Recap: Andy Nations Visits Family Business Radio

Andy Nations On Thursday, June 28, 2012, B&D Industrial CEO Andy Nations joined Family Business Radio host Meredith Moore to discuss his third-generation family business.

Based in Macon, Ga., B&D Industrial is the Southeast’s largest independently owned distributor of industrial bearings and power transmission equipment, including motors, gearing and automation equipment. The firm acquires the parts from 30 primary suppliers, though they work with several hundred in all. While many suppliers are located in other countries, Nations says he is seeing a shift back to the U.S. He speculates that freight costs and instability in other countries may be behind the movement.

B&D Industrial’s customers include industrial plants across the Southeastern U.S. And in some international locations. He says they range from mom-and-pop operations doing machine work to Fortune 500 manufacturers. While the original core business was providing off the shelf parts, the company has transitioned into building systems and providing solutions for clients as well.

As the distributor between the parts manufacturer and the end user, B&D Industrial’s role is to keep a supply of products in inventory so clients have good access and to offer clients expertise regarding the products and their applications. They have more than 30 branches around the Southeast. At some of these locations, called Mega Branches, multiple company divisions are located under one roof. Synergy occurs when the different groups and different types of professionals, ranging from electrical engineers, programmers and sales staff, are under the same roof. The Mega Branches also help B&D build business because they can easily showcase all of their services to potential clients.

Move to Macon Spurs Growth

In 1947, Andy’s father bought a Griffin, Ga., distribution business, renaming it Bearings and Drives. His original investment was $9,000. The company remained stable until Mr. Nations moved it to Macon in 1950. Located in the center of the state, Macon provided a better location and better highways. One employee who was part of the move is still working with the company.

Once Bearings and Drives moved to Macon, the company grew rapidly. In their first month there, they did almost as much business as they had done in previous years. In 1955 they moved from their leased location to their current headquarters. All human resources and accounting functions are handled from the Macon offices, and the Bearings and Drives and B&D Service divisions are housed there as well. A large warehouse houses parts for customers within a 50-60 mile radius. The branch offices service other territories around the Southeast.

From 1960’s Minimum Wage to CEO

Andy himself started working for B&D industrial as a 16-year-old in 1965. For $1.25/hour, he worked in the warehouse and made deliveries. He continued working in the summers through high school and his years at the University of Georgia, where he pursued a business administration degree with a major in finance.

Andy says his parents did not push him to join the company. However, in one conversation, Andy says he showed the typical college-age idealism and told his dad that he really wanted to have a job that helped people. He recalls his father’s telling him that’s exactly what they did at Bearings and Drives. They gave people jobs so they could support their families and provided opportunities for employees to grow in their careers.

Still, Andy thought he might pursue a master’s degree in business administration. His college advisers, however, told him he could learn more in two years of working in the family business than he would by studying business in school. Then he thought he might pursue a career in banking, which would allow him to use his finance degree and, as a bonus, pay very well. In the end, he decided the family business offered more opportunities for growth. After he graduated in 1971, he joined the company full time.

Andy’s first position was in inside sales and customer service, where he primarily helped customers over the phone. He says it was a good role for building relationships and learning the company’s products. For the first two years or so, however, he says he still questioned his decision to join the family business. The other employees accepted him, but he felt he needed to prove himself and perform better than his coworkers. He believes his father probably held him to a higher standard, too.

Soon, he moved into accounting. He took more advanced accounting courses than he had taken in college, and he could now see how to apply the concepts. In the early 1970s, he says it became apparent that the company needed a computer system. In 1974-75, they invested in an IBM System 3. Andy enjoyed the challenge of going through IBM schools and becoming a programmer. Using a system with punch cards and large floppy discs, he eventually transferred their accounting and bookkeeping functions to the computer.

The technology increased their productivity. They were more efficient and accurate. They used the data to analyze the cost effectiveness of business activities, to manage inventory, and to evaluate and reward people more accurately.

Continued Growth of B&D

When Andy joined B&D full time in 1971, the company was about to add its seventh branch office. The company continued to grow out from Macon through the 1970s and 1980s. They made a few acquisitions, but most of their growth was organic. As a salesperson traveled around an area and saw potential growth there, B&D came in with a branch office. Andy says many manufacturers were moving from the North to the Southeast during those years, so it was a time of rapid growth.

