Family-owned nurseries follow a variety of models to transition to the next generation of ownership
They say two things in life are certain — death and taxes — but death also implies a third certainty, and that’s retirement.
If one doesn’t choose a retirement date, sooner or later it will be chosen for them. It’s better to plan ahead before the day arrives.
While a retiring employee is responsible mainly for themselves, a retiring owner must consider the effect on family members, mentees, employees, customers, and the legacy they are leaving behind. That’s why many business owners find it preferable to choose one’s exit plan, rather than leaving successors to sort things out on the fly.
Robinson Nursery (Amity, Oregon) is one nursery that took advantage of careful transition planning. They started down this path after seeing what happened to other nurseries that failed to plan for the future.
“My dad has seen several very successful nurseries disappear because they didn’t have good succession planning,” said Josh Robinson, one of two sons of founders Rick and Roxanne Robinson that are taking over the nursery. “He didn’t feel it was fair to those who have invested into the business, to have it go away just because there wasn’t good planning.”
A completed transition
Several Oregon nurseries have started or completed the succession process, each choosing the unique path they found best suited to meet their goals and situations. One of them is Peoria Gardens (Albany, Oregon), a well-regarded annuals grower whose branded containers can be found at retailers all across the Northwest.
Ben Verhoeven purchased Peoria Gardens from his father, Tom Verhoeven, who founded the nursery in 1983.
Ben worked at the nursery off and on throughout childhood. He left in young adulthood because it was important that he get experience outside the family business. He returned to the nursery in 2010, as his father was preparing for retirement. The transition to Ben’s ownership started in 2012, and by 2014 he became the sole shareholder.
To purchase the nursery, Ben agreed to a loan and continues to pay principal and interest to his father. “It helps Dad with a reliable source of income,” he said.
During the four-year transition period, he worked in a variety of capacities to learn all the jobs at the nursery. He wanted to “live” this work and better empathize with the people performing it.
“I did pretty much six months to a year doing every job at the nursery, from driving trucks to sales, to growing to shipping, to transplanting,” Ben said. “I did pesticide application, I did production management, and then I started to move more and more into general management roles, HR, accounts payable and receivable, and payroll. At some point I had to do everything.”
For him, the transition period induced both apprehension and excitement.
“It was a huge decision to make to take over a family business,” Ben said. “There’s a lot wrapped up in it. There was a little anxiousness but also excitement. Now I’m really glad and couldn’t be happier. I really enjoy the work I do and the people I work with.”
As the transition was planned, father and son each had separate attorneys representing them.
“It was strange, but it was necessary,” Ben said. “It would have been a conflict of interest for one attorney to represent both of us, so it’s pretty much a necessity for each side to have their own attorney. It wasn’t contentious, but it was just necessary.”
A transition between friends
In 2016, Darin Cox purchased Pacific Nursery Inc. (Dayton, Oregon) from Gary Brooks, who founded the nursery in 1984.
Brooks is part of the family that founded Carlton Nursery. His father and three uncles — Kent, Gene, Lyle and Lynn Brooks — are in the Oregon Nurseries’ Hall of Fame. Cox had known Brooks since he was a child, as Cox’s father and Brooks had a specimen tree business together.
As a student at Oregon State University (OSU), Cox served as an intern for Brooks. Upon graduation, Cox went to work for Brooks at Grand Island Nursery LLC, just down the road from Pacific. He was hired to finish construction of the production operation, including the pot-in-pot, filtration, and greenhouse watering systems. Once that was in place, he moved on to growing material, which included shade trees and a limited line of shrub material.
“That was my introduction to the nursery business in a real way — first construction and then growing,” Cox said. “You name it, I did it.”
After working at Grand Island Nursery, Cox moved to Pacific Nursery in 2011 as a sales manager. By that time, he had offers from other big nurseries to come work for them. He stayed with Brooks and Pacific. He felt that provided the opportunity to get the broadest experience possible. “My goal was not to be slotted in,” he said. “I didn’t want to do just one thing. I wanted the whole scope, be involved in everything, from construction to the costing to planning.”
Ownership hadn’t occurred to him yet, but it soon did. “If I’m going to work this hard, I want to be an owner,” he said. “That was in the back of my mind.”
When Brooks wanted to step away from being the top manager of the day-to-day operations, Cox was the natural choice. He knew the business and had a lifelong relationship with Brooks.
It took almost two years to craft a deal. Although Cox had to come up with a down payment, the impact of the 2008 recession was still being felt. Brooks didn’t want to hand over the business until it was on firm footing.
“I was already, saying ‘Let’s go,’ but Gary held back,” Cox said. “He couldn’t sell something that was out of balance and expect me to magically bring it back. It had to be ready for sale.”
The nursery had far more plants than could be sold, and the grafting of Japanese maples and shade trees, in particular, had to be reduced.
“We had to slow things down, and that takes a few years,” Cox said.
Cox became owner in 2016, and knows the role of owner is different from that of employee or even manager. “No matter how ready you think you are to own a company, once you sign the personal guarantee, it is a different feeling,” he said.
Owners bear the weight of responsibility for employees, who are dependent on the business for their livelihood. “I wasn’t totally prepared for that pressure,” Cox said. “As an employee, I didn’t know what to be scared of, but I do now.”
Even while there are pressures, there’s no doubt of the rewards.
“I feel very fortunate that I have a great customer base and crew to work with,” he said. “And, it’s important that I continue what Gary started, and make it better along the way.”
A work in progress
Brothers Chris and Josh Robinson are in the process of purchasing Robinson Nursery (Amity, Oregon), a top quality liner production nursery, from their parents, Rick and Roxanne.
