The once and future owners of one of the largest trailer dealerships in the West didn’t really have a plan to transition the family business from one generation to the next—until they did. Five years in, the principals at Utility Trailers Sales of Utah can say the succession has been a success, even if the process had come as something of a surprise.
“I had no plans to be here,” says Justin Deputy, the company president.
During an interview in his Salt Lake City office, he’s quick to spin to the computer on a desk-side credenza to find exact answers, rather than offering estimates, for any questions regarding numbers or dates. Requests for additional information are immediately answered with a few clicks on the keyboard and a quick email. Which is to say he’s organized.
And these organizational skills were something he put good use in the construction business after college. He had worked his way up with a commercial general contractor in the area when his father Mike called him “out of the blue” in 2010. A manager had left the trailer dealership Mike had run since 1982, and Dad needed some help.
But Justin initially resisted the idea of becoming “an employee” when he had “a path to ownership” in the contracting business—which prompted his father to offer a succession plan of his own as “part of the discussion.”
Larger issues were in play, however: Prompted to evaluate his options with the contracting opportunity, he and the owner began buyout discussions. The catch: Commercial construction was at a low point two years into the recession, and the cashflow didn’t support the premium price for an ownership stake.
“Once I could see we were never going to meet in the middle on what the business was worth, I decided to move over here,” he said. “It was tough. I took less money, was working on commission selling Ottawa trucks.”
On the other hand, the trucking business wasn’t doing so well either, but Justin takes a positive approach: “I was lucky,” he quips. “I came in at the bottom and everything’s been going up since.”
He soon became director of operations, running the parts and service and rental departments before becoming president in 2013 at age 36. And at that time, he and brother Spencer, now the vice president of sales, began the “still ongoing” process of buying out their father and his longtime business partner, CFO Clair Heslop.
“Spencer and I have a great relationship,” Justin said. “Growing up, we had our moments but we have complementing skillsets. He’s a great salesman, he runs our sales operation. I’m a little bit more of operations organizer and numbers guy. We really get along—but that comes from our dad. ‘Life’s too short. Be fair. Don’t get caught up in the details. Make everybody win.’ Spencer and I have both gotten that attitude.”
Spencer, two years younger than Justin, had put in a long apprenticeship under recently retired industry veteran Bob Mueller, although he originally came on for what was supposed to be just a part-time summer job.
“I had some other aspirations after college,” Spencer says. “But I loved the people, loved the job. At that time, I had no intention of buying the company from my dad. He never pushed it on us. He wanted us to follow our own paths, but in the back of his mind he probably had a good idea of where he wanted it to go.”
Spencer recalls hearing stories from his father’s friends who told of bad experiences working with family. Outside of the usual boyhood rivalries, however, the brothers have always gotten along.
“I think our parents raised us really well,” Spencer says. “We respect each other, and respect each other’s ideas. Even in situations where we have disagreements, we’ll definitely hear each other out. We’re family—I don’t understand these other people that can’t operate like that. It’s so much better to work with some I know I can trust, that I can guarantee will be there and do the right thing.”
Another key to the dealership’s successful transition: While Dad keeps an office in the building, his level of involvement is “almost none.”
“He gets the financials, but we haven’t had any discussion of them at all in the last year,” Justin says. “I would attribute some of our success to my dad’s willingness to step out of the way and let us run the business. We know he’s there if we need him for advice or to bounce an idea off him, and we do that occasionally. He’s seen other dealerships over the years change hands to the next generation, and he’s seen in the dealerships that really took off, the father got out of the way.”
And that means letting that next generation make mistakes, Justin suggests, adding, “we’re not perfect, either.”
Justin’s move, especially, was more a leap of faith, by both father and son, than a formal succession plan.
“But he kind of knew, ‘hey, we’ve got to figure this next-generation thing out,’” Justin says. “We didn’t have any experience with one another, from a professional standpoint. In my mind, to him I was just the screw-off kid he knew from high school; but he’d heard good things about me in the business community. And once he saw me navigate a few years here, and work my way through the ranks, he was comfortable with selling to us. He was comfortable that Spencer and I weren’t going to blow to this thing up.”
In the Deputys case, even though there had not been a step-by-step plan initially, the family was fortunate because they did the most important thing first: They started early. (See the sidebar, “Keys to a successful transition,” for additional transition planning tips.)
And then they communicated.
“Having a transition plan is important. We’ve seen other companies falter quickly when there is no plan,” Spencer says. “The employees see it. Customers see it. Vendors see it. Competitors see it. Having a plan where everyone understands what’s going on is very important.”
