Purchasing a Family Business: Rachel Friddle-Johnson, CPO, and Rebecca Friddle
May 2015 Issue
Ten years ago, if you had asked Rachel Friddle-Johnson, CPO, 32, and Rebecca Friddle, 29, if they ever imagined running the family business, Friddle's Orthopedic Appliances, Honea Path, South Carolina, they would have answered with a resounding no. At that time, Rachel was in the process of completing her O&P education at Northwestern University Prosthetics-Orthotics Center, which she attended after receiving a bachelor's degree in integrative health science from Stetson University, and Rebecca was finishing her sophomore year at Tusculum College, where she was an English major. Indeed, Rachel was pursuing the family profession by becoming a fourth-generation O&P practitioner-but she intended to, and eventually did, go into clinical care. Rebecca, on the other hand, was initially leaning toward a career in journalism and had entertained the idea of working for a magazine or publishing company.
Yet this past January, the sisters purchased Friddle's from their father, Frank Friddle Jr., CO; they are the third generation to own the business. Rachel is president and CEO, and Rebecca is vice president. That they eventually joined the company is not necessarily a surprise, however, given their family history. The sisters grew up in the family business, which was established by their grandfather, Frank Friddle Sr., in 1967.
"Even as children, we were always walking through the office," Rebecca says. "I remember seeing all the guys working on big plaster molds. There are always memories of the office for as far back as I think we both can remember." Rachel adds that by age 12 or 13, they began working part-time for their father, filing papers, getting the mail, and doing other odds and ends.
Transferring the Reins
Purchasing and ensuring the success of a family business is no easy feat. The Family Firm Institute reports that according to various statistics, about 30 percent of U.S. family-owned businesses survive through the second generation and about 13 percent into the third. Succession issues are one of the major hurdles to overcome: Does the younger generation want to work for the family business? Are they capable of running it? Can the older generation loosen the reins? How is a purchase price determined?
Many family business consultants and founders stress that continued success is often predicated on subsequent generations learning the family business from the ground up prior to taking the reins, or at least getting initial work experience outside of the company. "Good genes may not be enough to ensure ability to run the business when the current leader steps down," writes Barbara Weltman, in J.K. Lasser's Finance & Tax for Your Family Business. "It takes something more-education, skills, experience, and maturity." Weltman goes on to write that assuming a leadership role in a family business should not be a birthright, but an opportunity based on that individual's readiness to assume authority and responsibility.
Rachel and Rebecca each took a different and gradual path to their new roles as business owners. Rebecca joined the company in May 2007. "I had a lot of fun helping out in high school and then when I would come home for break from college I would help out more," she says. "I really enjoyed it, and it was something I felt that I was good at and could excel in and make things work a little smoother...." She graduated college on a Saturday, and started working full-time the following Monday, she says. "I started in the shipping and receiving department-just kind of getting my hands on everything going out the door and coming in the door. I like to work with the machines, drive the forklift, help with our plastic sheeting-anything to do with the product that is hands-on...."
Rachel, on the other hand, joined the company in 2010, after working in a clinical practice near Nashville. "When I was in private practice, I told my employer at the time, you don't have to worry because I don't want to work for the family business," she recalls. But after she and her husband decided to have a baby, the desire to be close to family took over. They moved to Honea Path, where she assumed the position of director of central fabrication and product development, "to help bring in new technology or find additional niche areas for us to operate in," she says.
"I'd say 90 to 95 percent of everything we do here one of us can do it," adds Rebecca. "Rachel can do some fabrication work. I even got to where I can pull plastic if I need to."
As the two became more familiar with the company and its operations, and as they continued to take on new responsibilities, they noticed that their father was starting to take longer vacations.
The change to his schedule made it difficult to keep a finger on the company's pulse.
"We would seek out more responsibilities within the company, and Dad was fine letting us take those on," Rachel explains. "So after a couple years of realizing how much more he enjoyed travel and how capable we were, we were able to come to the conclusion that now would be a good time to do the buyout."