The arrangement allows Rick and Roxanne to experience the joys of retirement while still helping the business when needed, and it lets Chris and Josh operate and position the business for the future. It’s all by design.
At Robinson Nursery, sons Chris and Josh hold just over 50 percent of ownership stock, but their mom and dad retain a majority of the voting stock. This transition structure was chosen due to the tax benefits that it confers.
Each brother has responsibility for a particular part of the nursery. Chris concentrates on the production end of things, while Josh works primarily works on sales. Decisions are made together; disagreements are few.
Transition planning began early.
“[Our parents] had recognized that Josh and I were fully invested here and eventually wanted to take the company over,” Chris said. “My dad has always been very proactive as a person and is very good financially. They were getting older and wanted to spend their time doing other things. It was a win-win. It allowed [them] to meet their retirement goals and allowed Josh and I to further meet our career goals.”
It was a step by step process. First, the family established fair market value for the company by consulting with several experts. Next came work on the financial structure of the deal, so that the brothers would have the resources to purchase the business without adverse tax implications.
Attorneys for each side then went over the proposed terms of the deal to make sure all were treated fairly. “We did it the best way that we knew how,” Chris said. “It allowed us all to feel like the deal was fair.”
In moving Robinson Nursery forward into the future, the brothers are not content to merely run their parents’ playbook. They have implemented Lean processes, worked on product lines and continued the work their parents did in raising the company’s profile.
“We’ve been in training our whole lives,” Chris said. “Mom and Dad always communicated with us really well, and gave us a long leash in the business to figure out what we’re really good at. We have good advisers to go to for help, and our parents are good examples.”
Changing the management
Some nurseries are opting not to hand the business off just yet, but instead prepare for the future by changing the business’s structure.
Fall Creek Farm & Nursery Inc. (Lowell, Oregon) is one example. Founded in 1978 by Dave and Barbara Brazelton, the nursery has become a global powerhouse in blueberry plant breeding, introduction and production for fruit producers.
In order to help deal with the challenges and opportunities of international growth, the Brazeltons decided first to recruit a board of directors that includes experts from outside the family. This past January, they took the next step on the pathway to Fall Creek’s future.
Dave stepped down as chief executive officer (CEO), moving into a chairman role. The company appointed Dave and Barbara’s son, Cort Brazelton, and their daughter, Amelie Brazelton Aust, as co-CEO’s. The company also elevated Oscar Verges to the role of president. He had already been serving as chief operating officer.
The arrangement was recommended by the company board as the best way to incorporate everyone’s talents and serve the interests of the overall business.
“A co-CEO model had never occurred to us, but it should have,” Amelie Brazelton Aust said. “We spent most of 2018 diving into what this would look like, studying the pitfalls, and gaining vision into how this has worked well for other global companies, we are excited.
“Cort and I are as different and
as similar as can be,” she added. “We challenge each other and hold each other
accountable to focus opportunities, manage risk, and protect our company
values. At the same time, Oscar brings decades of global corporate experience
that is essential for us to enrich strategy and to bring what’s most special
about Fall Creek to the entire organization
and the people we serve, everywhere in the world.”
Linda Eshraghi, co-founder of wholesale grower Eshraghi Nursery (founded 1988) and its retail arm, Farmington Gardens (founded 1992), is following a different and unique path to planning a future for her businesses.
Following a divorce, she is now the sole owner of both businesses, which are located in Beaverton and Hillsboro, Oregon. Although she has no heirs wanting to take over, she still wants her business and legacy to survive. She also wants her employees to have good jobs after she retires.
Her chosen solution is to set up an employee stock ownership plan, or ESOP. Once implemented, the plan will gradually transfer ownership to qualifying employees, while providing her — and down the line, those same employees — with retirement income.
Tom Whitelaw was brought on board as chief financial officer to help set up the ESOP. He came with experience helping Oregon Vineyard Supply set up a similar employee ownership plan (although that business was later merged with another).
“An ESOP is an option where you get to reward your employees who have been there a long time for their efforts that have made the company successful, but without hurting yourself,” Whitelaw said. “It’s a way for the owner to finance the sale of the company to the employees.”
Under an ESOP, the company makes contributions, similar to the employer match on a 401(k) plan, to a trust. These contributions are part of the employee’s compensation.
The trust then purchases shares in the company from the owner. Employees don’t own the company directly; rather, they own shares in the trust that owns the shares. This setup has several tax advantages for both owner and employee.
“As a transitional tool, there’s a multitude of ways it can be structured to the mutual benefit of everyone,” Whitelaw said.
The trust can borrow money to increase its ownership share in the company, but it need not own the entire company. The selling owner can retain majority or minority ownership.
“It’s excellent for employee retention,” Whitelaw said. “It gets the employee to think like an owner. Every dollar you save, some portion of it goes into your pocket.”
For more information on how ESOPs work, log on to www.esop.org and www.nceo.org.
The common thread throughout these transition stories is the importance of planning ahead. Every transition must rest on a solid foundation. The business must prepare for the transition, as must those taking over.
Chris Robinson, of Robinson Nursery, said discussion is key. “Every step you make, open communication between all the stakeholders is really important, that you make sure you’re all on the same page,” he said.
According to his brother, Josh, it doesn’t hurt to ask around for advice. Name any nursery — if it has been around for long enough, chances are good that it too will have been through a transition.
“Talk to others who have been through it as well, so you can learn from what they’ve done,” he said.
Editor’s note: Tracy Ilene Miller contributed to this story.
Curt Kipp is the director of publications and communications at the Oregon Association of Nurseries, and the editor of Digger magazine.