Planning Your Succession for Success

Business partners shaking hands as a symbol of unity, view from the top
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As the co-owner and operator of Finstad’s Carpet One Floor & Home, a Montana-based business that my wife Terre’s grandfather founded back in 1948, I cherished my role as a third-generation small business owner. Finstad’s was such a staple in our community, and we loved the impact it had made. After 30 years working at the business, 20 of them as owners, my wife and I wanted to spend more time traveling and visiting with our adult kids and faraway grandkids. For two years, we thought about the future, talked about the business, and considered our options. With no obvious successor in place, we ultimately decided to put Finstad’s up for sale.

Selling a company coming up on its 75th year felt like a big responsibility—I wanted to make sure whoever bought the company would provide stability for our employees moving forward. Finstad’s was universally known in the community, and we had a reputation for being good to our customers and employees. So, I wanted to sell the company to someone who would make us proud, maintaining our workforce and the high standard of customer service we had become known.

However, finding a third-party buyer is hard. As many in the flooring industry know, most companies sell to a next-generation family member or current employee. Across industries, more than 200,000 small businesses are listed for sale yearly, and only about 20 percent find a buyer. Many longstanding, profitable small businesses shut down each year because they can’t find an appropriate buyer to carry on their operations. I wanted to make sure Finstad’s wouldn’t become one of them.

Luckily, I found a solution: employee ownership. I sold Finstad’s to a company called Teamshares, which helps transition small businesses into employee ownership. They weren’t looking for a short-term investment. Teamshares wanted to buy the business and ensure it never had to be sold again, keeping on our staff and slowly transitioning the company to become majority owned by our employees. It looked like a win-win-win: a way to fully transition out of the business, reap the benefits of a successful sale, and reward our employees for years of dedicated service with a retirement plan of their own.

The sale went through in September, and things are going great at Finstad’s. The company has continued to grow under new president Bob Schultz, paying dividends to all 12 employee-owners and increasing the employee ownership stake from 10 to 15 percent in just a few months.

This process has taught me a lot. Not just about business but about trust, loyalty, and legacy. For any other flooring business owners out there considering a retirement sale to an outside party, here are a few things I recommend:

Think ahead. The process for finding a buyer could be a few short months like it was for us. But more likely, it will take some time. Start your retirement planning about two to five years before you want to be out of day-to-day operations.

Start getting your business in order. There are many things you’ll need to provide as part of the sale—things like P&L statements, financial projections, tax documents, and business licenses. Start pulling everything together now, and ensure you know where everything is stored. If you start the planning process early enough and have the time, it also helps ensure that your day-to-day operations, staff roles, and key processes are well documented. It will make the transition to a new owner that much smoother.

Know what matters to you. For some people, price or payment structure will be the critical factor in their selling decision. For others, things like keeping local ownership or guaranteeing staff retention will matter more. Whatever it is, know what matters most to you before evaluating the different offers.

Get advice. Your business may be one of a kind, but you’re far from the only small business owner who has been through the succession process. Your local Chamber of Commerce, the National Wood Flooring Association (NWFA)’s network and Expo, and other local business and entrepreneurship organizations are great places to get advice and resources to help with the transition.

Be open to different kinds of offers. When the Teamshares offer came in, employee ownership was not a route we thought was viable. It almost seemed too good to be true. I’m glad we were open-minded enough to consider the offer and understand how it works because it allows us to continue to make a difference in the lives of our employees.

Prepare yourself emotionally for the transition. During the sale process, the most significant source of stress wasn’t worrying about the deal falling through. It was the anticipation of announcing the sale to our employees. We knew there would be much emotion on both sides—we were sad to be leaving the business, and employees were anxious to understand what’s next. You have to be confident in your decision and communicate your transition plan as clearly and kindly as possible.

Enjoy your newfound freedom. Running a small business is good, hard work. This is your chance to enjoy the fruits of your labor. We loved our time at Finstad’s, and we’re grateful to have the time and resources to now travel and spend quality time with family and friends.

Doug Hogan is the former co-owner and operator of Finstad’s Carpet One Floor & Home, based in Montana, a business celebrating its 75th year. Hogan served in the business for 30 years, with his wife, Terre, before converting it to employee-owned in 2022.

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