What it takes to maintain business success through multiple generations.
When he was a kid, Joe Brandt wanted to be a doctor. In his younger years, Doug Van Dyke knew he had a talent for sales. As a teenager, Mike Ghilotti came to the realization that his future was in construction. In the end, they all joined “The Bloods.” We’re not talking about the street gang. We’re referring to their family businesses—Brandt Insurance, E.R. Sawyer Jewelers (founder Elbert Ransom Sawyer is pictured above) and Ghilotti Brothers, respectively.
Brandt, Van Dyke and Ghilotti are part of a very unique and rare brotherhood—those who carry the mantle of the family business to the next generation. According to Peter Johnson, director of the Institute for Family Business at University of the Pacific (UOP) in Stockton, only 12 percent of family-owned businesses in the United States survive to the third generation; that survival number drops to 3 percent for the fourth generation and beyond. So far, five generations of Brandts have owned businesses in Healdsburg; Van Dyke is a fourth-generation owner, and third-generation Mike Ghilotti recently welcomed his (fourth-generation) son to the company.
This begs two questions. First, why do so many family businesses fold? Second, what are the secrets to success for those that survive and even thrive?
According to Johnson, 80 percent of businesses in the United States are family-owned or controlled. There are many big names—Ford, Wal-Mart and Hallmark Cards, for example—but by and large, we’re talking about smaller concerns: the little grocery down the street, the dry cleaner in the strip mall or the restaurant around the corner. Almost every business gets its start as a family business. And then the fallout begins.
“From the first generation to the second, only one-third of the businesses will make it,” Johnson says.
Staying informed
For the past 10 years, Johnson and UOP have been assisting family-owned businesses in the North Bay by providing educational opportunities, research services and access to regional and national experts in the family business arena. Members pay an annual fee (currently $1,975 per year) to have access to all the programs, and all family members can participate. Forums and discussion groups deal with a wide variety of issues, from communication and conflict resolution to sibling rivalry, generational succession and everything in between.
According to Johnson, there are many reasons family businesses don’t make it to the next generation. Inter-family issues, lack of communication, failure to plan for the unexpected (death, for example) and a dearth of employment policies in family-owned businesses can make for a very rocky transition.
Johnson fields all types of requests for assistance, but reports that 95 percent of the calls he gets are from women. “It’s the mom, daughter, sister or wife who calls, usually because her husband, son or brother has an issue,” Johnson says. “It’s generally the women who reach out for help, not the men.”
Many of the problems he addresses are generational. Parents who started the business and worked long, hard hours to make it profitable don’t understand when their kids want to work flex-time and go watch their own kids’ Little League games. “The children are saying, ‘Don’t base my performance on face-time in the office. That’s the way the world is now. We wear flexible clothes and we work flexible hours.’ The older generation doesn’t understand that,” Johnson says.
To be successful through multiple generations, it’s important to show each next generation the good, bad and ugly sides of the business. “Bring them on early to build a passion for the business,” Johnson suggests. “Show them how you help customers and enrich lives…and find out for sure if they’re really interested.”
One huge mistake parents make is not providing their children with enough exposure to the business. “Dad has a long day and complains about work—how the vendors drive him crazy, and the like. The kids hear this for 20 years. Then, when he says, ‘Come into the business,’ the kids say, ‘Are you nuts?’ They don’t want a life like that,” Johnson says.
Johnson believes all family businesses need an official employment policy so everyone knows what’s expected of them. “Kids need to know that their parents expect them to earn a college degree or work elsewhere in the industry first, if that’s the case,” he says. “Many kids expect to start where their parents are now, even though they’re only 24 years old and have a degree in anthropology. It’s good to have them work elsewhere first, so they know their real market value [salary] and can bring valuable information and best practices they’ve learned [from their experience],” he explains.
This approach also helps with older, non-family employees who watched the younger generation grow up and don’t understand why, all of a sudden, the youngster is now their boss. “When kids cut their teeth elsewhere, they get more respect when they join the family business. The kids are more successful and the business is more successful, which makes for a smoother transition,” says Johnson.
