, lots of different ways to approach that one.

Doug Damon: Yeah. And so we had some of them that the big one was, who had really great leadership skills during that forward. And in the case of my three, they, they all have different skill sets, they all have very good skill sets in certain areas.

Elizabeth Ledoux: Welcome to the business transition roadmap. My name is Elizabeth Ledoux. And through my years, I have seen how communities thrive. When business succession and transition are done. Well, me and my team at the transition strategists have been helping business owners develop and implement transition strategies for over 30 years. And on this show, we want to help you by giving you the roadmap to a healthy business transition. Let’s get started. Hi, everyone, and welcome back to our podcast today, I have the pleasure of having Doug Damon with us today. He is just an amazing entrepreneur and has such an incredible background. And I know him because of a person that we both are connected to by the name of Dr. Tom Hill. So I met Doug Damon at one of the eagle summits many years ago, gosh, I think it might even be 10 years ago now. And Doug and I just had a really great immediate connection. He, again, is an amazing entrepreneur and built a wonderful company, which he has been successful in transitioning to his children. And so what we’re going to talk about today is his journey and how he did that. And some of the things that worked some of the things that didn’t work. And maybe some things that were confusing or missing along the way. So Doug, thank you so much for being here. And welcome.

Doug Damon: Well, thank you, Elizabeth. It’s a real pleasure to be here. And it’s great to see you again. We haven’t had too much contact lately, but always great to see you. And I sure appreciate Dr. Hills introduction of us.

Elizabeth Ledoux: I do as well. So that said Doug, tell us a little bit about your company.

Doug Damon: The company started in the mid 40s. I was born in 1946. And it was a bar supply company in Reno, Nevada. And the owner of that company in 1963 sold it to my dad three partners who he subsequently bought out. And I worked there in the summers I washed bottles and things like that what our company did was we manufacture or we packaged bottled bar mixes and things like that to sell to the casinos in Reno. I bought the company in 1977 Or Yeah 1977 When I and I’d worked with it per after I got out of the army after I graduated from college. I’d worked with it until 1977 and bought my dad out. We’re still a very small company. We’ve grown somewhat, but we changed the whole notice of operation. What we ended up doing was pioneering bagging the box juice concentrates, we packaged those and they were sold through food service companies and distributors in different cities around the West. We expanded somewhat to the east and change the dynamics of the company from a bar supply company to a company that supplied any kind of beverage at an institutional food service such as restaurant nursing homes, schools that serve juice, and also casinos in Las Vegas that serve drinks like strawberry daiquiris, Pina Coladas, margaritas, all of that sort of thing. Nice. In addition to that we became a spirit rectifier so we could put alcohol in drinks

Elizabeth Ledoux: which is amazing. And that’s kind of where it’s going. Now. That’s what your children, right. That’s what the successors into expand and you know, in the market, it’s, it’s flourishing right now.

Doug Damon: Yes, yeah, they’ve got a lot of really great opportunities.

Elizabeth Ledoux: They do come here. And tell us a little bit about the journey that you’ve been on.

Doug Damon: Sure. Years ago, when I, when I was in the business, I was active in a trade association, which was called International beverage dispensing equipment Association. And that particular Association had companies all over the country, and a lot of them were family businesses. And in, I saw that there was a transition going on with children, in some of these businesses, that were having a really, really rough time making that all work. And in some cases, they just ignored the need to have a succession plan and any coaching that had to do with that. And some of them were truly a disaster and tragedy, family split, that sort of thing. So I decided at that point, as I was growing my own business, that in my kids, my three children, or adults, were interested in the business and had been working in the business with me, I decided that it was, would be a good idea to get some help in doing that. And by that time, I didn’t, I knew you. And I knew what you did. I know you did this sort of thing. So I talked to you. And you were the main spearhead of helping us put the succession plan together. We have done some work on that before. We had some coaching. We did a lot of different things. To the three children, children, their adult children, well, they’re your children, my children,