The dealership posts more than $100 million in annual revenue, on recent annual sales of about 1,700 new trailers and another 1,000 or so used trailers. Those sales make up about 80% of the revenue pie, with the other 20 percent coming from parts and service and a small rental fleet.
“We’re such a large sales operation that it makes our parts and service operation look small, but we’re running 29 technicians doing about $8 million in parts sales—so those are good-size operations,” Justin is quick to note.
In his five years as president, Justin already has recognized a shift in the way customers want to do business, with many wanting to trade more of their used equipment. “We’ve had to take larger trade packages,” he says. “So we’ve had to wrap our head around how to sell enough used volume to stay on top things. If you’re not selling them quick enough and that inventory piles up, then you have a problem.”
The key for the company has been to master the wholesale side of the market. And that means developing relationships with other dealerships. The company now has a full-time salesperson working only in wholesale, important for a dealership with only a central sales location—in contrast to large, multi-state dealership groups who can spread inventory around their own locations.
The upside is that customers who had been spreading their trades among several dealerships (along with their new purchases) now come only to Utility Trailer Sales of Utah, Justin adds. “We’re happy to do it, but the profit margin on the new trailers sales doesn’t even begin to hedge the risk of taking on the used,” he says, and he notes that the used market softened substantially in 2017.
While his tenure has benefitted from a generally strong trucking market, Justin has used the good times to prepare for the cyclical downturns. A benefit of coming into the business from outside of trailer sales is the ability to evaluate operations with “a fresh set of eyes.” And having managed the parts and service department, he saw the opportunity for growth (and for a revenue stream independent of trailer sales). The company has since doubled parts sales revenue and the number of people in the shop.
Similarly, the Salt Lake City location has benefitted from the nearby presence of reefer fleet giants C.R. England and Central Refrigerated Services. But the Swift acquisition of Central, and the relocation of the operations office to Phoenix, has been a lesson in the risk of having too many eggs in a basket.
“Anything can happen. With as much consolidation as we’ve seen, all bets are off—and that’s a concern for us,” Spencer says.
And that’s real concern for the head of sales.
“One of things that we’ve prided ourselves on is being adaptive,” Spencer agrees. “Trying to pay attention to market and to move quickly.”
Such market uncertainty has prompted an effort to formalize the company culture, and publishing a set of new core values and a new mission statement. Those values are posted in several locations around the facility, and the slogans are reinforced by an employee recognition program based them.
Indeed, the average tenure at the company is more than 10 years, with some employees who have been at the dealership for its entire 35-year history. So the new generation’s attempt “to shake things up” hasn’t always been easy, Justin points out, but the effort is clearly showing results as more people embrace it.
“Let’s try to set ourselves apart, and be hyper-focused on the customer experience, and on the employee experience,” he says. “It really does go hand-in-hand: When you’ve got happy people, you’ve got happy customers.”
Company Controller Clay Rich has been with Utility Trailer Sales of Utah for 20 years, and he recognizes that a cultural shift comes with having a new generation of management.
“I think it’s been a good shift,” he says. “Justin and Spencer have been very good at knowing when to push it and when to sit back. In a transition there’s a tendency for a new owner to have little bit too much control, and to be a micromanage. They’re very good at listening. They’ve been really good at letting people do their job, to make decisions."
He also credits the brothers with doing a very good job of “thinking strategically” and building the company.
“They’re more comfortable with taking risks, and knowing how mange the risks. And the risks they’ve taken have gone a long way to serving our customers,” Rich says, and cites the trade packages as an example. “We might lose a little bit of money, but we’re not going to lose the business.”
Sidebar: Keys to a successful transition
A business advisor—whether your attorney or accountant—is the best source for specific information on succession planning for your company, but the internet also offers a wealth of general information. Below is a set of eight identifiable best practices shared by families who have successfully transitioned a business to the next generation.
- They started their transition planning early.
- They articulated a clear vision to family, employees and key stakeholders.
- They formalized a succession plan as part of a larger business plan.
- They worked to prepare the next generation.
- They communicated the plan to the extended family.
- They anticipated and purposely addressed where potential conflict might arise as a result of executing the plan.
- They built an experienced transition management team.
- They developed a written business succession plan with an implementation timetable.
SOURCE: “Preparing for Family Business Transitions: Achieving the Vision for the Business and Family.” Whitepaper, Abbot Downing, a Wells Fargo business. www.abbotdowning.com