Planning ahead
Succession planning is critical, but often an afterthought. “No one likes to talk about death, and most families don’t want to pick who’ll run the company next, so they skip succession planning,” Johnson says. “But if the head of the business gets hit by a bus tomorrow, who steps in? If the business goes down the drain, the family wealth goes down the drain. A family must have a plan in place, and everyone needs to know what it is.”
Johnson also stresses the need for estate planning. “You don’t want to have to sell the business to pay estate taxes,” he says. “It doesn’t matter how much you put into prepping the future generation. This thing is dead on arrival if you don’t have estate planning.”
Finally, Johnson says the best way for a family business to survive is to evolve, especially if there are a lot of family members. “For the kids to be interested in it, it has to be stimulating. If it’s an old-fashioned business, it’s not real exciting for the kids. Sometimes you have to reinvent yourself so you stay strong for the next generation,” he says. “After all, the next generation means more mouths to feed. Which means you have to grow the business to survive.”
Change with the times
Brandt Insurance of Healdsburg is a perfect example of reinvention. There has been a Brandt business of some sort or another in Healdsburg since 1880, when Joe Brandt’s great-grandfather, Frederick Otto Brandt, opened a dairy business. Frederick’s son (Joe’s grandfather), Frederick John Brandt, along with his brothers Will and August, then opened the Brandt Brothers Brewery in the early 1900s. When prohibition hit, they sold soda water and ice instead of beer. The business eventually broke up, but Joe’s grandfather rebounded by operating a prune-drying business, employing Joe’s father, Frederick Milton (Milt) Brandt.
“Dad worked in the prune dehydrator until the 1940s, when he went off to war. When he came back, he took up ranching and farming,” Joe Brandt explains. “Then he got polio when he was in his early 30s, which took him away from farming. He spent three months in an iron lung and lost the use of his legs. After that, he went into business with Leland Engelke of Young and Engelke, a construction firm that paved roads, built foundations and operated several earth movers. When Lee left the business in the early 1960s, Dad was persuaded to go into the insurance business.”
In 1962, Milt Brandt General Insurance was born. Milt retired in 1982, selling his business to his sons, John (who’s been called Jack since childhood) and Joe, and the name was eventually changed to Brandt Insurance. Today, it’s officially ISU Insurance Services, The Brandt Agency.
Until his sophomore year in high school, Joe Brandt thought he’d become a doctor. “Then, when I found out what was required for a medical degree and how long it would take to get one, I changed my mind,” he says. “I just wanted to get through school [Santa Rosa Junior College and Sonoma State University], get my degree and work.” In 1973, he joined father Milt, mother Mary and brother Jack, and began to sell insurance.
The firm currently employs 13 people, five of whom are family members, including two fifth-generation Brandts—Jack’s daughter, Amy Brandt Browning, and his son, Todd Frederick Brandt. Joe’s son, Justin, is currently matriculating at Santa Rosa Junior College and has plans to join the firm once he finishes his schooling. His daughter, Rachel, worked at the agency for five years, but has moved on to a successful career in cosmetology.
Brandt believes their secret to success is selective hiring. “You want to have everyone on an equal playing field. You have to be careful not to put yourself in a position where you’re showing favoritism or bias to a relative versus a non-relative. We’re fortunate to have people who like each other and work well together.
“Before we hire anyone, the whole family issue is put on the table—this is what we have, here’s who they are and this is what they do. We ask the big question: ‘Can you work in a family situation?’ It’s important that we hire those who really like people in general and can get close to their coworkers. Because if you get someone in here who doesn’t get along with others, it creates a tough situation that makes every day a challenge,” Brandt says. “I’m not saying we have harmony 100 percent of the time, but I’d say we have it a good 90 percent of the time.”
Brandt and his brother were prepared for the family business by a father who went through The Great Depression. “He always saw the glass as half empty and never celebrated in the end zone. He always looked down the road to when things might not be as good,” says Brandt. “When he started the business, he didn’t have a day off for four years, and he didn’t take a vacation for seven years. My brother and I were trained by working five and six days a week, often for 12 hours a day, with not much time off. We attended corporate training held by insurance companies.”
