Family businesses play a major role in the economy. By some estimates, they produce about 60 percent of the U.S. gross domestic product and account for that much of the workforce.
But little is known about them.
A search that included talking with sources in the federal government, the state government, colleges and institutes did not yield figures on how many family businesses there are and how big they are.
That suggests that all-encompassing statistics on family businesses are nonexistent.
"I don't know anyone who is responsible for going out and collecting that data," said Greg Hamilton, a senior research economist with the Institute for Economic Advancement at the University of Arkansas at Little Rock. "Family business is not a legal entity."
The closest Hamilton could get is saying that there were more than 200,000 sole proprietorships in Arkansas in 2009, according to the Internal Revenue Service figures provided by the institute.
But sole ownership is not the defining aspect of what is commonly called a family business.
Control of enough shares -- though not all or even a majority -- is essential, along with a succession plan, moving the company to the second and possibly third generation and beyond.
The Harvard Business Review included some large public corporations, such as Wal-Mart, in the family category -- hence the eye-popping percentage of the U.S. economy. The justification for categorizing such corporations as family is because of the strong and lasting influence of the founders, in the case of the Bentonville-based retailer, founder Sam Walton, whose descendants continue to exert a heavy influence on the company.
Megabusinesses aside, coming up with a plan of succession is difficult enough to cause many firms to procrastinate.
Nearly 40 percent of family businesses in the United States surveyed in 2012 didn't have a plan for passing on the enterprise to the next generation, or "at best a loose one," according to auditing firm PricewaterhouseCoopers.
Steve Landers and sons have made a transition to family-business status as measured by the common definition.
The founder's youngest son, Scott, 30, recently took the reins of two of the most successful auto dealerships in the state.
Last month, it was announced that the two dealerships in Little Rock -- Steve Landers Toyota and Steve Landers Chrysler Dodge Jeep Ram, which employ 400 to 500 between them -- would be merged with the Luther Auto Group of Minneapolis to form LL Ark Holding Co. LLC.
A news release issued by Scott Landers said his father had sold his share to Luther. Scott Landers -- who bought out his brother, Steve Landers, 38, a few years ago -- retains a "major" stake, though not a majority.
Yet Scott Landers will have "100 percent operational control" of the dealerships, his father said, adding that that was a key part of the deal. It was also a good time to negotiate the deal with Luther because Landers was operating from a position of strength, the elder Landers said.
Steve Landers Jr. appears to be heading out on his own. He owns two lots, Landers Auto Sales in Benton, which specializes in hard-to-find and high-end vehicles, and iFinance on South University Avenue. He also owns a pawnshop, iPawn, and plans to open more.
In recent years, Steve Landers and his sons have turned to zany, boys-versus-the-old man television commercials.
The commercials even led to a proposal by a Texas producer -- ultimately vetoed by the family --for a reality TV series, said Christy Vandergriff, creative director for Little Rock-based GWL Advertising
The comic ads will continue, says the founder, and the Landers show will go on, one way or another.
Low-profile transition
Tom and J.T. Ferstl, father and son, are real estate appraisers and as low-profile as the Landers are high-profile.
They have quietly navigated the generational passage.
J.T. Ferstl said he and his father decided to form a Subchapter S corporation, which many family businesses turn to and which allows them to avoid federal income taxes on business income, as well as other tax advantages.
His father "had been running it as a sole proprietorship." The company actually has only four employees, but it has 14 independent contractors, J.T. Ferstl said.
And the key for perpetuation of the business is to not become pigeonholed, said J.T. Ferstl, 36, who now leads the company.
"Diversity is going to be the key. We do a lot of work for lenders, but we also do a lot of work for attorneys, accountants for estates and tax returns or whatever."
As the younger Ferstl started taking on a larger and larger role, it became clear that "technology was one of our biggest hurdles. My dad still uses a typewriter."
Which is not to say that the founder, now 75, is without his credentials to go with his experience, with a bachelor's degree in business and law degree from the University of Arkansas at Fayetteville and specialized training.
That set the example for J.T. Ferstl, who holds a business degree from the Fayetteville campus and a law degree from UALR.
It also set the tone for the appraisers that the company hires, who tend to have advanced degrees, J.T. Ferstl said.
Father to son
Richard Grace founded Grace Manufacturing near Detroit in 1966 and moved his operation to Russellville about 10 years later to take advantage of the warmer climes of Arkansas and continue making woodworking tools.
As his business grew, so did his family. He wound up with five children.
He liked being his own boss. As he approached retirement (he's now 73) and as he wanted to keep the business in the family, he had to make a decision.
Seemingly, it was a simple one. He transferred ownership to his son, Chris Grace, who was deeply involved the the business and, like his father, was an engineer. Chris Grace, now 43, has four sisters, two of whom are in the family business, with the third being a homemaker with four children, and the fourth a physician.
"He decided that he was going to transfer all of the stock to me," Chris Grace said. "My father felt that one person should be in charge." During a five-year transition ending in 2013, grants and trusts were set up to distribute the wealth to the other siblings, he said.
The founder was making wood rasps, and someone found that they made dandy cheese graters and citrus zesters. Things were never the same. Now the company makes more than 100 products for the kitchen.
The kitchen tools account for about 65 percent of all sales, Chris Grace said. A sister, Maria Grace, 46, is online sales manager for the company's Russellville-based Microplane products division, the family's surprise global hit.
Throw in medical cutting tools, such as a saw for knee operations, and a bed-making division, and annual sales range from $27 million to $29 million, he said.
The company has about 300 employees -- 150 in Russellville, 120 in Mexico, where the tools are assembled, 15 to 20 in McAllen, Texas, and 15 in Hamburg, Germany.
Being a family business, rather than, say, a public company with numerous shareholders, means being able to "look farther out. We can make some investments that are not going to pay out for several years," Chris Grace said.
With the authority in his hands, the company can move quickly when opportunity presents itself. He saw a chance to diversify and bought a bed-making firm in McAllen that was about to close up shop, he said. It's been a success, he says. The division makes hand-carved beds for Neiman-Marcus. He involved his youngest sister, Maureen, 34, an interior designer who had put her career on hold to have two children.
Family members are on the board, and "when I want to move in a certain direction, I don't have wait for a lot of authorization from a lot of people."
On the downside, "Grace Manufacturing is reluctant to take on heavy debt," which can put the company at a disadvantage with competitors that are more inclined to become leveraged, especially in an era of cheap capital, he said.
Yet, the PricewaterhouseCoopers survey states that the longer view of family businesses "gives them room to experiment, take risks, make mistakes and refine their approach."
As Eric Andrew, a researcher for PricewaterhouseCoopers, puts it: "Family businesses think in terms of generation to generation -- not quarter by quarter."
Chris Grace agrees: "We're going to complete 50 years two years from now, and we would like very much to be in business a hundred years. I have two boys, 8 and 5, and I'm hoping they like manufacturing."
SundayMonday Business on 06/29/2014