In the mid 1970s, Andy became secretary-treasurer of the company. He moved from the back offices to working more directly with people in the different locations. The increased exposure helped him learn all aspects of the business. Andy says his father was gradually decreasing his own role in the company while he increased Andy’s. In 1983, when his father turned 65 and Andy was 34, Andy was named company president, and his father became CEO. Ten years later, Andy took on the CEO role, while his dad became chairman of the board of directors.

Andy says his dad had never been one to look over the shoulders of his employees; he gave them a job and held them accountable for it. In 1993, he became even less involved in the day-to-day business, focusing only on the financial and strategic aspects of B&D.

Involving the 3rd Generation

Andy had married in 1975. His wife pursued her career in nursing, never working with B&D. When their three daughters were old enough, however, they performed clerical duties in the offices during the summers. The older daughters discovered they did not like working with the business. They eventually earned degrees in speech and journalism from the University of Georgia, and they are now both full-time moms.

The youngest daughter, Lauren, also attended the University of Georgia and earned a business degree. She initially worked for a private equity firm in Atlanta. She came to work for B&D in 2008, where she has been exposed to different areas of the business. When B&D adopted a new software system three or four years ago, she was instrumental in assisting employees in adopting the changes. She also helps with evaluation of the financials and measuring efficiencies.

Two of Andy’s nephews, a niece and a son-in-law have also joined the business. Each has taken a different path inside the business, gaining exposure to different areas. The nephews, Ben and Brian, came to B&D straight from college and initially worked in inside sales. His son-in-law, Tim, graduated from Auburn University, worked for IBM for 8-10 years, then joined B&D about five years ago. Andy says he heavily recruited his niece, Courtney, before she joined the company in 1999. She had worked for a Charlotte importing company, and B&D was starting the international side of its business. Courtney started the international division, which has since moved to Tampa. She now works part-time.

Business Structure

B&D has an Executive Council comprised of family members and members of senior management. They meet regularly to discuss issues and opportunities, offering a good blend of perspectives from family and non-family members.

The company’s shareholders include Andy and his two siblings. His brother, an Atlanta attorney, and his sister, a retired school teacher, are not involved in the day-to-day business, but each has at least one child working for B&D. All three siblings serve as corporate directors, along with two outside directors. They meet quarterly to discuss the “big picture” part of the business.

Family Time and Generation 4

Andy says that some business discussions will inevitably occur when the family gathers, but they try to keep it to a minimum. He says the family enjoys spending time with each other and doing things together. It’s too early to predict Generation 4’s future involvement at B&D. Andy has four grandsons, aged 2 to 5 years. He hopes, however, the business will continue into the next generation.

What’s Next for B&D?

Currently, B&D has more than 30 locations, but there’s still potential for expansion. He says the automation and technical sides of the business offer opportunities for growth. Because they have thousands of customers, they can use those relationships as they offer new services. Also, many of those customers have multiple locations around the country and the world. As B&D provides a solution in one location, the client will also ask B&D to provide the same service in its other plants.

There’s also opportunity for international growth. The company currently works with suppliers in India, for example, and they have customers in Brazil. Andy sees great potential in Asia as well.

Andy Nations’ Three Tips for Family Business

  1. Be honest, open and fair. Andy says this rule applies to any business. He says you cannot over communicate.
  2. Develop relationships with others in the family business community. Review their best practices; learn from their mistakes. Take advantage of the resources at the Cox Family Enterprise Center at Kennesaw State University.
  3. Establish a Board of Directors or Advisory Board, and get outsiders involved. They should be people who are not part of the family and do not report to the family. They should be able to offer objective opinions and to speak up on issues where others might not.

Contact Our Guest:
Andy Nations

B&D Industrial
P.O. Box 4325
Macon, GA 31208-4325
Phone: 478.746.7623

B & D Industrial CEO Andy Nations to Visit Family Business Radio

Andy NationsAndy Nations, CEO of B&D Industrial, leads the Southeast’s largest independently owned distributor of industrial bearings and power transmission equipment. Nations will join Family Business Radio host Meredith Moore at 1 p.m. on Thursday, June 28, 2012, to discuss the origins and growth of his family’s 65-year-old firm.

Started by his father, John Nations, B&D Industrial has grown into a multi-state corporation, consistently ranking among the largest of its kind in the U.S. Andy Nations joined B&D after earning his BBA from the University of Georgia in 1971. Over the years, he worked in inside sales, purchasing and accounting, and he even programmed the company’s first computer. He was elected Secretary-Treasurer of B&D, the oldest and original B&D Industrial company, in 1979 and became its President and Chief Operating Officer in 1983. Ten years later, he was also named CEO of B&D Industrial.