Today, things are different. According to Brandt, a person can get a license to sell insurance by taking a one-week class. There aren’t many corporate classes and agents have to learn by experience. They’re raising the next generation right, however. “We work with them,” says Joe, referring to Amy, Todd and Justin. “They grew up with [this industry]. They know if someone calls, you need to call them back. In this business, price is pretty much the same. You have to sell people on your service.”
The customer comes first
Service is also first and foremost with Doug Van Dyke, fourth-generation owner of E.R. Sawyer Jewelers, located on Fourth Street in downtown Santa Rosa.
Elbert Ransom Sawyer, founded the jewelry store in 1879 and ran it until he died in 1947. “At that time, women didn’t run businesses, so when Sawyer died, my great-uncle, Orin Magoon, interviewed with Mrs. Sawyer and convinced her to sell him the business,” Van Dyke explains. “My great-uncle then convinced his nephew, who was also my grandfather, Dr. Allan Flood, and his wife, Virginia, to put up the money. That was 1949; Orrin retired in 1963, and the Floods retired in 1978. My grandfather ran his optometry practice in the back of the shop.” According to Van Dyke, it wasn’t unusual for jewelers and optometrists to co-locate businesses in that era, because in those days, eyeglass frames were made of gold.
Van Dyke’s father, Robert, married Kathy Flood in 1961. “Dad was a car parts salesman, which wasn’t good enough for grandpa, so he got my dad fired,” Van Dyke laughs. “This forced dad to work with his father-in-law. As a result, I’ve been involved with the store on and off my entire life. I basically grew up in downtown Santa Rosa, because back then, there was no daycare and I’d go to work with my parents. My first job was polishing silver. We had 1,000 square feet devoted to silver flatware. That’s where I got my work ethic.”
Van Dyke recalls he had no intention of going into the jewelry business. He attended college briefly, then decided to sell auto accessories. “In 1983, my father dragged me to New York City for a jewelry show. I discovered then that the industry afforded a lot of opportunity for advancement, but I still wasn’t interested and decided to take a job with Empire Communications selling Toshiba telecom systems,” he says. “I did well enough that I was going to take a year off and work on my golf game.
“In 1986, Dad wanted to go on vacation, so he asked me to manage the store while he was gone. His only request was that I open the door in the morning and close it at night. He even said I could read a book if I wanted to.”
Van Dyke didn’t read a book. Instead, he sold jewelry. “Sales is sales,” he says. “While dad was gone, I made sales. I fell in love with the jewelry business. And when he got back, he asked if I wanted to go to work for him. I told him there was no way I was going to work for him. A few days later, we went to lunch and he changed the terminology: Did I want to work with him?”
Van Dyke accepted, and his father put him through on-the-job training. “When I came up with an idea, he didn’t automatically say, ‘That won’t work.’ And I was able to take what I had learned from selling telecom equipment and modify my focus from competitive sales to customer service sales.”
E.R. Sawyer’s business is multifaceted. They sell all levels of jewelry and fine Swiss watches, make repairs and restore old jewelry. Service is intertwined and very important, because Van Dyke believes today’s society is living in a non-service world. Those who provide excellent service are those who’ll survive.
“The only asset I truly have is my reputation, and I guard that with all my heart,” he says. “I think it’s in my genetic code.”
Van Dyke views jewelry as the great uniter of all generations. “Grandma’s ring and grandpa’s watch—you don’t throw those away,” Van Dyke says. “Our job is to maintain the generational customer. I remember my dad once selling an engagement ring to a kid who didn’t have the money to pay for it. In exchange, the kid gave him $100 and a cord of firewood each year for the next five years. That kid became a long-time customer.”
The next generation of E.R. Sawyer consists of 8-year-old Andrew Van Dyke and 5-year-old Alivia Van Dyke. They’re not polishing silver flatware just yet, but they’ve handed out candy canes to customers at Christmas.
When asked if he’s preparing the kids for the business, Van Dyke says, “I don’t think you can. You have to teach your kids the values you learned and then let Mother Nature take its course. There has to be a passion; it’s the key. You can’t teach that. I can teach integrity, loyalty and trustworthiness, but I can’t tell them they have to go into the jewelry business. You cannot teach passion. It has to come from within.”
Tradition and legacy
Passion surely fueled Mike Ghilotti, who, along with his brother, Dante, is the third-generation owner of San Rafael’s Ghilotti Bros., one of the North Bay’s most respected contractors.