Elizabeth Ledoux: they’re your children. So yeah, even though they’re older and adults, because children, you know, can be just for the audience, it can be 3040 50, sometimes even 60 years old, but they’re still your children, there’s

Doug Damon: so much older and yes. And two of them had been in vestige group as an AI, CEO group. In a they got a lot of background and learning from that. We also did, I was big on, I had an interest in human development. And so I was interested in personality profiling, skill set profiling, that sort of thing, routine building aspects of the business. So we did, we did a lot of that. And then when you came on board, you did all the things that you do. And we hadn’t really started any of those. So that was a good guideline for us to go forward. And that’s how that’s how we got into a relationship with you as far as the business was concerned. Right.

Elizabeth Ledoux: So so the value of having a plan that was written was important. And you had done a lot of work, you had already in your mind made decisions on, which I think worked for you, you had already thought through your you know, who might come on board, you had some conversations that need that needed to happen. And so you kind of had a little bit of a vision of what you wanted, and what would be your ideal. But there were some hurdles that needed to get that you needed to get through somewhere with employees and also some with the kids, right, your children, just trying to figure out how they were going to come together? Yes.

Doug Damon: Years ago, I don’t know. I don’t even remember how I got the book. It was a little pamphlet. And there were was related to what I had learned my experience with people in our industry, in the book was called The Seven Deadly Sins of family business, and and dealt with all the tough things. That’s I think, where a lot of companies failed in their succession is that they didn’t want to go through these type things. In the tough things were, what about as, as I recall, the major ones were what about a child that’s not in the business? Well, that wasn’t a problem for us. We had all come into the business at that time. What are the skill sets? Who’s going to be the CEO? All of those types of things. What about in laws are not a part of the business very dicey subject. And so we were able to take those one by one, and do a program where most of it wasn’t a problem. The one big issue that was still hanging out there was, who’s going to be the CEO? That’s always a dicey issue. If you a lot of people say, well, it’s going to be the oldest son, or, you know, there’s different ways to look at that

Elizabeth Ledoux: now, or even the one who has worked in the business the longest, right? Because they ever did, or, yeah, lots of different ways to approach that one.

Doug Damon: Yeah. And so we had some of them that the big one was, who is who had the best, who had really great leadership skills during that forward. And in the case of my three, they, they all have different skill sets, they all have very good skill sets, in certain areas. Two of the three were more macro, macro oriented. And the third one, who happened to be the oldest, was micro oriented, he was a good operation sort of a person. And I knew he had some leadership skills. But with the way we were structured with me at the helm, it’s really hard for our kids to rise up and shine in the way that they can, when you’ve got a patriarch, running the place. You know, I think a lot of times there’s, there’s a view in family businesses where, well, why should we listen to Darrell Dad? What does he know? I’d say that facetiously, but there is an element of that. We were fortunate to have a person who had a wide breadth of being a C CEO, in a very large company. And he and I, he had experience and he was a competitor of mine, we joined forces. And he and I thought we were very similar in our thinking, strategies and our experiences. And so we were simpatico, and he was a good coach, he was really a good trainer. And so I let him do the do the work with the with the successors, the kids. And that worked out really well. Good, because there’s just that natural tendency of, I went through the same thing with my dad, I own ideas, and I had to go in my own direction, they had to go in their own direction. And so, so that worked, worked out pretty well as it as it turned out.

Elizabeth Ledoux: And that’s pretty great. Because one, you had an experience with your own father that didn’t want to repeat it. So you kept your kids from that. And those prior experiences are important, both positive and negative. Because sometimes if you’ve had a bad experience, right, you do it differently. But also, if you’ve had a great experience, you try to recreate it. And it doesn’t always work in this time, right? Because the time and the external environment has shifted and changed the businesses bigger. So what worked in the past doesn’t sometimes work. And the other thing that was great, and I remember this, and we talked about it, that having that external person that wasn’t dad trying to bring the three of them together, gave you gave actually them the opportunity to have somebody who could really, one be honest with them, and not that you couldn’t be but they would see you in a different lens, or through a different lens than they saw him so he could come in and be that external person who had all this knowledge and skill and they listen, versus the guy inside you, who also has the knowledge and skill, but they don’t listen, they listen differently because their father,

