All in the family
Growing up in a tight-knit Italian-American family, Marcus Benedetti knew those ties would one day lead him toward taking over Petaluma-based Clover Stornetta Farms.
“I always did think that after seeing my dad and grandfather talk business around the fireplace,” Benedetti said. “I wanted that relationship with my dad that he had with his father.”
Those dreams came true in 2006, when at the age of 30 Benedetti succeeded his father, Dan, as president of the privately held business founded by his grandfather in 1977. He became CEO in 2010.
But making that dream a reality was a challenging two-year process: Six-figure bills paid to attorneys and estate planners. A structure to transfer equity from the second-generation to the third. Decisions made on shareholders and board appointments, and finding the exact roles where family members could prosper.
“You cross all the realms in personal expectations, health, longevity, business,” said Benedetti, who later quipped, “My only regret is not getting a psych degree.”
The challenge continues today in a consolidated industry where Clover is one of a handful of independent California dairy processors, facing a declining market for milk consumption while deciphering the taste preferences of a finicky millennial generation.
Still, Benedetti remains bullish, noting that Clover’s strength comes from family members who know the core values of the business while also operating as a meritocracy. For example, his cousin, Michael, who serves as director of quality, has undergraduate degrees in neuroscience and philosophy and previously worked for research labs.
Under Benedetti’s leadership, Clover has grown to 240 employees with $160 million in annual sales.
“I look at myself as a temporary steward of something I can pass on to my children,” Benedetti said.
The Benedetti story is one tale of many that Sonoma County family businesses have faced in the difficult task of navigating a transfer in ownership from one generation to the next: dealing with complex tax and estate laws; finding potential areas of revenue that allow the new generation to eventually buy out the preceding one; and handling occasionally volatile family relationships that could potentially sink a deal.
Sonoma County has a particular affinity for family-owned businesses, as the longevity of Friedman’s Home Improvement, G&G Market and Hansel Ford have proved in an increasingly competitive retail marketplace.
The county’s longtime agricultural roots have resulted in a crop of businesses that have survived and prospered under family ownership. For instance, approximately 85 percent of the county’s vineyards are still family owned, according to the Sonoma County Winegrowers. But the role of family businesses in the local economy spreads far beyond the county’s wine industry.
About 85 percent of the county’s nearly 18,000 businesses have fewer than 15 employees, said Ben Stone, executive director of the Sonoma County Economic Development Board.
“We’re a county of entrepreneurs,” Stone said.
The odds, however, are not in favor for a successful transfer of the estimated 5.5 million family-owned businesses to the next generation. According to the Family Business Institute, a North Carolina-based consulting firm, only 30 percent of family businesses survive into their second generation, 12 percent exist into the third generation, and a mere 3 percent of them operate into the fourth generation or beyond.
A strong governance structure with clear lines of responsibilities among family members can make a big difference, said Monika Hudson, director of the Gellert Family Business Resource Center at the University of San Francisco.
But not all are heeding such advice. A survey conducted last year by consulting firm Deloitte found that many family businesses are not prepared for succession of new leadership, nor do they have outside voices that can give important guidance beyond the family structure. Almost half of the 222 respondents said they only review succession plans when a change in management requires it, and 41 percent did not have leadership contingency plans.
“We see a variety of preparedness,” said Simon Inman, an attorney at Carle Mackie Power & Ross who works with family businesses in the wine industry. “Some have plans laid out. Some have no plans. Then there are some who have plans and then things change.”
Twenty-eight percent of the respondents of the Deloitte survey also indicated they have no board of directors.
Kim Stare Wallace, president of Dry Creek Vineyard in Healdsburg, said one key for her winery’s transition was having a board of directors with non-family member representation, even though she and her husband had 20 years of experience in the family business. She took over operations from her father, David Stare, in 2006.