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Retired entrepreneur Martin Newby, 75, who founded what's now a 200-employee niche property management company, has a stock line when people ask him about succession planning: “If you don't have a succession plan,” says Newby, “your widow and her lawyer will have a plan a week later.”
Newby, like many other business owners, came by his succession wisdom the hard way — through mistakes. The company he founded in 1975, Ellenton-based Newby Management, which oversees RV home parks and manufactured home communities, is now run by a nephew, Tim Newby, 58. A second nephew, Todd Newby, 51, is president and being groomed to run the company. “You need to start thinking about succession a week after you start the company,” Martin Newby says. “It should be a part of the business plan.”
Despite the early missteps, the Newbys succession strategy went so well overall they've embarked on a speaking tour about it. One stop last year included Orlando, at an annual meeting of C12, an executive roundtable group that uses Christian principles to guide decisions. “The worst thing we can do is go to the bank and say here's our business,” says Tim Newby. “We have to look at this as a legacy.”
Here's a look at the five most important steps to a successful succession, according to the Newbys.
Hire well: This seemingly obvious step, notes Martin Newby, is often overlooked because small business owners let their ego get in the way. Not only hire people smarter than you, says Newby, but also groom them for ownership from the onset. He did at least 20 years ago with Tim Newby, his brother's oldest son, and two other employees. The other two — not because they weren't family, says the elder Newby — didn't pan out.
One key characteristic to look for, says Newby, is a business owners' passion. “You mentor all of them,” he says. “But not everyone proceeds like you think they should.”
Remain engaged: The mentoring, says Tim Newby, must go on for long past the decision of who will run the business next. Says Newby: “Too often companies just abandon and go.”
Tim Newby says he chats with his brother every day about the business, calling it a privilege to work with his sibling. They talk about decisions big and small, and when and where the business will grow. “If you can't leave the company in better shape than you found it,” says Tim Newby, “we are doing something wrong.”
Go Long: Martin Newby says one of the biggest mistakes he made in succession was he sprung it on Tim Newby, with no notice or conversation. Looking back, he likens it to a flying instructor telling a student, out of the blue, “Why don't you fly solo today?”
“We had some growing pains in the beginning,” acknowledges Tim Newby. He adds that he and his brother have had multiple succession conversations.
Stay Clear: Another misstep, says Martin Newby, was the company didn't have clearly laid out job descriptions. It had hardly any descriptions. This led to overlap, confusion and even some standoffs. Now, says Tim Newby, job descriptions at Newby Management are “critical.”
Let go: This can be the most difficult step, particularly for a company founder. Martin Newby, who took on the chairman role when he named Tim Newby CEO, eventually had to vacate his office in the company headquarters to work from home. It was too hard to see someone else, even someone he trusted, make key decisions. “I was an entrepreneur, and I didn't like the way he was parenting,” Newby says.
The process went smoother in the ensuing months and years. Says Newby: “I realized I had to get out of the way.”
Follow Mark Gordon on Twitter @markigordon
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