The Passing of the Torch: Business Succession Planning

How and why one mold shop sets seven-year plan in motion to hand over the reins to a younger management team.

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Founded in 1988 as a contract CNC machining source for cavity and core work on plastic molds by David Kuhary, Industrial Mold and Machine (Twinsburg, OH) has thrived for more than three decades and risen above many challenges. Although Kuhary and current President Tom Nahodil have enjoyed their success, they are making plans to retire, but didn’t want to leave the company and its employees in the lurch, so they devised their own business succession plan to leave the company in the hands of an up-and-coming management team.

The company’s 40-plus employees operate a 30,000-square foot facility that runs a constant two-shift operation with the ability to morph into a 24-hour a day operation when required. According to Nahodil, the company “excels in innovative mold and product design support for our customers, making sure projects are managed properly and efficiently to assure needs are successfully met on time.”

 

Devising a Strategy

When Kuhary and Nahodil began to plan their retirement approximately three years ago, they were concerned about putting a new team in place that would continue their tradition of excellence. “The concept of a ‘Management Team’, based on key employees who have demonstrated a sincere effort to grow within the company through job performance and attitude, has allowed these people the opportunity to expand their roles and understand our total business,” Nahodil explains. “The initial group of eight was chosen by David and myself by a ‘gut-feel’ process and our CPA was retained to give classes to educate this group on all aspects running a company—from understanding a financial report to formulating a long-range business plan.

“The initial group has been pared down to seven people who manage individual areas of our operation in engineering, sales, office management and plant operations,” Nahodil continues. “This group has successfully worked on several projects, such as curbing and controlling healthcare costs, aside from their day-to-day duties and in doing so have earned the respect of all of our employees.”

Kuhary’s daughter Wendy Wloszek is set to assume the role of President within the next year. The seven group members have purchased shares of stock and are anxious to start the buyout of current owners. “This group should have an equitable stake in Industrial Mold no later than January 1, 2010 with a finalized plan in place to continue on their growth path,” Nahodil notes. “The range of age of this group is from 31 to 47—which gives them adequate years and energy to make this endeavor worth their efforts.” 

“The Management Team is evolving into an entity that will be responsible for running the day-to-day operations as well as making long-term decisions that will steer the company into the future as a leader in the manufacture of high quality molds and dies,” Wloszek states. “We are in the process of developing the members into their new roles, which requires a bit of empowerment. The members are redefining their purpose within the organization.

“The team has set goals that are complementary to the goals of the current owners, which is beginning to exercise some autonomy,” Wloszek adds. Additionally, the group is working hard to develop plans and make recommendations that, hopefully, will drive the future growth of the company, she notes. “A major factor in the success of the group will be support and encouragement from current leadership to assist in realizing these goals.”

Fortunately, Nahodil is in synch with Wloszek. He plans to assist in the day-to-day operations over the next several years “in any way the new group feels to be constructive without limiting their efforts for growth and success.” He adds that Kuhary will continue in his role of CEO/VP of manufacturing in the short-term, but “continually backing away as he feels appropriate—again allowing the group the latitude to grow and steer the company in the directions they see as secure and profitable.”

 

Making The Transition

The Management Team has been charged with new equipment and software purchases, plant expansion and finding ways to reduce leadtimes—challenges they have tackled with relish. “This team has been instrumental in decisions regarding target sizes and features for the purchase of Industrial Mold’s last two high-speed machining centers—along with the required sundry type items such as tooling,” Nahodil notes. “They also have expanded the EDM department significantly with two additional machines and the development of ‘work cell’ type principles that have allowed us to meet required tool deliveries without exceeding quoted costs.”

Additionally, the team has worked diligently to purchase and implement new software packages for both the engineering and programming departments that Nahodil says have been invaluable in reducing the company’s mold deliveries and improving the quality of its products. The team also is in the process of upgrading Industrial Mold’s mold tryout capabilities through the installation of a second injection molding machine. Each manager has also contributed in updating and using our office/job tracking software to its fullest advantage.

Throughout this transition, the company has relied heavily upon both its corporate attorney and CPA to guide them in acceptable business practices and principles. “We had attended several seminars on employee stock ownership plans (ESOPs) and talked to a variety of financial planners over the last few years about succession planning, but our lawyer and CPA have been instrumental in helping us to think out of the box and develop a plan that allows the people who have worked so hard to let us be successful have the opportunity to achieve the same for themselves,” Nahodil states. “Hopefully, the trends we have seen toward stronger and a more stable business based on expanded services and efficiencies will allow us to continue to grow and develop—allowing this transition process to happen with future generations.”

During this time of change, Nahodil notes that staying competitive and profitable has remained of the utmost importance. “We will continue to make prudent decisions to purchase improved technologies along with expanding further into market areas such as multi-shot molds and LIM technologies that our equipment will allow us to serve effectively and competitively,” Nahodil comments. “We have been—and will continue to be—active in organizations such as the AMBA, which allows us to network with our peers and support American manufacturing.”

 

Staying The Course

Fortunately, Industrial Mold’s current employees and customers share Nahodil and Kuhary’s enthusiasm for the upcoming changing of the guard and the company’s continued success. “There is definitely a secure spot in the industries we serve for American sources that can give the type of value-added services and support that many people are finding don’t exist with the lower prices of foreign tools,” Nahodil states. “We, as an industry, have had a wake-up call over the last several years and understand that we have to go way beyond just providing molds. We have to be competitive in price, exceptional in quality and service, and we have to provide these benefits in very aggressive timeframes. Our Management Team is committed to these principles and knows their futures and success depends on them.”

The duo wants the company to which they have devoted so much time to remain effective—and profitable—in the years to come. “Our goal—as I’m sure many companies our size share—is to keep Industrial Mold a viable, long-term resource for the plastics industry, along with giving the employees that helped us grow and prosper the same opportunities we have enjoyed.”

Relying on their own experience and expertise in the industry coupled with seeking expert legal and business assistance has provided Kuhary and Nahodil with the tools they need to smoothly transition the new management team into place, and serves as a solid example for other shops facing this same challenge.

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