Doug Damon: right, right. And that worked really, really well by this time. My former editor was part of the business. And so we had an internal piece that helped to bring that along. And then the external piece was you and you’re very, very good at being candid with having There’s conversations if you will, with him to point out things that maybe they could consider in a different way on some of these difficult issues. So, in a certain stance, I was able to, even though I was a participant in all of the learning process, and so on, was able to kind of sit back and see how it flowed and not get too terribly involved in how that should work and how that was going to work. And let you do your job what you do very professionally. Well,

Elizabeth Ledoux: thank you, so that it’s kind of, you put your best team mate forward in the business. And that’s what makes the business the most healthy. And so understanding how people are wired, what they do best. And so many families, and so many businesses will put a CEO or put someone into a successors position, just because of the you know, they’ve been there the longest, or they’ve gotten their degree or whatever that might be. And truly, in a way, they’re doing one the business a disservice. Because they’re not going to have that, you know, the one who’s supposed to be the CEO who’s made to be that and, and operates that way, from their internal wiring. And the other thing, I think, is doing the person a disservice, because we all are wired in a certain way, you know, by we’ve had many conversations about this, we’ve all we’re all wired in a certain way. Most of us have the ability to do the other things. It’s just not in our normal love, right? Under normal fulfillment. So in this example, you could have said, Oh, you know, I’m gonna give you a shot at being CEO right off the bat. But if you’d done that, he might have felt obligated and going, Okay, I’ll do it. But I really like this stuff over here better. So those open communication, and conversations are, I think, so important. And understanding, even helping the successor understand who they are. So the plan helps the successor say yes or no to what the, we know what the invitation is, and then knowing themselves and knowing the team, then you’re able to put that person in the right spot where they’re going to really thrive, instead of stuffing them into the CEO role, because they’re supposed to be there. I think of it like a football team, lots of times, you know, a quarterback, we all know, the NFL Draft just happened a little while ago. I mean, you draft a quarterback, if you want a quarterback, you don’t draft a running back to be the quarterback or a kicker to be the quarterback and in a professional team. They don’t trade places. You don’t say hey, do you want to play quarterback this quarter? Just don’t do it. So this is you’re trying to figure out put the best team forward. Because it makes a difference for the business and the employees and also the family and those who are going forward. Once you’re not there.

Doug Damon: You’re absolutely correct. On on what you just said, I probably saw me nodding my head. And the Vistage group that I was in always said that too. There’s one CEO, and that’s the conventional wisdom. And I they all felt like they could work out together in a very amicable fashion. And so rather than me appointing a CEO, we did it as a triumvirate if you will. And we’re able to learn over that that process to see who rose up in certain ways and others in other ways. And it worked out really well. The youngest one, Tiffany, the daughter, she didn’t want to be the CEO. So that was easy. And I wasn’t sure, you know, I felt the on the other two that they they would figure it out. So I kind of went against the conventional wisdom. And you and I have many conversations, and you had conversations with each of them. And as it turned out, one of the good things that we had going and thankfully that’s still intact, was they’re all very close. They’re all very respectful of each other. They get along really, really well. They’re there. They’re all very confidential in how they handle things. Each and they all do have the different skill sets that mash. I would I would add that a sense, since you were involved in the process, that they’ve all grown immensely into their skill sets differently. And the way the way it’s set up now the company is going to split off into two different companies. And I’m still on the board. I’m not chairman of the board. But they’re splitting off into two companies. And the oldest son is CEO of the one company with a chairman, that’s not me that we put on the board. And the middle son, the middle child, is going to be the CEO of the other company. And he’s got he’s got duties and in both companies, and will continue to have that for a while. But it’s all worked out. And what’s really been pleasing to me is that they have have all risen with with me, not there. That is a source of pride, nor an idea. That doesn’t hurt my feelings.

