3 Steps to Building a Long-Term Business, an Interview With Chairman, Dan Axtell

By Child Care Accelerate Marketing

Originally published on May 1, 2024 (www.childcareaccelerate.com)

Where do you see your business going in the next ten years? Will you still be operating it? Will it be passed down to the family? Will it be purchased by an outside entity like a competitor or private equity firm? If you don’t know the answer to these questions it is time to consider your succession plan.

SEED Collective conducted an interview with Dan Axtell who serves as Chairman of the Board at Lexington Plumbing — a full-service plumbing company serving Kansas City and the surrounding areas. Dan started his career as an apprentice plumber under his father-in-law’s guidance, later bought the plumbing company and successfully managed it for 25 years. The company is nearly 80 years old and is currently run by Tom Axtell, a third-generation family member. We have summarized Dan’s responses to our questions and prepared this blog to highlight key factors to consider when creating a succession plan.

According to Investopedia, the term succession planning refers to a business strategy companies use to pass leadership roles down to another employee or group of employees1. Your succession plan helps to predict the future of your business and should be considered immediately once your business becomes profitable. When done right, succession planning affords employers an opportunity to train the next generation of company leaders, ensure continuity in key roles, and manage all aspects of the transition2. A succession strategy does not happen overnight, it requires time and effort. Here are three steps to consider when building your succession strategy for long-term business growth.

Make it a priority

It is easy to get caught up in the day-to-day operations of running your business, so it is important to carve out time to have the discussion around your succession plan. For Dan, he makes it a priority to meet with key stakeholders and the advisory board three times a year. During these meetings succession planning and business direction over the next ten years is a key topic. The team evaluates decisions and makes pivots if necessary to ensure alignment to their succession strategy. It is important to have an advisory board made up of non-competing business owners within your industry to provide input based on their diverse perspectives and experiences.

Retain employees

It would be difficult to create a succession plan without employees. When you take care of your employees, your business reaps the rewards. Dan shared three ways that he successfully retained employees over his 25 years running Lexington Plumbing.

• Treat your employees like partners. Treating employees with respect, showing appreciation for their work, and being an encourager can create a desire in employees to also treat customers and clients well. “The most productive employee is one who is not stressed”, according to Dan. Employees who are treated well contribute to higher productivity levels and profitability.
• Offer employees training and development as an additional perk. A training program is an essential component of many organizations’ employee retention strategies. It keeps your team educated and your workspace ahead of the curve.
• Compensate them well. Keep in mind that compensation is more than wages and salary. Dan shared with us two ways he went above and beyond to properly compensate his employees: he offered a phantom stock plan or rabbi trust. A phantom stock plan is primarily designed for use by a privately held company to incentivize employee and other service provider performance by granting awards whose value is determined based on the company’s stock value3. While on the other hand, a rabbi trust is a non-qualified employee trust created for the benefit of both the employer and employee 4.

Find the right manager

Having the right employees in place matters. If you successfully retain them, you’ll have a pool to choose the next leader to groom. Dan shares key criteria he leveraged to select the next president of Lexington Plumbing, “Characteristics that I look for include dedication, proven work experiences and the capacity for visionary thinking”. Once he was ready to retire, he knew which employee to elevate to management and run the business.

Throughout our interview with Dan, he continually used the word “fluid”. Fluid is a term used to describe a state that is constantly changing. As you prepare your succession strategy, give yourself grace and the flexibility to make changes. Dan highlighted a ten-year plan that includes potentially hiring his grandkids to run the business — but the plan is fluid as there is a possibility this plan could change.

To wrap up our interview with Dan, we asked him to give us one piece of advice based on his 40+ years of experience to share with entrepreneurs. He said, “Your reputation is important — do what you say you’re going to do”.

Sources:

1 Kenton, W. (2022, November 28). Succession planning basics: How it works, why it’s important. Investopedia. https://www.investopedia.com/terms/s/succession-planning.asp#:~:text=The%20term%20succession%20planning%20refers,%2C%20retire%2C%20or%20pass%20away.

2 Eby, C. J. (2018, November 15). Avoiding age discrimination claims during succession planning. HR Defense. https://www.hrdefenseblog.com/2018/11/avoiding-age-discrimination-claims-during-succession-planning/

3 Lilienfeld, D., &; Moldowan, G. E. (n.d.). Phantom stock plan (private company) — shearman &; sterling. Sherman. https://www.shearman.com/-/media/files/perspectives/2020/05/phantom-stock-plan-private-company-update.pdf?la=en&hash=080E9A243E8397C841F7BD76A40DE705F0DC24E2

4 Kagan, J. (2020, May 24). Rabbi trust: Definition, origin, Advantages & Disadvantages. Investopedia. https://www.investopedia.com/terms/r/rabbitrust.asp

About the Author

Dan is a business coach, mentor, family business specialist, and teller of evident truths. Dan Axtell leverages his 43 years in business and hard earned lessons to help other small business owners buy, grow and exit their businesses. His past experiences range from journeyman plumber to project management, estimator to CEO. He currently serves as the Chairman of the Board for Lexington Plumbing, a full-service plumbing company serving Kansas City and the surrounding areas.

Child Care Accelerate is an innovative business support program designed to help child care providers optimize their business operations in two months. Our customized coaching journey allows us to partner with providers on their self-identified goals and priorities and share tools to improve their operational efficiency, build financial capacity and sustain a competitive edge. To learn more about Child Care Accelerate, please email info@seedconsults.com.