“I grew up in the business,” Ghilotti says, “but with my parents, it was sort of like the ‘don’t ask, don’t tell’ policy that you have in the armed services. I didn’t feel it was demanded or necessarily expected that I would continue in the business, but I know there was hope and interest on their part.”
The Ghilotti name is synonymous with construction in both Marin and Sonoma counties. Today, four Ghilotti companies stem from the original James Ghilotti Contractor firm that was established by Mike’s grandfather in 1914. James had five sons, and after they joined the company, he changed the name to James Ghilotti and Sons. Eventually, James sold the company to the boys, who then renamed it Ghilotti Bros. Over time, some family members ventured into their own construction businesses. One of the original five brothers founded Maggiora and Ghilotti in San Rafael. Two third-generation cousins started Ghilotti Construction Company, headquartered in Santa Rosa. Mike’s parents, Mario and Eva, remained in charge of Ghilotti Bros., which they sold to Mike and Dante in 2000. Just last year, another third-generation cousin founded Team Ghilotti in Petaluma.
“I don’t know that I really ever wanted to do anything else,” Ghilotti says. “There was such a strong feeling of tradition and legacy. I worked for the company during summers as a teenager, which was a family requirement. I started as a grease monkey—the assistant to the fuel and lube truck driver. Mario and Dino believed in starting family members at the bottom, which I believe is a good strategy.”
A father of four, Ghilotti is continuing this tradition. This past summer, his oldest son, 13-year-old Mario, went to work in the company backyard, helping with small tools and supplies.
Ghilotti believes supervisory style is a major challenge in family-owned businesses, and that communication is critical. “You have a way that you grow up communicating as a family. And then you have to convert that style to the business world. In families, there are behavioral traits and learned behavior with different siblings. When you bring these different relationships into the business world, it can get really challenging,” he says.
“How parents treat one sibling versus another is also critical,” Ghilotti says. “It’s a process, and what you get at the end of the line is a commitment to stay together, work together, fight through things and continue that relationship. It’s not easy, but history and tradition help.”
Mike and Dante have settled on a good working relationship that divides their responsibilities. Mike is president of Ghilotti Bros. and oversees all operations except the equipment division—D&M Equipment—of which Dante is president.
Ghilotti isn’t sure if his children will follow in his footsteps. “Lots of kids feel they’re forced into the family business, or, on the other hand, they see very little of their father when they’re growing up,” he says. “When the time comes to turn the reigns over to the kids, they say they don’t want a lifestyle like that—it’s crazy, just nuts. So you need to expose them slowly and get them comfortable and appreciative of the family business.”
In the end, Ghilotti feels parents should step back and ask some key questions. “Are they qualified? Do they have the aptitude, intelligence and experience?” he asks. “And finally, are they even interested?”
If the chemistry isn’t there, Ghilotti feels the result could be detrimental to the survival of the company.
Ghilotti earned his MBA at Golden Gate University while working during the day (it was the only way he could convince his father the degree was worth it). While there, he did a case study of Coors, one of the nation’s largest family businesses. “The Coors made their kids work in all the different departments of the company. They had to promote their own personal career paths just as if they were trying to get ahead in any other business. They answered to superiors and endured the challenge of survival just to get to the top,” Ghilotti explains. He believes that’s critical to the success of a multigenerational family business.
“There’s an old saying that the first generation starts the business, the second generation builds the business and the third generation spends and squanders the business,” Ghilotti says. “I feel blessed because we’ve been successful. Hopefully, we’re on our way to the fourth generation, which is so unique. If that works out, that’s great. But I have to tell you, in today’s world, with all the exposure to the Internet, drugs and social pressures, if my wife Lisa and I can raise our kids so they’re good people—have good work ethics, treat others with respect and be happy—then I feel we’ve done our job. Whatever happens from that point on is all a bonus!”
Although the odds are against them, Joe Brandt, Doug Van Dyke and Mike Ghilotti are testaments of how the power of “blood”—families ties, tradition and history—can culminate into a legacy of excellence and success. It’s a legacy that, when partnered with their personal values of merit and hard work, is destined to live on in the generations that follow.