Andy has served as president of two international industry trade associations, the Bearings Specialists Association and the Power Transmission Distributors Association. In Macon, Ga., where his company is headquartered, he serves on the Board of Directors of The Georgia Employers’ Association, and he is active in his church and the Macon Rotary Club. He has served on the Board of Trustees at Wesleyan College in Macon for the last four years. He is married to Carolyn, and the couple has three adult daughters, three sons-in-law and four grandsons.

About Our Guest:
Andy Nations
B&D Industrial
P.O. Box 4325
Macon, GA 31208-4325
Phone: 478.746.7623

Recap: Family Business Expert Joe Astrachan Offers Resources and Tips

Joe AstrachanCox Family Enterprise Center Executive Director Joe Astrachan, recognized around the world for his expertise in family business, visited with Family Business Radio host Meredith Moore on Thursday, June 21, 2012, to talk about the Cox Family Business Enterprise Center programs and offer tips for family businesses.

Emergence of Cox Family Enterprise Center

Faculty at Kennesaw State University (KSU) began working in the field of entrepreneurship about 30 years ago. Mike Mescon, former dean of Georgia State University’ business school, helped start an entrepreneurship chair on the campus. A few years later, Craig Aronoff was appointed to that chair. When the he asked entrepreneurs about their businesses, they often found that family issues—intergenerational communication, for example—were among the major problems in business. In about 1983, the first real research was done on family businesses, and for the first time a special issue of an academic journal was devoted to the topic. Only three institutions have family business programs that pre-date KSU’s, and only two of those were conducting research in the field at the time. Some independent researchers were working on family business topics as well.

Then, in 1987, Kennesaw State University (KSU) began hosting quarterly family business forums. As a relatively new college, KSU had an entrepreneurial spirit, and professors and staff members were freer to try new things than they might be in more established programs. The day-long forums started with breakfast, followed by a talk from a visiting expert. A family business owner would present, as would one of the day’s sponsors. The Family Business Forum model was copied by over 110 business schools around the country and came to be known as the K Model.

KSU’s family business program expanded from the quarterly forums also to include six breakfast meetings and one two-day, off-site retreat per year. The school also started the Georgia Family Business of the Year awards program to honor family businesses that have demonstrated commitment to families, employees and the communities. The awards go to multiple-generation families in small, medium and large categories as well as 100-year-old family businesses.

As the forums and meetings became more content rich, a change came about in the world of family businesses. Accounting firms, law firms and banks that had formerly ignored family business began targeting them with seminars of their own. Though the new offerings may not have been as neutral in content as KSU’s programs, they appealed to family business owners because they were free, whereas KSU’s family business participation required a membership fee.

The program continued to grow anyway. Joe came to KSU in 1992. In the mid 1990s, the relationship with the Cox family began to emerge. The Cox family owns a business that started in Ohio more than 100 years ago and has since moved to Atlanta. It is one of the largest family-owned businesses in the country. About 20 percent of the gifts from the Cox family and other donors fund ongoing programs at the Center, and the remaining gifts provide growth capital for new projects and research.

Executive MBA in Family Business Program

One of the projects was the establishment of the Executive MBA for Families in Business. Launched in 2009, the program began because researchers found that family businesses that were managed like non-family businesses experienced problems. Family businesses have unique issues that should be addressed and unique strengths upon which they can capitalize. The Executive MBA for Families in Business has now run four complete classes, each open to about 15 students who are family members in a business. Occasionally, if a family member has been through a course, the program allows a non-family member executive in the company to participate.

Though limited in size, the program welcomes students from all over the world. Every other month, class members travel to the businesses of other class members for one week of classes. One day is devoted to the host company, with tours, case studies and talks with family members or non-family member executives in that company.

In the future, Joe hopes to extend the Executive MBA for Families in Business offerings to non-family owners and professionals at the KSU campus, then to offer the curriculum at no charge to other business schools.

Meanwhile, he points to success stories coming out of the program. More than half of the participants have used their experience to help their companies make strategic decisions at high and integrated levels. He refers to Level 5 thinking, where businesses determine the optimal mix of activities to make the most money, given the demand for services or products and the restraints on resources. He says it’s similar to lean thinking, though KSU professor Dr. George Manners says it is “what lean thinking will be when it grows up.”

