Skip to main content Navigation

Articles and News

TRANSITION PLANNING: IS YOUR LEGACY READY? |  March 21, 2012 (1 comment)


Merrick, NY--The Centurion spoke at length with Jon Parker of Virginia Beach, VA-based DJP Executive Search. According to Parker (shown at left with Debbie Dern, his wife and partner in DJP), activity is picking up as the economy steadies. Retailers are seeing their businesses grow again and need additional help in their stores, and he’s staying busy finding the right employees for the right situations.

DJP is a search firm, not a placement agency, and Parker is picky about the difference between the two. His job is to find the right person and get them interested in the position. But a new area of business for him—and for his clients—is helping with future planning, especially for jewelers nearing retirement.

Options of what to do with the business are not endless for jewelers who want to retire. One is to groom a relative or trusted employee to take over when the time is right; another is to end the business with a ‘GOB,’ a going out of business sale. Yet another is an outright sale of the business to an interested buyer. But Parker offers still another suggestion: hiring the right person to take over and buy the store, but who will work alongside the owner while he or she retires. This option is working for a number of Parker’s clients.

“I see a number of owners looking for more than a sales manager,” Parker says. Retirement age has a lot to do with it. Some jewelers are prepared for retirement with either the next generation or a succession plan in place, but many are not, and Parker is seeing many owners interested in hiring someone to eventually take over the business.

“An interesting point to some of the independents is the fact that some that do not have a legacy [in place] are almost sad at the thought of doing a GOB [where they] take the money and run,” said Parker. “They’d like to continue the legacy and don’t realize that option is out there. We’re looking at creative ways to help better independents keep the store open and still retire with it/from it and continue the legacy at the same time. “

Parker offers some advice for those jewelers who believe they have a thriving business and no legacy. “Explore options to find out if your person in charge may be able to take over and buy,” he said. Those people don’t always have the right personality or skills to make it work, but some do.

Or consider hiring that legacy. The situation needs to be well planned, in advance, says Parker. An accountant or CPA would need to help an owner figure out a valuation for the business. This needs to happen before a new person is hired and a price needs to be set in advance and agreed to by all parties.

Parker tells of an owner and a relative who wanted to buy the store. The owner and relative loosely set up terms on a single sheet of paper and shook on it. The relative increased sales over 60% the first year (largely to pay off the owner). When the owner realized this, he was ready to renegotiate for a larger share, since the store was doing so well. The relative was not happy, needless to say.

Generally, once the legacy is in place in a new store, the owner and the legacy split the profits until the owner is paid off. Over the long term, this helps owners sell their business over time and get paid monthly. This arrangement may ultimately make the owner more money than a GOB sale. The store’s sales price would be closer to the true investment the owner has made in it.

When asked about what skills/personality a legacy needs to be successful, Parker had some thoughts on the subject. “You’re looking for a person who has progressed beyond sales manager into an operational role; someone who can take responsibility for the P&L’s and balance sheet. That’s the person. One who is directly involved now would be the appropriate person.

“There are plenty of these types of people around,” says Parker. His firm has found a number of these for interested clients, and thinks more owners might take this route if they knew it was an option.

Owners also need to have the right mindset to make this situation work. “When the legacy comes in, he/she’s in charge, not the owner,” emphasizes Parker. “You can’t have someone start paying [for the store] until they are in control.”

Parker summed up the mentality of a successful legacy owner – which is pretty much the same as the owner that sell his/her store: “Ownership means this is your baby. The buck stops here.“

Share This:

Comments (1):

Great article and a big topic.  Thanks.

By David Brown on Mar 24th, 2012 at 7:48pm

Leave a Comment:

Human Check