dolution

Who should they seek out for advice?
What should they do now?

Jim Goodwin started Goodwin Sporting Goods in 1947, at the age of 24, after serving in the military during the Second World War. The retail sporting goods store sold camping and fishing supplies.

In 1950, Jim’s younger brother, Paul, invested in the business, joining Jim as a partner, and together they expanded to include athletic equipment and uniforms. The business was owned 70 per cent by Jim and 30 per cent by Paul.

The retail business did well through the 1950s and early 1960s, which allowed the brothers to expand to three locations. However, by the mid-1960s, the business began to struggle as new retail outlets and malls created competitive pressures.

In 1968, Jim and Paul established a new direct sales division in order to sell sports uniforms to local schools and colleges. Jim convinced his son Jim Jr., then 23 years old, to join the company as a sales representative straight out of college and to work for his uncle, Paul, to help establish the new division.

Jim Jr. proved to be a go-getter who helped drive revenues from the new direct sales model far beyond expectations. By early 1970, the direct school sales revenues surpassed the faltering retail store business.

In 1971, at the age of 48, Jim Sr. suffered a series of health problems, and he abruptly left the business to recuperate, leaving his brother Paul in charge. Less than two months later, Jim Sr. died. The sudden death of the company founder created stress within the family and the business. There was no clear succession plan, and Jim Sr.’s widow, Charlene, became the majority shareholder of the company. Charlene was not prepared to run the business, and she didn’t know what to do.

Paul approached Charlene with a proposal to buy out her share of the business. However, Jim Jr. convinced his mother that Paul was not offering her a fair price, given the success of the new direct sales division. Paul tried to explain to the grieving widow that the recent financial success was the result of his management of the direct sales division and that he was offering her a fair price for three underperforming retail locations.

A dispute ensued over the value of the company. After much anguish, grief and expense, Jim Jr., with the financial backing of his mother, acquired Paul’s share of the business, and at 26 years of age, Jim Jr. assumed the role of president of Goodwin Sporting Goods; however, the dispute caused a permanent rift in the family.

Through the 1970s and 1980s, Jim Jr. grew the direct sales line to become a large, regional, school athletic equipment and uniform distributor. Then, in 1994, his son Peter joined, fresh out of college and with a degree in marketing. Peter was 24 years old when he began working in the family business.

In the mid-1990s and early 2000s, the company remained a regional leader in direct sales despite pressures from Internet-based competitors that eroded the profitability of the company.

Peter pushed for his father to invest more in the business, streamline, expand nationally and become a modern apparel company in order to increase revenue and profitability. Peter was concerned that the company was missing opportunities and, as he always said, “You’re either moving forward or falling behind.” He constantly vocalized his desire to become the president and grow the company to the next level. Peter “wanted his turn at bat,” and this dynamic caused tension between Peter, his father, and other members of the family.

Although Jim Jr. recognized Peter’s viewpoint, he was unable to invest any significant capital in the business. Jim Jr. and his wife Pam lived well, but personal cash flow was always an issue, given the heavy financial demands of the family. Although the business was successful, they saved little and had developed an unstated assumption that the business would support them in their retirement.

In the early months of 2010, at age 66, Jim Jr. began experiencing serious health issues. Pam wanted him to retire or sell the business. Discussions surrounding retirement, succession or selling the business always resulted in a stressful situation, and conversations on these topics were avoided.

Given Jim Jr.’s family medical history, he was seriously considering retiring, but he was not sure how to finance it. Furthermore, both Jim Jr. and Pam were concerned about the financial well-being of their two other children, Mary and, in particular, Fred.

Mary was 43 and married to a high-school teacher. The family business helped provide her family with a lifestyle that was well beyond their means, and Pam wanted this support to continue.

The youngest child was Fred, who, at age 38, had serious long-term medical issues that prevented him from working. Both Jim Jr. and Pam felt they would need to provide for Fred financially for the rest of his life.

Peter, age 40 years old, had always been more than adequately compensated to accommodate the financial gifts given to Mary and the heavy financial support for Fred. Pam thought it was only fair to treat all the children equally.

In passing, Jim Jr. mentioned to the family’s banker that he would like to retire but that he and Pam needed the business to fund their retirement. He also mentioned that they wanted to provide for their children equally, yet they knew their son Fred’s needs were greater than those of their other two adult children, Mary and Peter. Jim Jr. and Pam also had concerns with Peter’s management abilities and wondered what he would think if they sold the business. After all, the family business was the only place Peter had ever worked, and Jim Jr. and Pam knew he expected to inherit the business and become president one day soon.

Jim Jr. And Pam didn’t know how they would be able to retire and, at the same time, satisfy the competing demands of the family. Their banker asked them whether they had an estate plan. They looked at each other, and then Jim replied, “No. What should we do?”