Succession Planning

By Jacob Hamilton, General Manager at Tim Ferguson Plumbing, Air & Electric When my father-in-law called me into his office on an afternoon in 2010, I didn’t know my life was about to change. I had been working as a nurse before joining his plumbing business, Tim Ferguson Plumbing, Air & Electric, jumping headfirst into Read more

By Jacob Hamilton, General Manager at Tim Ferguson Plumbing, Air & Electric

When my father-in-law called me into his office on an afternoon in 2010, I didn’t know my life was about to change.

I had been working as a nurse before joining his plumbing business, Tim Ferguson Plumbing, Air & Electric, jumping headfirst into a new industry I knew nothing about. But Tim trusted me to learn and saw something in me then that I couldn’t see in myself.

During our meeting, he laid out his plan for me: He wanted me to help continue to build the family business and take over when he retired. I told him I knew nothing about how to run a company; but I could sense he had complete confidence in my ability to learn. And I knew that, if he believed in me, for something as important as leading the family business into a new generation, I should trust his plan.

Tim Ferguson

It was Tim’s foresight and commitment to long-term planning that made his dream come to fruition when he sold the company to Leap Partners and retired. I took over on Oct. 1, 2023.

Leadership transitions are hard. But it was Tim’s patience and long-term planning that helped us all smoothly transition with minimal disruption. His intuition also prepared our 45 employees and me to easily and naturally transition into a new era and continue the legacy he’d built over more than 20 years.

How did we do it? Let me share some lessons we learned along the way.

Communicate, communicate, communicate

Without question, the most important piece of advice I can give to anyone undergoing a leadership transition is to communicate consistently. It’s imperative that you communicate clearly and often with your employees about your plans for leadership. You don’t want employees to fill in gaps with hearsay, and you definitely don’t want them to hear two conflicting or muddled messages at the same time. Overcommunicating is always going to be better than not communicating enough.

Let them know the plan, when it’s happening and how you expect the transition to go. If you don’t know the answers to some of these questions, let them know that too. Listening to feedback and being transparent will help cut down on the feeling of unease that can come with change. Treating all employees like integral partners in the business by being overly transparent with them can make everyone feel invested in what’s happening. Especially with small businesses, your team should feel comfortable with the transition and feel that their input is being considered.

Anticipate challenges and plan for them

How am I going to deal with the potential of losing managers or technicians? What if people don’t like the new leader? When should we change over? These are all normal questions to have, and it’s crucial to fully think through the answers before any plan is put into action.

Run through every scenario in your head and create a rational plan for each. Find the solution that will have the smallest impact on your business, and make sure you consult with your leadership team for feedback.

An aspect that is often overlooked is the timing of your transition. As best you can, try to implement your transition plan during a time of year that’s comfortable or slower for your industry. In our business, we know summers are often draining on our employees, so we looked at September or October to start transitioning duties rather than during the intensive summer period.

Give thought to potential pitfalls, and make sure you plan accordingly so you don’t panic when they arise.

It’s never too early to start planning

A lot of the success in Tim’s transition plan was due to his foresight and patience. Just as he did with me for the better part of a decade, I’m looking ahead and thinking about how I can prepare the next generation of company leaders.

There are many aspects to leading a business that you have to just learn in the role, but there are other skills that come naturally to any good leader. Identify those rising leaders with exceptional listening skills, emotional intelligence and strategic foresight. Engage them in tasks that foster the development of these skills and provide leadership opportunities where you can, preparing them for larger future roles.

Starting this process early will save you time and potential headaches down the road. If you’re not sure where to start, don’t be afraid to ask for help. We had the support of our parent company Leap Partners to help guide us through our transition, and their advice and helping hand were vital to our success.

A smooth transition of leadership does not happen overnight. It requires detailed planning and strong communication. It’s what Tim did for our company 14 years ago, and I thank him every day for it. By laying the groundwork years ago, he paved the way for a seamless transition and made it easier for me to keep his business growing and successful.

There’s time for you to put in the same work. Your future business will thank you for the time you put in today.

Jacob Hamilton is general manager at Tim Ferguson Plumbing, Air & Electric, a member of the Leap Partners family, operating across Western Tennessee.

Let’s face it: no one can work forever. After years of building and managing your HVAC business, you will have to pass the baton to a successor at some point. As the baby boomers generation ages, it’s a cold hard fact that many contractors can no longer keep up with the ever-changing demands of the Read more

Let’s face it: no one can work forever. After years of building and managing your HVAC business, you will have to pass the baton to a successor at some point.

As the baby boomers generation ages, it’s a cold hard fact that many contractors can no longer keep up with the ever-changing demands of the heating and cooling industry. Today, owners of HVAC and other contracting businesses are retiring in droves to move on to the next chapter of their lives. Couple that with record-breaking levels of merger and acquisition (“M&A”) activity in the HVAC sector, and owners have many considerations and opportunities to consider when succession planning.

How prepared are you for that big day in your future? 

In today’s dynamic business environment, managing risks associated with planned and unplanned departures is a business imperative that contractors can no longer afford to ignore. Decades-old, highly successful and well-established HVAC businesses, in particular, need proactive succession planning to ensure continued business growth.

Succession planning, however, can be a complex undertaking. It involves identifying and training your successor to ensure your retirement does not disrupt operations. Additionally, it requires creating a robust strategy to maximize the business’s economic value during the ownership transition and manage any taxation and compliance implications. Succession planning also includes considering M&A options for your business.

