Family-owned and operated businesses are an extremely important part of our economy. According to Grand Rapids’ Family Business Alliance, the greatest part of America’s wealth lies in family-owned businesses. Far too often, we see family businesses purchased by out-of-state buyers and private equity groups that are not connected with the community. They have to strip the company to make the deal work with little consideration of how this will affect the surrounding community. Art Van Furniture and Hemisphere Design were both fine examples of family-owned businesses that are now out-of-business after being purchased by geographically removed private equity firms.
This is not to say that all private equity firms are bad for the community. Still, a special relationship exists between family-owned and operated businesses that disconnected corporate enterprises simply lack with the community. These family-owned businesses provide a humanistic and supportive atmosphere because they are run by people who live and work in the local community. Not to mention, the majority of the company’s wealth stays in the local economy with a family-owned business rather than being exported to wherever the equity group or buyer is located. By establishing firm ties to the local community, family-owned businesses contribute to the economic stability of an area. These small businesses also offer one thing that big box businesses don’t: more care and concern for the well-being of the local community than for the businesses’ bottom line. [Actually, my definition of “local” is actually more appropriately “regional”]
Hardware Distributors, Inc., a third-generation family owned business. For the past twenty-six years, Dan Workman—along with three of his cousins—owned and operated the business. The cousins learned the business by coming up through the ranks while reporting to their fathers. This was exactly how their fathers learned the business from their father. Dan’s grandfather had founded the business in 1952 after splitting it off from the family’s wholesale hardware and industrial supply business. Dan Workman and I went to high school together, so I was excited when he asked me to help him sell his family’s business. The company’s primary customers were independent hardware stores, which have struggled due to big box stores and hardware chains eroding the market over the past several years.
I had been working with Dan and his cousins for three years to find a suitable buyer. However, declining sales and tight margins made it difficult. What we needed to find was a person who knew the distribution business and had capital available to them. Most importantly, HDI needed someone with the vision to take the company in a different direction while continuing to service small hardware stores and still keeping it a family business. Jack Snyder, a veteran business broker based in Grand Rapids, also assisted.
In 2019, Dan sold his Grand Rapids home through a local residential realtor, Brandon Faber. During the course of the transaction, Dan mentioned to Brandon that he was trying to sell the family business. In a beautiful display of community coming together as a network, Brandon told his father that HDI was for sale. In turn, Brandon’s father thought he knew someone that might be interested in acquiring a family-owned distribution business. Brandon’s father connected with Greg Lamphere, a successful sales professional who was working in the paper and packaging industry. Brandon and I talked and later connected with Greg and qualified him as a buyer. Thus, the connection between Dan and Greg was established. After several months of looking at the opportunity, Greg and his wife, Jill, decided to pull the trigger and purchase HDI.
We took the deal to Huntington Bank and worked closely with Ben VanDerWeide there. Although the trends were not positive, the company’s cash flow was still relatively strong after making adjustments for Greg’s proposed operation. Additionally, Greg negotiated a very preferable purchase price. Jill had prior experience running a family business, and the Lampheres enlisted the aid of Jill’s son, making this a true family to family transfer of the business.
If you or someone you know has a family-owned business that they are interested in selling but are concerned about the transition of the business and its effects on the local community, let Left Coast Capital help them find the perfect buyer. I will personally take them by the hand and walk them through each step of the process from initial valuation to closing. I will ensure that their family business remains as they want it to— a vital asset to the local community and integral part of our economy’s backbone. Call me today to discuss your family’s business and how we get started.
Eric Seifert, Principal 297 West Clay Ave. - Suite 101
Left Coast Capital Resources LLC Muskegon, MI 49440