Colin: Act now to solve family conflict

My grandfather Sam Colin came to the US from Poland aged 10 and founded Yonkers Window Cleaning Inc in 1913. The business started as a small window cleaning shop with five employees serving retail stores, homes, and commercial buildings.

My dad George joined the business in 1945 after the war. He added floor waxing and a janitor service beyond the city of Yonkers and is credited with establishing our caring culture and expanding our company through revenues of $1 million by the mid-1960s. He was truly a gem of a man who gave much back to the community and our family.

My brother joined in 1963 after graduating from university but I did not complete college and was drafted during the Vietnam War. I had severe attention deficit hyperactive disorder so school was a problem for me. Nevertheless, I felt I could learn the ropes of the family business quickly and make an impact.

I joined in 1967 as a trainee. I had always wanted to work with my dad and did so every summer and winter holidays as a youngster. I liked people and saw the company as a people intensive business. I always enjoyed being with my family.

While my brother was suited to bigger picture thinking – he was able to structure our business; for example, he computerised the company – I was the rainmaker. I developed a strong team of people and focused on revenue generation. We grew to become a regional player and an admired company. I introduced branding and promoted our ultra high customer service culture. Ultimately, the janitorial and mechanical company Colin Service Inc grew into a $90 million concern. A non-family executive/partner ran an equal-sized guard service company called Effective Security Inc.

In 1998 the combined businesses had 10,000 employees, operated in eight states with 22 offices and achieved revenues approaching $200 million. Unfortunately, this was just the start of our problems.

My skill set was terrific for building a small business but once the family firm became a much larger organisation it became difficult for me to manage. In particular, I didn't place enough emphasis on reengineering business technology and finance. Worse, we were faced with an industry that had turned from an added value service with pricing power into a commodity vendor.

However, it wasn't just external factors that preyed on our minds. The family legacy mentality put pressure on the business. Arguments over costs and entitlements decreased our ability to reinvest in the business. Critically, we lacked the ability to take the necessary action that could enhance the business and protect the family. In the end we did nothing and harmed both the business and the family in the long run.

The troubles began in 1980 when my brother decided he wanted a lifestyle change. By this time he had no day-to-day operating responsibilities and wanted to run his own business. In our shareholders agreement we agreed to equal compensation and ownership, with the promise that he would relocate to California and build a profitable business in a different industry with higher margins. At the time, the situation seemed like a win-win for both parties - I liked the idea of him leaving so he could be happier and build an asset in a new field for us. More space was a good thing for all of us, we were ready to expand and I was ready to manage the core business with a non-family executive/partner.

As part of the deal I became president of the company and had the right to terminate my brother's involvement - I never did because, ultimately, he's my brother.

Our buy-out agreement was based on revenue calculations rather than EBITDA. The formula seemed perfect at the time and met several back-of-the-envelope measurements; however, as our customers consolidated leaving us with less pricing power and our employees became more unionised our margins decreased and the formula no longer worked.

His departure added clarity and accountability to the business, which experienced a period of great growth. Unfortunately, the business in California, which was environmentally focused on cleaning oil and gas leaks where underground tanks existed, failed after several years. Although it had all the ingredients of a higher margin business with a big upside, we reached a point where we decided to sell it. In addition, my brother and his wife felt he was too detached from the core business and considered returning to the mother ship very important.

It was at this time that I started to feel resentful. My brother and I both drew the same money, but the value of his stock in the business I looked after had increased dramatically, while he exposed us to risk and came back empty handed. What's more, when he returned he expected to fit in as if he never left. Worse, he had an attitude of entitlement. I am sure he was very unhappy to return under these conditions, we all had a dream that this would work, but ultimately he had failed.

It was a very difficult period for everyone, but particularly for me. One of the reasons I agreed let him go and start a new life and business in California was a desire to see him as happy as I was. He was my older brother, he had had a great education, was nice to me when I started and we worked together mopping floors, shovelling snow, and cleaning toilets. We were building something together. We weren't necessarily friends because we were so different, but we were brothers who had respect for each other.

Consequently, I agreed to make another investment and let my brother try his hand in another company. This one closed within a year.

