All in the Family: Successful Succession From One Generation to the Next

August 17, 2006

For many independent bookstore owners the idea of retiring and having the time to read the books stacked at their bedsides might seem the stuff of dreams, but, inevitably, there comes a time when store owners have to make a decision regarding the future of their businesses. For some, this means selling the business either to an employee or to an outside party; for others, this means handing the business off to their children.

According to a recent article in BusinessWeek, "within the decade, 40 percent of all family businesses will hand control and assets to the next generation." BusinessWeek also reported that many of these families are ill-prepared in regard to sucession planning and that most family-run businesses have made "few or no provisions for turning the business over to the next generation."

During the last year or so, several prominent independent bookstore owners have announced plans to retire in the near future and to gradually turn over their stores to their children. Fortunately, these future former-bookstore owners -- Neal Coonerty of Bookshop Santa Cruz in California; Ed Morrow of Northshire Bookstore in Manchester Center, Vermont; and Michael Powell of Powell's Books in Portland, Oregon -- came to the table with a plan.

BTW recently had the opportunity to talk with the owners and their children about the challenges of transition. For each family, the process of succession is slightly different, but the issues facing the new generation of booksellers are very much the same -- especially remaining competitive and growing in an industry that offers small margins. All expressed a determination to, as Chris Morrow of Northshire Bookstore in Manchester Center, Vermont, put it, "evolve the business to thrive in the 21st century." And, like their parents, the new generation comes to the job with a passion and love of good books and a sincere desire to ensure a vibrant future for independent bookselling.

The Start of Something New

When Bookshop Santa Cruz's Neal Coonerty, a bookseller for 35 years, was asked when he began planning to turn over Bookshop Santa Cruz to his 30-year-old daughter, Casey Coonerty Protti, he joked, "I've been planning succession for 30 years now."

While there is often truth in humor, the bottom line is that succession from one generation to the next is little more that a pipe dream until the day the next generation becomes amenable to the idea. In many cases, that's simply a waiting game.

"For a long time -- when I was a teenager -- I thought that bookselling was dorky," Casey Coonerty Protti admitted to BTW. But, as she grew older, her perception of the bookselling industry slowly evolved. "I started going to bookstores, and I realized it was my calling. I love books and being at the center of a community," she explained. With an MBA from the Kellogg School of Management at Northwestern University and a Masters in Public Administration from the Kennedy School at Harvard University, she also developed an appreciation for the entrepreneurial aspects of bookselling.

For his part, Neal Coonerty stressed that he would never have forced either of his two children into the bookselling business, but, he noted, "I knew after Casey graduated from business school that she would take over the store."

Similarly, Ed Morrow's son Chris acknowledged that bookselling wasn't his first career choice. "I think my parents always had aspirations [that I'd take over the business]. I wasn't convinced at the time." But after spending a year in the Peace Corps and receiving a Masters Degree in Environmental Policy from the University of Michigan, in 1998, he had a yearning to go back home. "Being in Vermont interested me, the book business started to interest me.... I began seeing [bookselling] as an attractive option."

Ed Morrow told BTW that his two sons "grew up in the business and, at some point around junior high school, both boys said, 'We're never going to be in retail -- especially bookselling!'"

But, he added, "It's a seductive business. After they saw a bit of life, it had a lot of attraction. Both my sons came back and said how nice it is in Vermont, so we had that working." Andy, the Morrow's older son, moved into the antiquarian book field, while Chris, who is now 39, worked toward taking over Northshire.

For her part, Powell's Books' Emily Powell, Michael Powell's 27-year-old daughter, said the bookselling business was "something I wanted to explore -- I realized there was a chance I wouldn't like it. My father was trying not to bank on it!"

Emily, who has a degree in urban planning and design from Haverford College in Pennsylvania, said that what made her want to get into bookselling was "growing up in the business, a love for books, and the respect and admiration for what [Powell's Books] had become to the community and online. To be involved in the book business has a very powerful hold."

Michael Powell told BTW, "We had always talked about whether Emily had an interest in the store -- she always kept the door open, but she didn't know [at first] and wanted to try other things." However, about two years ago, Emily asked her father if she could start learning the business, and, he said, "She had a fair amount of enthusiasm."