Throughout the years, we’ve seen how the lack of a well-thought-out succession plan has led to severe financial damages for many HVAC companies. With this in mind, businesses must develop long-term strategies to mitigate risks and ensure a successful transition.

The Importance of Succession Planning for Your HVAC Business

Whether you have no plans of retiring anytime soon, the future is unpredictable. Having a solid, documented succession plan is crucial to your business’s health and fate.

Succession planning allows you to:

  • Ensure your management team is aligned with your plans and goals for the company’s future.
  • Stay focused on a long-term, bigger-picture vision for the business.
  • Protect the business in the event of a sudden major life-changing event.
  • Assess parts of your business that may need special attention for your succession plan to be effective.

No matter the size or structure of your contracting business, having a defined succession plan is critical to selecting and developing the best leaders. Extending tenures may prevent the impending headwind, but there is no substitute for a viable long-term succession strategy. After all, business leaders, irrespective of their stature, would inevitably need to make way for the younger generation.

3 Insightful and Actionable Succession Planning Steps

Every business situation requires a different exit strategy. Some existing business owners may want to step out of their position for good. While some would prefer to stay minimally involved to ensure the company’s future success.

Whether you plan to pass your company on to one of your children or trusted employees or sell it to an outside party, succession planning is paramount.

Here are three important things to consider as you plan for your HVAC business succession:

  1. Decide Who Will Take Over

    Identify who will take the reins when you retire, and give them the opportunity to develop their skills and experience to successfully replace you in the future. Every aspect of business operations should be clearly defined, including detailed role definitions for key decision-makers at various levels. This is especially true for family-owned businesses.

    With any luck, you’ve had capable family members or employees who have established themselves in the specific roles they will eventually assume.

If your business is family-owned and operated, it is important to talk to your family members before making succession choices. Ask them if they are interested in taking over the business, and determine if they have the capability to effectively run the company.

Starting your succession plan sooner rather than later gives you more time to hone the knowledge and skills they will need to take over.

On the other hand, if you’ve been anticipating that one of your employees will buy out your business, make sure they have the financial capacity to give you market value for your business along with the skills to sustain its success. Internal transfers are often structured where the owners are paid over time through the profits of the business, so it is important to really assess if your successor has the skills to run the company profitably without you going forward. Otherwise, you’re giving your business to someone who can put your long-term financial security at risk if they cannot execute successfully. This is why many business owners look to third-party M&A to transition their business.

As retirement looms, you must also train them to do the jobs well to ensure that a steady hand will lead from the top down.

  1. Determine When the Transition Will Happen

    You can’t just flip a switch and hand over the job to your successor with little notice. Think long-term and set a date for your last day in the company. The ownership transition should begin before your last day to give your successor enough time to get accustomed to their new role.

    As the existing business owner, you must also invest in the professional development of your succession choice to help them gain valuable experience and boost their soft skills. Let them assume different responsibilities to assess where they might need some additional training and development.

    If you’re in a position where you don’t have a qualified candidate to take over, then you need to craft a broader succession plan that enlists a third party to purchase the business. Make sure to find a buyer who values your business the way you do, has the ability to demonstrate consistent earnings and will continue its legacy when you are no longer there.

  2. Consider a merger and acquisition (M&A)

When one entity buys another entity and folds it into their organization, that is referred to as an acquisition. In a merger, two equal companies join to form another entity or co-branded company. The timing has never been more perfect for HVAC businesses to consider M&A. More investors are looking for lower-middle-market organizations for M&A activity, and the benefits to you, as a small business owner, are immense.

Rewarding financial returns are one of the reasons business owners turn to M&A. During an M&A, you’ll be able to enhance the price you receive for your company, allowing you to cash in on your hard-earned success and retire with ease. There are also opportunities to create generational wealth by selling portions of your business to a private equity firm. In this scenario, you are able to continue investing, you stay involved in running your company, and you work with the majority owner to generate increased value for your business. Eventually, you’ll be able to liquidate your equity at a larger amount in this second sale of the business.

If you are interested in M&A, it’s never too early to start planning. Price isn’t the only thing to focus on. From determining timing, better understanding your customer relationships and determining what to do with your team, there are seven things to consider when selling your company.

Ignite A Big-Picture Mindset

Changes in the HVAC business happen fast. But through effective succession planning and considering M&A options, you can ensure business continuity. Don’t forget to call in the experts for help with your company’s succession planning. Look for a team with many years of experience, diverse business background and a proven track record in the M&A industry.

Need help with your company’s succession planning? The experts at Align BA are happy to advise you on the best way to create a strong leadership pipeline.


About the Author: Dena Jalbert is at the forefront of executive leadership within the M&A industry. She is  also an award-winning entrepreneur, a mother and a philanthropist. Dena is an outgoing, high-performing, and deeply analytical leader who is passionate about driving business growth through financial discipline, innovation and creativity. Dena is a proven leader whose distinction interlaces a wider-view of business needs to connect the dots between data and business growth strategy. It is this unique strength that has led to repeated successes throughout her career, enabling a different and fresh perspective in building and leading organizations — utilizing innovative strategies to deliver transformations in operations and business results. As a mother of two young girls, Dena is determined to do what she can to advance the opportunities of young girls and women throughout Central Florida.