JULY 3, 2017 - VOL. 53 No. 10

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Family businesses thrive with careful focus on transitioning through generations

By Jodi Schwan
For the Sioux Falls Area Chamber of Commerce

They might be the ultimate experts in work-life balance. Mom or Dad doubles as boss, and the dining room table could just as easily become the boardroom table for hundreds of Sioux Falls-area family-owned businesses.

Navigating those unique dynamics can be as challenging as it is rewarding. Managing to do it for multiple generations has proven impossible for all but a select few.

Several Sioux Falls-area businesses aren't just surviving but thriving. Prairie Family Business Association, which serves more than 200 businesses in five states, calls them solid models that others can emulate.

"The trends I notice about the businesses featured are that these families are dedicating time to working on their business rather than only in the business," executive director Stephanie Larscheid said. "They are in peer groups that help them with critical business and family decisions. They seek out experts and build an effective advisory team around the family and the business."

Nelson & Nelson CPAs

Chuck Nelson and his daughter, Jill, are the "number people" in their family. That helped draw them into the family business, Nelson & Nelson CPAs LLP, which was founded by Chuck's grandfather James in 1923. It's South Dakota's oldest homegrown CPA firm and now includes clients in more than 25 states and many foreign countries.

Chuck's father, Wes, joined the firm in 1957. "Growing up with it, you see what's involved," Chuck said. "I saw how my dad handled the business, and it just always intrigued me. By the time I was in middle school, I knew that was the direction I would be going."

His daughter took a little longer to decide. Jill also grew up in the office, but first gravitated toward becoming a chiropractor. A semester in college quickly showed her accounting "was a more natural and better fit and more of what I wanted to do," she said. She graduated from USD in 2013, earned a master's degree at the University of Sioux Falls two years later and has been working in the business since then.

"I like it," she said. "Right now, it's just working and trying to understand all the rules and regulations and how everything works, and within the last year understanding more of the operations has been fun. Who better to learn from than your dad?"

Chuck and Jill also take their father-daughter team on the road, teaching a tax course statewide in November. "We travel together and do a team approach, so I like that part of the year and sure enjoy spending time with her," Chuck said.

Wes continues to be involved in the business but has transitioned it gradually to Chuck over the past 15 years. Because Nelson & Nelson also helps family-business clients in transitioning, they have had a chance to see potential pitfalls.

"Sometimes, the oldest generation has a hard time letting go because they've been in control," Chuck said. "I was in a unique situation where my father was very open to me taking over, so the transition has been seamless."

As a family, they bond over common interests other than work, he said, spending time lakeside or hunting. "Work doesn't consume us while we're actually having family time," Jill said.

They also try to make it a family atmosphere inside the business for their 26 employees, Chuck added. "We've always said family comes first, and we try to run the business not only for the blood family members but the entire staff."

Pride Neon Sign

Dan Menke grew up mowing the lawn, picking up nuts and bolts and sweeping the floor at Pride Neon Sign Co., which his grandfather George Menke Sr. co-founded 70 years ago.

"And my dad said, 'I want you to go to college, get a degree and work elsewhere before we talk about you coming back.' And that's how it worked," Dan said.

He gravitated toward accounting, eventually becoming treasurer at the former VeraSun Energy Co. and rejoined the family business in 2009. "I just decided it could be a good deal, and carrying on what they started is a huge challenge, but it's something we're all trying to do," he said.

He and his cousins each work in different areas of the business, including sales, production and service and installation. Dan, an accountant, works alongside his father, Dick, the company's secretary-treasurer and his uncles, George Jr., who is CEO, and Bob, who leads production and art design. The family has been more deliberate in succession planning than the prior generation, Dick said.

"Communication is vital," he said. "What helped us is getting an outside advisory board, getting really good advisors and having regular family business meetings to give everyone a chance to speak their mind, and we work through those issues together."

A family-business agreement set protocol for future generations to buy into Pride Neon. It requires they get a degree, work somewhere else at least two years and work in the family business at least five years before they have a chance to buy stock. "We want them to be good stewards and be involved in the community, so we've laid that all out so there's no misunderstanding going forward," Dick said.

Outside advisers have helped with transitioning, Dan said, adding that while there are challenging days in family businesses, the benefits outweigh them. "When you look at the statistics, they don't make it to generation three very often," he said. "A lot of that is personality and work ethics, and I think we're blessed me and my cousins have a strong work ethic and we don't let any of that get in our way."