Making the Transition

At Powell's, once Michael and Emily Powell agreed that Emily would begin preparing to take over management of the business, Michael decided to bring in a consultant to help with the succession plan. "We worked with Mark Green [director of Oregon State University's Austin Family Business Program], a coach in family succession issues," Michael said. "We needed to work out a timeline and positions for Emily [so she could learn all aspects of the business]. It was a collaborative process with the excellent help of this group.... Using Austin was good, because instead of Ma and Pa, you have an authoritative figure with credibility."

Michael said that they needed to decide on a good "point of entry" for his daughter. "We began with the Internet and marketing side.... Now she's in the used book world. Emily is very smart and grounded. Next will be [the] in-store experience."

"I began in an entry level position [in the online division], learning from the ground up," Emily said. "I started in the Internet office where I did a variety of jobs ... [such as] answering e-mails. I spent a lot of time interacting with people who interact with Powell's. [Customers' e-mails] could be about any aspect of the website.... I also did data entry."

Emily was also involved in business development, "looking to other partnerships and reaching out to other businesses online," and, on May 1, she became the director of used books. As with the Internet, used books are a key component of Powell's. "I needed to understand the guts," she noted. "I needed to understand the used book business, the life cycle of the used book. I was the right person for the job.... I was new and not ingrained in the practices, and I knew the company well."

While Emily has known for a few years now that she was working toward taking over the management of Powell's, it wasn't until this past spring that the store officially announced plans for the transition, which will take place over several years.

For Neal Coonerty and Casey Coonerty Protti of Bookshop Santa Cruz, the succession process went a little faster than expected. The original plan, which began developing five years before, called for Casey to ease into management of the store beginning in June 2006. However, in March, Neal decided to run for a seat on the Santa Cruz County Board of Supervisors -- an unexpected development that required his full-time attention. At the time, Casey was working as a consultant developing educational programming for the American Booksellers Association at its headquarters in Tarrytown, New York. When Neal decided to run, however, she returned to California in April and took over the store immediately.

As Neal campaigned full-time, Casey had a very experienced management team at Bookshop Santa Cruz to fall back on. "We have had a management team here since before I was born, and [my father] was around for questions," she explained. When she assumed management, Casey met with staff and outlined the things she wanted to work on. "Their institutional knowledge has been helpful," she added.

Chris Morrow of Northshire Bookstore explained that, as a child of a bookstore owner, attempting to pinpoint when the succession process began is difficult. "It depends on how you define it," he said, noting that he'd been involved in the bookstore since the age of nine, "in different ways." He became a full-time employee in 1998 to help with the store's expansion and one thing led to another.

Ed Morrow concurred, and he noted that, eventually, he and his wife, Barbara, who is co-owner of the store, "had to adjust to letting go of our baby. We'd seen other family transitions that weren't pretty, [so] we spent time getting used to the idea."

Ed noted that after two years of attending BookExpo America with Chris, their first step in letting go was deciding to stay home the following year. "We thought, if he's going to learn the ropes, he had to start interacting [without us there].... Two years ago, we discussed a more definitive date to take over." And they decided on this year, the store's 30th anniversary.

Ultimately, however, the succession plan had to be written out. "The investors wanted it planned, and it could not have worked any better," Ed said.

Though he officially took the helm this year, unofficially, "it was a few years ago when I took over the day-to-day operations," Chris said, explaining that when the store's general manager left in 2000, his role "kind of evolved, and I eased into it." Chris apprenticed with his parents: "I was spending a lot of time with Dad in operations, finances, and [on the] strategic planning side, though much of my efforts from 2000 to 2003 focused on our expansion. It turned into a behemoth of a project."

The Challenges of Succession

The challenges of making a successful transition from one generation to the next are many. Whether it's relinquishing control, ensuring profitability, managing staff, or simply balancing the books, there are always hurdles to overcome.

For Chris Morrow, the key challenge is beating the competition. He explained that the bookselling business is a mature industry and online retail has taken its toll. So his aim is to educate customers about the importance of buying locally.