Other tangible results include more and better family meetings in participating companies. Joe says that relationship problems can’t be solved with structural solutions, such as regular family meetings. However, in families with good relationships, family meetings help ensure the participants are in continual conversation to educate and make decisions. He says families could easily meet once a month, but he’s happy if they even meet once a year. They should try to meet at least four or five times per year to continue conversations, some related to business and some related to the family itself.

Joe Astrachan’s Family Business Story

Joe himself grew up as part of a family business, Seatrain Lines. His father didn’t work directly for the company, but it was very much a part of his life. Publicly traded on the New York Stock Exchange, the company had in 1976 a market capitalization of more than $1 billion. It had 200 offices in the United States, several coal mines and owned the Brooklyn Navy Yards, where it built ships.

Joe says when he was an undergraduate at Yale and decided not to become a physician, he went back to his dream of being part of the family business. Yale did not have a business degree at the time, so he created his own major in family business, focusing on a combination of business and psychology courses.

During that time, the primary officer of the family business was Joe’s great uncle. In the 1970s, many things occurred to hurt the shipping industry. President Gerald Ford made changes in the flagging rules, and the Arab Oil Embargo was instituted. The company had already been harmed by the Cuban embargo and other international events before the end of the Vietnam War.

Then, about 1980, Joe’s great uncle had a heart attack and passed away. After six months, the family was still unable to choose a new leader. The company had about $300 million in debt, which was not a large amount for a company of its size. However, the bank called the debt in. The company’s shares started at $35 each one morning and fell to 19 cents by the end of the day.

Over time, despite the efforts of Joe’s father and grandmother to keep the family together, the family devolved. Without the core of the business they no longer communicated.

All of this happened while Joe was an undergraduate. As he talked to his advisors about what to do next, they recommended he pursue a doctorate. He was accepted into the program, where he continued studying family business.

Common Features in Successful Family Businesses

Joe says that the elements successful family businesses share depend on how success is defined, whether it is considered from the family dynamics side or simply from the business side. For example, to a family, a business that lasts multiple generations may be the most successful.

Joe says that those businesses that do survive have a different culture from other families, businesses or even from their local societies. In his travels, he has discovered that in virtually every culture, children are reluctant to disagree with their parents, and families don’t talk openly because they don’t want to risk conflict. Yet open communication is required in stable, long-term relationships. In successful family businesses, family members are willing to delve deeper into problems and to have difficult conversations. They have what Joe calls “pleasant confrontation.”

Another common factor of long-term family businesses is a willingness to put family interests before individual interests. In families where the parents have always put the happiness of their children first by giving them the things they want, children are not likely to learn to put others first and to cooperate. Yet in businesses and organizations, those skills are necessary. At some point, the parents have to step back and allow the child (or young adult) to take care of problems for him- or herself.

On the business side, successful family businesses must learn not to spend more than they make. If all family members receive a dividend from the business, then the business will have to grow fast enough to fund the rate of growth in the family. Joe says if a family is growing by two to three children per child, per generation, the profit growth rate must be 6 to 7 percent, before inflation to maintain a constant dollar level of payout per child. That means an overall growth rate of 10 to 12 percent after inflation.

Such a high growth rate can be hard to maintain. Joe says that in a mature industry, a company’s growth rate will mirror the population’s growth rate, which is about 3 percent worldwide. Yet if you need 12 percent growth, your company will have to make up that 9 percent difference. One way to deal with this is to scale back on the dividends family members receive. Joe says it’s important to have discussions about changes in dividend rates early rather than later in family life.

Joe says that only 30 percent of family owned businesses make it to the next generation, and the difference for those is in the family dynamics. If someone likes working with family, they will continue doing so as long as possible, even if the business is failing. If a family hates working together, they will leave the company, and likely the family, even if it is making money. Most family members can’t separate the emotion from the business.

Family Businesses Around the World

Joe says that the challenges of family businesses are similar across cultures. For example, one perception is that family businesses in Europe survive longer, but Joe says there is no data to support that. He points out, however, that the U.S. is a younger country, so businesses that started here will naturally be newer than some that have withstood centuries in other parts of the world.

As far as industries that seem to have more family-owned businesses, Joe says there aren’t really any where family ownership is more prevalent. Worldwide, almost every industry starts as family-owned businesses, though government regulation may change family involvement. For example, in the U.S., power generation companies are generally not family-owned businesses, but they are in other countries. Overall, the vast majority of businesses worldwide – 70 to 90 percent – have family involvement.

