A family business connects the past with the future in its succession design.
LANCASTER COUNTY, PA - The statistics are scary.
Even though family-owned businesses account for 50 percent of the gross domestic product and provide 60 percent of all wages in the U.S., only one-third of U.S. family businesses survive to the second generation and only 10 percent beyond that, according to the Family Business Center at Elizabethtown College.
Yet, in Pennsylvania, family businesses form the backbone of most local economies.
The “overlap of family, business and individual potential is fraught,” said Dan Hess, senior consultant at LMA Consulting Group Inc. He said the seeds of a positive succession are planted long before the time to do it.
Manny and Flossie Lapp have planted those seeds and intend to be part of that successful percent. The Lapps started planning three years ago to hand over their family business, Lapp Electrical Service Inc. to their sons. Aware of the pitfalls, they worked with a consultant to ensure a smooth transition.
In many ways, the story of their business mirrors that of other family businesses.
Manny Lapp started the company in 1969 and ran it from his home “by the seat of my pants,” he said. His wife took care of the books and looked after their three sons at the same time.
Even after the company expanded into its office across the road in 1976, the boss was a constant presence—in the office or out on a call.
Company information was “all up here,” said Manny Lapp, tapping his head.
Lapp Electric Service grew, adding new services and buying out smaller companies until it now has 65 employees and a wide variety of services, including computer technology and automation fields. The Lapps have had the same bank for 25 years and the same financial adviser for 20 years. Four or five employees have been with the company since the early years.
At age 56 and after some health problems, Manny Lapp decided to transfer leadership while he was still doing well. Working with North and Schanz Consulting Group, Lancaster, Lapp and his sons created a formal structure for the company with written job descriptions. Managers were put in place and a reporting structure organized with scheduled meetings.
Long before the transition, the Lapps addressed the tricky aspect of family relationships. Brothers-in-law and cousins work for the company and there are three sons.
“You have to divorce business from the personal,” said Manny Lapp. “This is business and this is personal,” he said, striking his hands on the table to underline his point. He recalled having to terminate a family member and later having the same person return to work with no ill feeling.
Manny Lapp never took his work home with him. He could be “totally swamped,” but when he got in the car at the end of the day, he said he could forget it.
Lapp never talked work at home.
Business differences were reserved for the office. “Our offices were at opposite ends,” said Flossie Lapp, who continues to do bookkeeping for the company, “and when I’d stomp up to his office, everyone would know something was up.”
Separating family from business has carried on to the transition. “Neither one of us would have pressured our sons (to go in the business),” said Flossie Lapp. Son Geoff prefers to continue his profession as a teacher at Garden Spot High School. His twin, Tim, 32, partners with older brother, Greg, 34, to oversee the company. Greg will assume the role of president of the corporation while continuing to serve as the firm’s chief financial officer. Tim will serve as vice president and general manager.
Greg Lapp had worked with another company for three years after finishing college and found he could bring those skills to the company. Tim Lapp ran the family’s self-storage business after college. He seriously considered if he wished to run the family business and decided to make the commitment.
The two brothers complement each other with Greg’s financial skills and Tim’s ability to interact with people.
The sons admire their father’s entrepreneurial skills. “We’re taking less of a risk than he took,” said Greg Lapp.
“He built the business from scratch with an eighth-grade education,” said his brother. They credit their father’s work ethic to his Amish upbringing.
Although the family is obviously close, they have written contracts worked out by their accountant and attorney. These cover unpleasant contingencies. What if one son decides to leave in a few years? What if they don’t keep their financial commitments?
“I take their first born,” joked their mother.
“Contracts are for things that don’t happen,” said Manny Lapp. “I feel you have to cover the bases the best you can.”
Lapp Electric Service, Inc. is now officially turned over to the second generation.
“The toughest part was making the decision to do it, “ said Manny Lapp. “I wanted to do it when I’m healthy, not when I have to.”
Now 59, he plans to remain as the public face of the company. For many customers, he is the company.
He will, however, shorten his hours. He’ll only put in a 12-hour day, from 6 a.m. to 6 p.m.
“That’s part time for me,” he said.
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