Parenting Your Business Towards Meaningful Succession

by John Davis, Paul Davis Automation

The timing of this article could not be better — since I have just earned CPMR (Certified Professional Manufacturer’s Representative) status through MRERF, which I highly recommend, the topic of strategic planning is top-of-mind. In our world of 30-day contracts, it is easy to forget that our businesses are long-term entities — just because our contracts are 30 days doesn’t mean that our businesses have to be the same.

After all, the long-term promise to ourselves of building a legacy through our businesses is driven by our intent, rather than the whims of external actors.

Talking about succession may sound odd for a 34-year-old owner of a rep agency, but one of my goals for 2018 is indeed to conceptualize a succession plan for my business. Don’t confuse this with executing a succession plan — I certainly am not planning on retiring at 40. Rather, my intention to consider succession was fueled by the realization that it is mighty hard to push through a race without a finish line.

To draw on another analogy, parenting children offers many parallel experiences. The successful parent constructs a framework of values and behaviors that represent the type of person who will positively impact the world. With the framework in place, parenting looks like a constant feedback loop of teaching, assessment and correction that — hopefully — inspires our children to embrace that framework and achieve success in adulthood.

In parenting, taking the long view lends additional meaning to everyday tasks. While this is absolutely true in business, the long view can also lend a certain urgency to the present — it is hard to discount the value of time when it is so clear that the gargantuan goal just over the horizon may be far away, but not inconceivably so. Time is skittish — when it knows we are watching, it runs faster to get away.

This year — my capstone year — of CPMR, focused on planning strategies of several varieties — succession, disaster and strategic, to name a few. During one of these sessions, I had a moment of clarity that radically impacted my conceptualization of the intrinsic value of my business.

To paraphrase Nancye Combs, one of our CPMR lecturers, “Knowledge by itself is meaningless, it is the transfer of knowledge that generates value.”

The value of our firms is not solely derived from selling the products on our line card. The value of our firms lies in the transfer of knowledge between manufacturer and customer. And, as our firms grow, that transfer of knowledge becomes a transfer of wisdom — the latter being far more valuable as it has a non-insignificant time value associated with it.

This accumulation of knowledge — and then wisdom — comes only with decades of hard work and learning. The contracts that we have and the cash flow that they generate are the physical manifestation of wisdom being transferred, and planning is the conduit that supplies the infrastructure to power the transfer. Just like water through pipes or electricity through conductors, the better the infrastructure, the higher the rate of flow.

This, then, is why I am starting to think about succession at age 34. Over the next several decades of my career, I will (hopefully) amass vast amounts of market and product wisdom that — through careful planning and continuing education — will have great value. To maximize the economic payoff of that wisdom, I have to be able to acquire, synthesize, and then transfer it successfully. And, like parenting, this is a process that will take a very long time.

The true value of my firm lies in my ability to create a long-term stable environment in which my firm can acquire knowledge, turn it into wisdom, and then transfer it to the next generation.

Doing it any other way would be leaving money on the table.

John Davis has two professional passions — engineering new software and hardware products and having the privilege of being the second-generation owner of his family’s rep business, Paul Davis Automation. Both keep him busy during the cold Cleveland winters. When not at work or spending time with his family, he can be found at the local airport.