Bringing in the Next Generation

When only 30 percent of family businesses survive a generational change, it’s important to prepare next generation family members carefully. This is one purpose of family meetings. Family members need to figure out how they will treat each other, for example, and those guidelines may change as each generation matures. For example, cousins in their teens and 20s need to know how to handle boyfriends or girlfriends brought to the group, while parents in their 30s may need to discuss how to interact with or even discipline each others’ children. Families should also begin teaching new generations relatively early about how money is earned and managed. Family members should begin to understand important business concepts, such as balance sheets, equity and depreciation, in their teens and 20s. Joe says learning business is like learning a language; it’s easier to acquire when the student is younger.

Joe says no research has ever been done to determine whether it’s beneficial for a young family member to work outside the business before coming on board. While he says he doesn’t see a problem with allowing people to work elsewhere first, it’s unclear whether it’s better for the family, business or individual.

And when two family members simply don’t like each other? Joe says families must look at the underlying reasons, probably turning to a family therapist or psychologist before looking for business solutions. Often, such conflicts occur when each family member is putting personal needs or desires before the good of the family.

Joe Astrachan’s Three Tips for Family Businesses

Joe calls the following three items the “diet, exercise and don’t smoke” of family business—three things that businesses may not want to do and may not do all at once, but that are vital for healthy businesses.

  1. Regular family meetings.
  2. A functioning board of directors. Research is inconclusive on whether for privately owned companies the board should be made of family members only or include outsiders, but researchers have found that boards are most effective when they meet three to six times a year. The board should make sure the CEO and top management are doing what they say, when they say they will and with the expected results. The board members should not feel like they’re working for the business, but should remain neutral so they can make difficult decisions when needed.
  3. Strategic planning. Family members should have an ongoing conversation about where the business is going, why it’s going there, and how it will get there. Strategic planning allows family members, management and employees greater autonomy. If all know where the company is headed, all can make decisions that support the goals.

Contact Our Guest:

Dr. Joe H. Astrachan
Executive Director of the Cox Family Enterprise Center
Wachovia Eminent Scholar Chair of Family Business
Kennesaw State University
Phone: 770.423.6045

Cox Family Enterprise’s Dr. Joe Astrachan To Visit Family Business Radio

On the next edition of Family Business Radio, we will welcome Dr. Joe H. Astrachan, Executive Director of the Cox Family Enterprise Center at Kennesaw State University. He will discuss the trends and news in the family business industry with FBR host Meredith Moore at 1 p.m. on Thursday, June 21, 2012.

Our Guest:

Dr. Joe H. Astrachan

Dr Joe AstrachanDr. Astrachan holds the Wachovia Eminent Scholar Chair of Family Business and is Professor of Management and Entrepreneurship. He served as editor of the Family Business Review and as an editorial board member of several other academic journals. Dr. Astrachan is an internationally recognized scholar in the field of family business.

Contact our guest:

Dr. Joe H. Astrachan
Executive Director of the Cox Family Enterprise Center
Wachovia Eminent Scholar Chair of Family Business
Kennesaw State University
Phone: 770.423.6045

Recap: Ed Butler Finds Just the Right Place for His Children in the Family Business

Ed ButlerEd Butler, chairman of The Butler Group, Inc., joined Family Business Radio host Meredith Moore on Thursday, May 31, 2012, to talk about the growth of his family-owned enterprise and the steps he and wife Betty took to welcome their three children into the business.

The Butler Group is a sales organization representing wholesale manufacturers and importers of home decorative accents, personal accessories and general gifts in a nine-state Southeastern region. The organization operates an 11,000-square-foot showroom in the Atlanta Gift Mart. The Butlers also are partners in Maison Chic, a manufacturer of baby gift items, and owners of Kaleidoscope, a distributor of jewelry and accessories.

Creating a Job That Won’t be Eliminated

Ed got his start as a janitor in a retail store. He says he gave extra in all he did and was eventually accepted to the manager training program. He then spent 21 years working in management for Montgomery Ward, a now-defunct department store with locations primarily in Texas and the Midwest. While Ed had planned to spend his entire career with the organization, his job was eliminated in 1982. He then worked for Federated Department Stores and managed Rich’s stores in Atlanta.

