Editor’s note: Sources in this story asked to remain anonymous to respect the privacy of their family members and their business relationships.
Probably one of the most important decisions a small family-owned business ever faces is how to deal with continuing the family business when the owners get ready to hang up the knives and cleavers.
Successful transitions in the meat business abound, with thousands of small firms operating under later generations. Indeed, some now run under a fifth or sixth descendant of the original owners.
But for all the successes in passing along the family business, there are legions of stories about those that shut their doors. Many of those disappointments came after World War II when many of the more than 10,000 locker plants – facilities that did custom slaughter and processing and offered frozen food storage – came to grips with the reality of fewer farm families, the advent of the home freezer and the growth of large supermarket chains. An abundance of those businesses closed their doors while others moved forward to expand their quality and varieties of further-processed meat offerings and continued in operation.
It is on these “survivors” that we focus and explain how many attempted to pass the baton on to younger family members. Every small meat-processing business owner and worker knows the demands of working long days in a cold, wet and back-straining environment.
Most of those managing these small enterprises today grew up in the family business, working as clean-up help after school and learning the ropes. They recognized full well how their parents worked seven days a week from the beginning of hunting season to the end of the year, with never a day off.
If that problem didn’t deter the younger family members, there were the daily, face-to-face dealings with government meat inspectors, most who couldn’t cut their own Easter ham or never stuffed a sausage, but assumed total authority in the plant operations.
“I loved the business, but I couldn’t take the constant berating of my Mom and Dad by inspectors who felt their decisions should never be questioned by the plant owners,” related one owner’s son who decided to leave the industry.
Another son who proved his mettle as a meat plant worker was delighted when his parents announced they would transfer ownership of the business to him over the next five years. It was when he told his wife the good news that she related her belief that he shouldn’t have to work those kind of long hours. They soon divorced, and he left to work as a meat cutter and merchandiser outside the family business.
Flourishing meat businesses have groomed their best and brightest to learn all aspects of the plant, including product development and marketing, often sending them to business management and marketing schools, or meat science and processing training.
Even with that level of preparation for transition, some had to totally rethink the planning when the management heir-apparent developed terminal cancer or was killed in an accident, forcing the owners to go outside the family for someone to run the business.
Still, other family-owned meat companies had to cope with having so many family members involved in the business that they had to bring in outside consultants. One Pennsylvania firm had over 70 family members involved and had to get “outside the box” help to determine the five family members who would continue the management in a successful transition.
Another company owner in Kansas asked one of his key employees to drive him to the airport. He then explained to the trusted employee that the business was failing, gave him the keys to the pickup truck, and told him to go ahead and run the place. It too turned out to be a good decision, and the company blossomed under that former employee’s leadership.
We have encountered the son of a meat plant operator who showed up at a meat-processing convention and trade show stating that he had a problem: “My Dad left me this meat business, and I know nothing about how to run it,” he stated. “I think I have a real problem.”
Was it a problem or an opportunity?
Looking to sell
Over the years we have had to field questions from individuals who said they wanted to sell the business. Many have even offered to work with the prospective buyer for months or, in some cases, years.
When pressed to avoid the public auction route to dispose of the plant, many would-be sellers attempt to get some idea of what the enterprise is worth. For some, the approach they take is to get a local realtor or appraiser to give them a hard cash number. This process may work for some, but too often small family-owned meat processing businesses are located in rural communities where they are the only such shop in the area.
Typically, an appraiser will look at what comparable facilities in the area sold for in the past few years, determine replacement value, taxation value, equipment value or what other types of businesses might fit into what was once a meat plant.
A huge part of the problem is that an owner wanting to sell usually pulls out sales volume records for the past two or three years and bases the asking price on the highest sales year. In reality, the likely buyer isn’t looking at what volume the plant did in the past, but rather what lies in the potential for the business, what the buyer will have to do to re-equip or renovate the facility, and most importantly ask the question: Is there a viable customer base that will offer a return from a growing market to return his or her investment?
When the potential buyer seeks financial help a lender will want to see a business plan for the future, not one that tracks past sales. Questions such as what the plant will need to do to obtain or retain inspection and details on improvements being demanded by authorities will be asked.
The best laid plans for transitioning a family meat business are made by those owners who have kept up with the customer base and introduced new products and services. The need to diligently follow the meat-eating habits of customers and make the changes in equipment, product, presentation, packaging, serving sizes, quality and variety that will retain their current clientele and bring in new shoppers is paramount.
Nearly 40 years ago, a small locker plant operator on the outskirts of Washington, DC, had a successful business, but he was tired of the backbreaking work. Unfortunately, his son wasn’t interested in following in his footsteps by taking over the business. Fortunately, a major hotel chain came up with a $2 million offer for the property (the land was worth far more than the structure itself). The owner retired and the son started a catering business a few miles away. He was pleased with not having to push carcasses on rails, working in the cold and doing custom work to satisfy a declining base of farm families. Happily, he continued the business of feeding customers in a way that was easier on him and more profitable.
It has never been easy to operate a small family business. But for those entrepreneurs who know the direction they want their enterprise to take, younger generations and sometimes outside parties will gladly seize the opportunity to take over the business and grow it for years to come.