Elizabeth Ledoux: I think I well. And I think that transitioning your company, into a successors hands, whether it’s a family member, or an employee or somebody else. Night, sometimes it’s a third party. But I think that transitioning your business so that it continues forward. And the community continues to thrive, like employees continue to have jobs. And you know, and the business actually thrives inside of the community. So many people have heard this before. But you know, philanthropy continues and all of the things that that business plays in that society continues to move forward. I think that’s the most important thing that you can do. Yeah. It to go forward. Continue.

Doug Damon: Yeah, I agree. That it is worked out. It worked really well together. Yeah.

Elizabeth Ledoux: Well, so this is a complete true success story for everybody to hear today. And just, I am so thrilled for you, you were on the chairman, you were the chairman of the board for a short period of time, I think. And you also did something with the banking that I think is really important for our listeners to hear. So how long did it take you to get off the board as the chair? And what’s that banking thing that you did that worked?

Doug Damon: Well, when part of the completion of the succession plan is most small business owners now, the owner usually has a personal guarantee on any loan facilities that are available to the business, we had borrowing base for inventory and so on. We also had some term loan in when I own a company as Subchapter S. So I would utilize the cash available within the covenants of the bank, but I didn’t have to answer to anybody on there. When you have three new owners, then it becomes a different story. You have to increase your revenues, you have to increase your profitability. They’re gonna do some of the things I was able to do. They had to grow the business and they had to grow smart fashion. So the bankers realizing that wanting me to stay on the guarantees. Again, this goes against conventional wisdom, but I did it. And I figured, well, it takes about five years to be bankable on their own with their own balance sheets and so on. And they were able to retire the debt and get me off of the personal guarantees in two years, and less than two years. So that was great. Yeah. It was great for them. It was great for me. And that was,

Elizabeth Ledoux: that’s outstanding. Store. Yeah, that’s outstanding. And the other thing that is important to know, too, is that you made a trend, action. If I remember right, all at one time, you didn’t do a partial partial partial partial, you just sold it to them. And then they had it and it was all in just one slide. So you did in your transition strategy, you did a lot of work, prepping up into a time when you said, I’m going to own none of it, and you’re going to own all of it. So, and a lot of families or companies will do you know, 10% 20%, and kind of eke along in yours, you did the entire thing. We’re done. And then you still had that note. So that’s tricky to be able to do that review

Doug Damon: and very risky, very risky, but a lot of potential downside to that but minority orientation. Doctor, Dr. Hill, asked to call me outside the nine dots. So that’s a,

Elizabeth Ledoux: I’d say you see outside the box for sure. Well, good. Well, guys, I think we’re at our time, Doug. And I just want to thank you so much for being here with us today and just congratulate you on such a great transition and a great journey. You’re one of it’s statistically out there, you’re one of the few that that makes it and that this is actually a reality. So congratulations, and thanks again for being here. Well,

Doug Damon: thank you, Elizabeth. On behalf of my successors, and myself, we have a tremendous amount of gratitude to you also, for help us in this process.

Elizabeth Ledoux: Thank you. Thank you. Take good care of you.

Doug Damon: As you to Okay.

Elizabeth Ledoux: Thank you for listening to this episode of the business transition roadmap. If you are listening to this and you find yourself wanting to go deeper into these topics and start the process of putting together your transition strategy. I’d love to offer you a free initial strategy session with my team, where we’ll help you to explore the future transition of your business, head over to www dot transition To schedule a call. Thank you again for listening, and I’ll see you on the next episode of the business transition roadmap.


The Business Transition Roadmap with Elizabeth Ledoux

How do communities thrive? When businesses experience healthy growth and transition. Join CEO of The Transition Strategists, Elizabeth Ledoux as she and her guests identify what makes a successful business transition roadmap. If you know you want to transition or exit your business “one day”, today is the right day to start planning. This show will give you the roadmap.

If you’ve enjoyed this podcast, you can check out other episodes here: Podcasts – The Transition Strategists
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