In 1988, Ed decided to create a job that wouldn’t be eliminated. He visited a business brokerage, where he first looked at retail businesses selling products such as paint, building materials and hardware. Every time he looked more closely at the businesses for sale, he could see their weaknesses. He then came across a manufacturer representative business for sale. Using money earned through investment in rental properties, he and Betty purchased it. Their main cost was for the lease of a showroom, which was located in the Merchandise Mart in downtown Atlanta. (Since then, a Gift Mart has been added to the Merchandise and Apparel Marts, and the three are connected into America’s Mart, the number one market in the nation.) Manufacturers provided free or low-cost samples for displays. Salaries were also a large cost, though he and Betty took no salary in the first two years of the business.

The Butler Group, Inc. got its start selling baskets, a popular item at the time. One of their largest accounts was Cracker Barrel, which offered a room of baskets in each of their stores. The Butler Group had 3,000 accounts managed through the showroom and five sales people who went onto the road to call on stores. About 90 percent of the sales were in baskets, with the remainder comprised of other gift items.

As the popularity of baskets dwindled, The Butler Group had to diversify offerings quickly. They analyzed the 3,000 stores in their customer base to determine the types of products they might use. Because their territory was the Southeastern U.S., they focused on lines that would be attractive to people in the South. In conducting their research, they found that their organization had developed a reputation as being one of the “must-see” showrooms at the America’s Mart. As they started to look for other manufacturers to represent, they found they were already well-known in the industry and their services were in demand.

Welcoming the Family to the Business

When they founded The Butler Group, Ed and Betty had one daughter who had finished college, a second daughter in college, and a son in high school. Ed says that none of the kids wanted to join the business because they thought their parents worked too hard.

Ed and Betty encouraged their children to pursue their interests in college. The oldest of the three, Christy, was working as a director for Mary Kay and home schooling her two children. The second daughter, Paula, earned a degree in theatre. While she landed a couple of bit parts and commercials, she also worked for a jewelry company. Greg worked in the warehouse of a wicker basket/furniture importer during high school. In college, he took every art class he could, exploring many different types of art.

Paula was the first to join the company in 2003. Her job was to drive a mobile showroom to florists. In 2004, Greg came on as showroom manager, using his artistic talents to design displays. Christy asked to come on board after her older child left for college. Ed wanted to use her sales experience, but there was no open sales territory. He gave her the clients that were a low priority for the other sales representatives, and she spent time with them to turn them into solid clients.

Family Meetings and Each Finding a Place

As Ed and Betty started to consider retiring and exiting the business, they realized their children might not have jobs if the business sold. They began working with Joe Astrachan and Kristi McMillan at the Cox Family Enterprise Center at Kennesaw State University. The Cox team interviewed each of the children and talked to the family as a group. They had some family council meetings so the children could become part of their retirement and exit planning.

As part of this process, Ed says he was concerned with having each of his children in the right position to match his/her abilities and interests. He interviewed each privately, asking them questions about their goals and things they enjoy doing. He also asked each what he/she thought the others should do in the company. Ed says they all agreed. Greg wanted to work with the displays and not have dealings with the manufacturers. He thought Paula should handle sales, which was exactly what Paula wanted to do. Christy also thought Paula was best suited to run the group, and she took on the role of cheerleader and supporter. Ed and Betty agreed with the assignments. As a family, they refined their respective roles and agreed to hire others to perform the additional functions.

Other family council meetings included one in which Ed says he and Betty revealed to the children how much money they make. While he says it was awkward for him and Betty, the kids’ response was neutral. The parents tried to express the time it takes to accumulate wealth. The family also talked about profit margins in a business where they work on a commission, which is limited and shared with sales representatives. They agreed to look toward finding a product they could develop on their own so they could enjoy the manufacturer’s margin. They would avoid situations they had encountered in the past where they had helped a manufacturer grow by teaching them good distribution practices, only to have the manufacturer leave them with no interest in the company. By having their own products to distribute, the family business could take advantage of revenue streams at different stages of the manufacturing and distribution process.

Opportunity Knocks With Maison Chic

In July 2008, the owner of Maison Chic offered the Butlers the opportunity to manage her business. The manufacturer of high-end baby gift items, the business had tried unsuccessfully to handle distribution from the factory, and the business had failed. The Butlers responded that they were not interested in managing the business, but they would be interested in purchasing it. Ed says they were mentally prepared when the unexpected opportunity came along because of the discussions that had taken place in their family council meetings.