While the business began to struggle as problems with unions began to escalate and our competitors grew into more formidable outfits, we decided that I would step aside and hire a new president to try and pull the company together. Unfortunately, my brother did not get on with him and there were many conflicts. I needed to back the new president to give him the support he was entitled to, but this only served to bring things between my brother and I to a head.

When lawyers got involved their solution was designed to reduce my personal exposure.

Over the years I had talked to my brother about resetting the valuation of our buyout agreement – my preferred method was an EBITDA – but he refused to make any concessions thereby holding me hostage. His refusal added to my resentment and kept him tenured.

He attempted to force me to buy him out by "putting" his shares using the buy-sell formula that he refused to adjust. He knew the shares were overvalued and kept that as his checkmate so I couldn't buy his shares.

Obviously this was not acceptable to me and after wasting $1 million dollars in legal expenses we decided to try another tack – mediation. We had a log-jam and could not see any alternative approaches except continued legal costs, which caused a huge distraction in my life. I needed to get the problem resolved so was open to anything.

I didn't know what to expect but I was eager to "air" the issues with a hope that my brother would get to a place that would enable us to go our own ways. The process unexpectedly became my day in court. We dealt with valuation issues in front of seven strangers. They in a way became the jury and became a great physiological source of strength. Finally reason would be the judge.

My brother had logic against him and there was a noticeable shift to my position by the seven outsiders. They appeared to be watching a tennis game, waiting for our individual retorts back and forth. It became a court of logic that solidly confirmed my position and forced him off his as everyone thought his position was more psychologically motivated against me.

Finally, we decided to sell the business that had been in the family for 91 years and four generations of family management. I still feel that we could have worked through the business issues, but the family issues were the most discouraging aspect of the whole saga. After 37 years of working hard to make a success of the business I was tired of it and willing to sell. The business was valuable and we could all be comfortable.

Today, my wife Laura and I help other families who are undergoing problems similar to those that we experienced. We are co-authors of Family, Inc, a book designed to assist business-owning families with conflict and mediation. My brother and I have forgiven each other. We speak several times a month usually relating to our 92-year-old mom. We own a building together, and we are brothers in the end, but we will never forget what happened between us. 

Q&A

What's the biggest lesson you have learned?

You must act! You need to stop being embarrassed about your situation and get help from a family business expert. Unresolved family issues will destroy the golden goose and the family may be forever changed. 

What is your biggest regret?

Letting a frustrating relationship turn into anger.

What do you feel was your biggest achievement?

Taking a mom and pop sized company and building it into a regional powerhouse of great value with a great team of professionals.

Has your experience changed your opinion of family businesses?

There is nothing better than a well-run family business. The family bonds, the sense of mission and the feeling of trust are very special. The feeling of sharing and winning for the family is very powerful. However, when conflicts go unresolved and business decisions become almost exclusively based on a family first orientation then the business can be put in danger. Someone must represent the business. 

What advice would you give families who are currently experiencing conflict?

Seek help! One way is to get involved at a college or university that has a family business centre. We have been to several programmes and have been put on the advisory board of Stetson University in Deland Florida. Such places are very rich resources for families. Also, I recommend you read the various family business magazines/websites and develop a relationship with a family business specialist – someone with a deep psychological and business background who is not your current lawyer or accountant.

What would you say to those family businesses that think conflict is what happens "to other people"?

Wake up! Conflict is very common. Families don't like to discuss these issues as they may be a reflection on their ability to manage their family. I have been fortunate to speak to many family business owners and it always amazes me how I hear the same stories, see it in their eyes, and feel their pain. As people we are imperfect and our goal must be to try to avoid problems. 

The effect on our family

"My dad was very upset and it was extremely difficult for him. I wanted to please him as I regarded him as a friend. He gave me a big chance and I paid him back handsomely. He just wanted peace between my brother and I. My mom wasn't really involved and just wanted everyone over for celebrations such as thanksgiving and holidays, but these got harder and harder to enjoy as last minute no-shows were standard. My kids and wife knew of the tension and although they understood the situation they were embarrassed by the outcome. It was uncomfortable for them and they got drawn into the conflict through hearing dinner conversations and witnessing our distress," says Colin.