Pride Neon has earned a regional reputation for quality and innovation, and its leaders are eager to see their successors build on it. "It's great. We're so excited about it," Dick said. "Owning a small business is living the American dream. I think they see it, and they're committed to it. We didn't want to force them, but at the same time it's really exciting for us."

Fiegen Construction

Jeff Fiegen's father, Ron, was a premier ironworker. He traveled the country fabricating large bridges and towers before returning to South Dakota to start Fiegen Construction Co. 50 years ago.

Jeff and his brother, Rusty, grew up changing oil in equipment, "watching Dad's hard work and Mom do payroll," he said. "It was small beginnings like many family businesses." At 17, he was a certified welder working in Aberdeen and eventually transitioned to the office.

The family talked openly about eventually transitioning the business, he said. The brothers were made vice presidents. But it was "more difficult for Dad to let go," Jeff said, so Ron retained most ownership until he died eight years ago.

"He retired from the daily business, but we reviewed monthly financials, we talked openly and talked strategy and business direction," Jeff said. "I personally believe people who don't work within a family business don't really comprehend how many are out there, from large corporations like Ford to small mom-and-pop restaurants."

He and Rusty split duties but share ideas, equipment and team members, he said. A year ago, they began transitioning part of the business to Jeff's son, Lucas, and their chief financial officer, Mark Stortgle.

Lucas, an architect, has worked full time at the business since finishing graduate school at the University of Nebraska-Lincoln in 2012. He started while in high school, though, working in the field.

"It was valuable. It was nice having that hands-on experience," he said. "I realize that more now than I did then." He said working in the family business is a lot of fun, though his dad and uncle "don't hold anything back, and I don't get special treatment."

Lucas also is helping evolve the business. While his dad's generation helped Fiegen get into design-build construction projects, he is tackling marketing and technology, and recently helped rebrand the company with a new logo and website for its 50th anniversary. "It's little ways I can provide insight, but they've started to open up to it, too, which has been nice," Lucas said.

Sharing information and striking a balance is key in making the family business work, Jeff said. "You need to work plenty of hours, (and) communication is good, but sometimes you just need to step away and enjoy family," he said.

Providing information doesn't just extend to the family, he added. About two-thirds of Fiegen's workforce has been with the company more than a decade. "It's not just the persons with the name Fiegen in the family business. It's many, many of our staff that have been with us a long time, and I respect them like family."

Austad's Golf

Dave Austad knows only about 10 percent of family businesses find themselves where he is – successfully passing down the business to the third generation. "The ones that seem to struggle the most don't confront issues," said Dave, whose father, Oscar, founded Austad's Golf in 1963. It has grown to nine locations in five states. "The beauty of a family business is you have people who know each other. The struggle is you bring that family dynamic into the business as well, and sometimes that's great and sometimes that will kill you. I've seen a lot of family businesses where you don't talk about the elephant in the room."

It was "trial by fire" for Dave when he took over at age 28, and while that proved an effective education, he's taking a different route with his son, Ryan, and daughter Sara. Ryan has started running most of the day-to-day business, and Sara leads the e-commerce operation.

"It's fun to see them work together," Dave said. "They truly believe this is a family business and it's their baby, so there's ownership there, which I think is really cool. A lot of times, my job is just to get out of the way, and I think there's a lot of family businesses where that's part of the problem."

He also keeps the rest of the family – including two daughters who don't plan to be in the business – informed. "We haven't had any major concerns (transitioning) at this point, so we just keep plugging along," he said.

Ryan and Sara worked for other large businesses before returning to the family business. "I think it's the best thing for someone in a family business to do," Ryan said. "I never felt entitled to a job – any job – at Austad's. I knew if I wanted to work at Austad's, I better be able to produce results."

He and Sara tend to defer to one another on issues in their areas of expertise, but they do enjoy "fun and lively" brainstorming sessions, he said. "We were raised in a house where debate over dinner was the norm. We were taught to articulate our thoughts and engage in discussion," Ryan said. "My sister, my dad and I actually enjoy that sort of productive conflict. One dinner guest described the Austads as 'The Osbornes without the swearing.' "

All joking aside, he said he's fortunate his dad has allowed him to lead. "We've had our occasional boardroom spat, but nothing that nine holes of golf can't solve," he said. "It helps we share the same philosophy: We work in golf. If we aren't having fun, we are doing it wrong!"

Most families do find the rewards of working together outweigh the challenges, said Larscheid, at the Prairie Family Business Association. Their success is reflected in the broader community, too, she added.

"Family businesses are critical to our local economy and the economies of communities throughout the states we serve," Larscheid said. "The survival of the business throughout generations will directly impact the community where the business resides."

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