The Butlers joined the current owner and her husband in a 50-50 joint venture partnership in January 2009. The Butlers handle distribution in North and South America, and the other owners handle the manufacturing and sell from the factory. She also has the final say in the proprietary designs of the textile-related products. Daughter Christy took on a new role and is the Executive Vice President of Sales and Product Development for Maison Chic.

The new line’s brand philosophy is to provide nicer textiles with hand-worked details. These details allow them to increase the price point. The venture has been successful for a number of reasons. First, the Butlers found that the customer base was already there. Store owners had liked the product, they just didn’t like that it was hard to get into their stores. With a policy in place to guarantee delivery, the customers returned.

Also, because the higher end product is primarily used for gifts, it attracts repeat customers. Finally, Maison Chic had the advantage of displaying products in The Butler Group’s nationally known showroom, where sales representatives come in looking for lines to represent. The company now has 150 people selling the line.

New Jewelry Focus With Kaleidoscope

In the original family meeting where new ventures had been discussed, jewelry had been the first idea. It’s small and easy to ship, women love it, Paula had experience, and Betty had a natural interest. In March 2009, Ed and Betty started Kaleidoscope, which offers 2,000 items including fashion jewelry, handbags, scarves and accessories. Their customers are the same kinds of gift stores that carry other items they have represented. Like Maison Chic, Kaleidoscope rents space in The Butler Group’s showroom in America’s Mart.

Kaleidoscope’s product line is also a sign of the times. Ed explained that many gift stores relied on home accents as a large portion of their sales in the past. With the housing bust and fewer people buying new homes, those sales have slowed considerably. His observation is that Americans still want to buy something personal in a down economy, they just buy less. The result is that 11 percent of sales in gift stores now come from fashion jewelry, greater than the amount sold in clothing stores. Accessories such as scarves and purses comprise another 6 percent of sales.

Responding to Changes in Consumer Buying Habits

Ed says it is important in his industry to be able to listen to and react to the customers. He has to be aware and have the flexibility to switch products. Except for the Kaleidoscope and Maison Chic lines, the Butlers do not have to acquire products, but the products The Butler Group represents need to reflect the economic environment. The sales representatives at The Butler Group also serve their customers—store owners—by helping them keep up with trends they may not see while they are tied to their shops.

What are some of the trends Ed is seeing? Right now he says that fashion jewelry, scarves and accessories make up about 17 percent of sales in gift stores. These categories are followed by Christmas items, baby items, candles and related accessories, and picture frames. Picture frames used to be a major category for retailers, but thanks to digital photos and the many new ways of sharing them, they have fallen to only about 1 percent of sales.

He says that this is the year of the scarf. Sales took off in January, and they will be big in the fall. He says belts were popular for a while, but interest has waned. Interest in gold fashion jewelry has increased this year, though silver is still 90 percent of the business.

In the Southern market, Ed says we see more bright colors and more monogramming and personalization than in other areas of the country. One advantage of the specialty stores they service is that they can base their product selection on the clients in their own neighborhoods.

Mixing Family and Business

The Butler family does not schedule regular family meetings, but calls them when an opportunity or need arises. Most recently, they’ve talked about goal setting. Ed has revisited his questions to each of them about what they enjoy doing and how their preferences may have changed in the past several years as their situations have changed.

While he wants to guide them to jobs they find fulfilling and interesting, he has to balance that role with also holding them accountable. They are currently looking at what the market value is for the jobs each of the children holds. Each will then be paid a salary according to his or her contribution to the company and receive separate funds for their ownership in the form of dividends.

The family is also looking at ways to involve the next generation; Christy’s daughter is in college and already helps a little. She is planning her studies so she’ll be prepared to work in the family business.

Outside of business, the Butler family enjoys many family gatherings where they don’t discuss work unless something unexpected comes up and they schedule a brief meeting. Initially, they had planned to have a special family council meeting as part of their annual family-centered Thanksgiving retreat so they could share with the third generation. The grandchildren were not interested, and the family has discontinued the practice.

Ed Butler’s Three Tips for Family Business

  1. Allow each child to do what they enjoy and hire others to do the rest.
  2. Separate ownership from job responsibilities. Pay a salary and bonus for the job and dividends for ownership.
  3. Communicate with each child individually and with all as a family. Listen to the spouses in the family; they know what’s going on.

Contact our Guest:

Ed Butler
The Butler Group, Inc.
230 Spring Street NW, Suite 1212
Atlanta, GA 30303
Phone: 404.577.6941 or 800.241.9533