Transitioning a family-owned HVACR business from one generation to the next is often about more than just numbers on a ledger sheet. For many involved in succession planning, it's often difficult to separate business and family, and that can make for a complex, sometimes messy undertaking.

APR Supply has carefully navigated the rapids of family succession planning. The Lebanon, PA-based HVACR wholesaler with 18 branches, No.142 on a recent wholesaler industry ranking, transitioned from the second to the third generation in the 1990s when Randy Tice sold the business to son-in-law Scott Weaver and son John M. Tice. Today, Weaver is the president and CEO, and John Tice is the vice president. Randy Tice is the chairman.

While there were some unexpected twists along the way, the business today is stronger than ever. Perhaps more importantly, the families remain close. They achieved success in succession planning by carefully delineating roles, establishing a strong operating management team and working out any problems collaboratively. While the fourth generation is still at least a decade away from potentially becoming involved in the business, the third generation is already establishing a plan for when that day comes.

Randy Tice was the president of APR Supply when he first entertained the notion of turning over the business to the next generation. In doing so, he was determined to establish a smooth transition. He had joined his father, Mark, in the HVACR business in 1971. In 1975, Randy started his own Control Specialty firm and then merged the two businesses in 1982 to form APR Supply. When Mark retired, Randy had to buy out his father's equity in the business that he had helped to build so that Mark could split his estate among Randy and his two siblings.

When Tice asked his son-in-law to join the family-owned business in 1990, they worked out a plan that would be equitable to all involved. Tice's plan, recalls Weaver, went like this: We'll open a new branch of APR Supply with each of us putting in some equity and each of us owning 50 percent. We will operate it as a separate company with separate incorporations. After five years, Weaver would have an opportunity to buy out his father-in-law's equity of the new business at a preferred rate.

By doing this, Tice would not penalize his son-in-law for helping to grow the business. “The uniqueness of transitioning from a second to a third generation is that you have to help APR become a better place and help increase its value quickly. You will rise and fall on your merits,” Weaver says. “I was going to purchase the big company with a small company.”

For Weaver, the offer was intriguing. After working in commercial banking for a couple of years after college, he obtained his MBA from Cornell University's Johnson Graduate School of Management in 1990. He contemplated moving to Silicon Valley to become involved in a startup venture, but he instead decided to take up his father-in-law on his offer. The branch co-owned by Weaver and Tice thrived.

In 1993, Weaver was appointed as the vice president of operations, and he took over as president three years later at the age of 32. (His appointment was not without symbolism. Mark Tice, former president of NHAW, HARDI's predecessor, bought Lebanon Plumbing Supply in 1947, at age 32.) But at the end of the five-year agreement between the two men, Weaver had not bought out his father-in-law. During that time, John Tice decided to join the business. When Weaver had first joined, John Tice was only 17, and they did not know if he would join the family business. Once he decided to become involved, it delayed the ownership transition. “We had to give him a couple of years in the business to see if he would like it,” Weaver explains.

When it became clear that John Tice liked the business and would be staying, they reworked the plan. “I had three branches trading as my company, and John had three branches trading as his company,” Weaver says. “Then when we went to purchase the original APR as a company, it was a bankable deal.”

While APR Supply is one company in the minds of customers, employees and suppliers, it really operates as three separate entities, with Weaver and Tice having separate ownership of three stores each and then sharing equal ownership in the remaining stores. “It does not affect operations in any way,” Weaver says. “We use the same systems, the same computers. We only make decisions as one company. We have a common group of benefits paid by the APR Supply Company. Everything else we want to do, we do it through our own company.”

Weaver says the end result has been good for everyone involved. “It turned out to be a really good outcome,” he says. “When we looked at how we were going to put this company together, John and I didn't want to be driven apart by arguing about money. And we never argue about money.”

During the past 10 years, Weaver and Tice have grown the company. When Randy Tice formally sold the business to his son and son-in-law, John Tice was only 24 and Weaver was 32. But Tice never doubted that this relatively young ownership team would be successful. “I know he believed in us, and we believed in ourselves,” Weaver says. “History has proven that this belief was not misplaced.”

APR Supply has both a senior operating management team and a family board. The management team, comprised of the director of logistics, the COO, the director of sales, a senior salesperson, the director of IT, Tice and Weaver, meets each Monday for four to six hours to discuss all of the day-to-day issues throughout the company.

The family board is comprised of Weaver; his wife, Deborah (Randy's daughter); John Tice; Randy Tice; and Randy's wife, Sarah. John's wife, Wendy, is not a voting member but attends regularly. The board meets quarterly to discuss the direction of the business and what the family needs from the business. The family board does not have a formal role in voting on APR Supply's business plan.

Weaver and Tice have taken the business to even greater sales since they assumed ownership. Weaver cites several reasons for its rapid growth over the past 10 years. Tice and Weaver were in a growth mode, while Randy Tice was looking at retirement for himself and wanted to maintain the business. Weaver also mentions another reason for such growth: the bank loan. “Randy gave us a nice deal,” he says. “But to pay for the deal, we have to grow the business. A bank debt is usually a good motivating factor.”

But they also know that the business is bigger than both of them. “John and I have taken the roles of stewards of the business. Our general demeanor and attitude — and this is from the family perspective — is that we serve the business, the business doesn't serve us.” That is, they are preparing APR Supply for the next generation of Weavers and Tices.

For now, the question of succession to the fourth generation is a topic they do not discuss with the children, who range in age from seven to 14. “We don't know whether they want to be in the business, they don't know, and it's not appropriate to ask,” Weaver says.

What Weaver and Tice are drafting, however, is a family constitution that will provide their children (each has two) with the “rules of engagement.” Weaver had been searching for such a plan for some time until someone suggested a family constitution. He began the process two years ago, and an attorney is developing the document. At a certain age, most likely when each child is 16, Weaver and Tice will sit down with them and explain what they must do if they want to join APR Supply.

Their children can work for APR Supply whenever they wish. But if they want to become a voting shareholder of the business, they must meet certain requirements. Among them are: obtain a college degree, work outside APR Supply for two years, receive a job promotion, manage at least one other person and go through a management training program with APR Supply. To assume ownership, they must show that they have developed the character that would enable them to run the business. “You've seen all too often the next generation being given something that's running well, not having to earn it, and the results being disastrous,” Weaver says. “We would not want to put our children in that position.”

While an attorney is important in drafting legal documents and agreements, Weaver says the nuts and bolts of any succession plan must begin with honest conversation among the family members. “If you end up having attorneys figure out how to get from one generation to the next, you're certainly set up for failure,” he says. He recommends that someone from the next generation take the lead in the succession process. “That's part of the experience in leading a company,” he says.

For Weaver, the experience has been a positive one. But the process took longer and was harder than he imagined. “The family issues are harder than the business issues,” he says. “It doesn't mean that we don't love each other — we do. It just isn't easy.”

He advises others who are considering developing a succession plan to not rush the process. A five-year plan turns into eight or nine years. Weaver's story is a case in point. At the end of his five-year plan with his father-in-law, he hadn't yet assumed ownership. “It doesn't mean at the time that I didn't question it. I had an agreement that said after five years I'm supposed to own this business,” he says. “But it was worth it.”

Be prepared to accept the fact that things don't always go as planned. Even when everyone involved has the best intentions for the business, other issues can get in the way. Work through them, understand the perspective of others and be prepared with a backup plan. Says Weaver: “Even with good people from one generation to another, there is pain associated with it, and there are no magic bullets.”

Michael Maynard is a business writer in Providence, RI, who writes on issues related to HVACR, construction and architecture. Contact him at michael.maynard@lycos.com.