"Our main competition is the Internet," he said. "In a rural area, people like the convenience; so, we started a Local First campaign, which we're getting going in the next few months. I think there's a significant opportunity to help raise the awareness about the value of locally owned business. People are stressed for time and they do what is convenient. There is a broader parameter of decision-making. It's getting consumers to think local first, and it's a big endeavor to change consumer buying habits."

As for operational challenges, Chris acknowledged that the accounting is a little dry and "therefore, more difficult to learn. I work my way through departments and ask ... questions. Human resources are also difficult as well, dealing with [staff] on various issues. People are the most complex element of the equation." Northshire employs 45 people, including part-time employees.

For Ed Morrow, the challenge of succession is twofold. "Number one, it's very difficult letting go ... and, two, to develop trust that someone else can handle it competently and take it to the next level." However, he's convinced that Chris is the right person for the job. "I've watched Chris handle and grow into the job, and he's done it at least as competently as I did, if not more so, and that's a great comfort. There are no doubts, I feel really blessed."

Early in the succession process, one big challenge, said Emily Powell, was grabbing the attention of her very busy father. "In the first year, I had to arm wrestle my father to get time on his calendar," she said.

In addition, though she and her father have a very strong relationship, a family business by its very nature is emotional. "Having family involved means everyone has a lot at stake at the table," she said. "This is what we want to do. There's always a box of Kleenex [at meetings]. But it's all done very well."

Now, the biggest challenge for Emily is "trying not to become too overwhelmed. We have 500 employees, and there are lots of ... complex issues." Many Powell's employees have 20 to 30 years experience, including senior managers, "and they're watching out for me. I'm relying on senior management.... We have 100,000 square feet. It's a big job."

Bookshop Santa Cruz's Casey Coonerty Protti echoed both Emily Powell and Chris Morrow when she noted that staff issues are among the most daunting challenges she faces. Fortunately, Casey explained, the management team and staff are "open to the business model changing, but there is some justified worry about how their job would change. I am trying to be inclusive.... I believe in the backbone of the business -- I didn't come back to sell trinkets. We're still going to be a bookstore. We are unique, and I want to keep it that way."

As for the nuts-and-bolts of running a bookstore, Casey said that cash flow management presents a challenge. "I hired someone to manage the business office to get us more up to date. I feel good about the business office. We're moving in the right direction."

Among the other challenges cited by Casey were small profit margins and rising rent. "We're located in a main retail area. The rent is okay, at least according to the ABACUS study, but there are increases every year, and we're in negotiations with the landlord. We also want to increase the areas that are working, improve merchandising," she explained.

One thing that Casey didn't have to worry about was how her father felt about leaving the business. "I'm good at letting go," Neal Coonerty said. "It helped that I was not hanging around her shoulder.... Removing me from the scene has been good," and, he added, "We will go over financials on a monthly basis for a number of years." He predicts that they will start transfer of ownership in a year or two.

The Outlook

As Chris Morrow, Emily Powell, and Casey Coonerty Protti take the helms of their respective bookstores and scan the horizon, it is plain to see that there is anything but smooth sailing ahead for booksellers. Neal Coonerty, for one, told BTW that he had mixed feelings about his daughter taking over the store. "Bookselling is a tough business," he said. "There's not a lot of growth and there are a lot of challenges."

But for this new generation, perhaps it's those very challenges -- which are inherent in almost every entrepreneurial operation -- that make their new roles so enticing.

Emily Powell said that, thus far, she's having fun. "This is a tremendous opportunity," she said. "Every day is devoted to learning, to doing [business] in new and innovative ways, and figuring out how to make ourselves better. It's a really cool job."

Said Casey Coonerty Protti, "I want to bring new ideas. A lot of what booksellers are doing is not working. I don't know what will succeed. There's a risk in trying new things, and we're just trying to figure out what that is."

"Overall, I feel very excited and ... honored," Chris Morrow said. "I could get paid more in a different line of work, but this is my family's business and heritage. It's something I feel strongly about. We're looking to constantly evolve the business to thrive in the 21st century and to break out of the habitual mode of operating." --David Grogan

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