Financial discussions with family members can be tricky, especially if the parties involved have different vested interests. The sisters say that it wasn't too difficult to settle on a purchase price, however. "We've involved our accountant; you want to have too much information [rather] than not enough," Rebecca says. Because the company accountant knew the business' financial standings, he helped determine a fair market value for the business operations, and the sisters negotiated a five-year buyout plan with their father. The building and equipment were appraised for purposes of insurance coverage and rent. "We're young, and buying a company is a big deal for us," Rachel says. "But it's not like we're buying it from a stranger. We're buying it from our father. So we also want to take care of him, but do what's best for us. That was sort of our goal, to try to come up with a happy medium for him and for us, so it was fair."
Rebecca recommends "dotting your i's and crossing your t's." Rachel continues, "We involved our accountant and our attorney. It's important to have meetings that are face to face, that we are communicating and talking it out, and making sure everything is signed."
Their father continues to counsel the sisters. "We do occasionally turn to him for advice," Rachel says. "He is a great mentor. He thinks differently than both of us. Yet he is very supportive of us making our own decisions." Nevertheless, the transition is not without its growing pains, she says. "When he is here and not traveling, I think it's hard not to have an office, not to have a presence like he once had."
Google the term "keys to a successful family business," and the search engine returns more than 2.5 million pages of results; opinions, suggestions, and resources are plentiful. One recurring theme stands out: the importance of familial relationships. "Most businesses can survive the threats of competition, economic cycles, changes in technology, or other factors, but the deterioration of interpersonal relationships will devastate the business and tear apart the family," says the Family Business Institute. The organization also lists aspects of good relationships, such as having open communication, mutual respect, and common goals.
Like typical sisters, Rachel and Rebecca squabbled when they were younger, but once Rachel went away to college, their relationship blossomed. They credit the change to maturity. In fact, they say they are best friends, and the connection extends beyond the office; they spend of a lot of their free time together and with the family.
One of the sisters' abiding principles, they say, was passed down from their grandmother: "Do what you mean, and mean what you say."
"You have to be able to communicate," Rebecca says, explaining that part of communicating involves listening to what others say-whether it's a business partner, an employee, or a customer. Sometimes minor conflicts do arise, however, and if the sisters are at a temporary impasse, they have learned to give each other space. "And later we'll come back and...we talk it out," Rachel says.
Their communication skills were well honed prior to purchasing the family business. They began by recognizing and respecting each other's strength and weaknesses during the first two years of working together, Rachel says. "As our roles started to change within the company into more responsibility, we would sit down and talk about areas where Becca [and I] wanted to grow.... So we verbally communicated areas where we wanted to see each other excel and take on those responsibilities so the other one didn't have to worry about it. Management, communication, financial, that's more an area where I can do better."
Rebecca's strengths include her graphic design skills, so she maintains the website, and documents policy and procedures, which allowed Friddle's to receive its International Organization for Standardization (ISO) certification, Rachel adds.
She continues, "Our work ethic is similar.... We just want to do the best we can and grow from there." Both women are in accord with plans for growth of the company. They use a goal-setting chart that a friend gave them to discuss and write down their own and company goals, in monthly and yearly increments-something they recommend that all new business owners do.
Toward this end, Rebecca explains that she "would like to continue to try to increase the efficiency and productivity in regard to the warehouse, the manufacturing, distribution. She is expanding on her father's efforts in the urethane department by using the material in AFO fabrication and helping to eliminate waste.
"My focus has been on central fab for the most part and standardization within central fabrication," Rachel says. She is increasingly incorporating the company's carbon fiber braiding machine in fabrication and is utilizing a digital vertical alignment fixture to record and save measurements. "We were not doing prosthetics central fab before I came," she says, adding that this business line grew 100 percent between 2013 and 2014.
In addition to their grandmother's adage, the sisters take heed of some of the lessons they have learned from their grandfather and father.
First is the importance of treating employees well. Some have been with the company since the women were toddlers and have watched them grow up. "The way that [our father] treated everyone is something that we can always learn from, whether it was a coworker or a customer," Rachel says, adding, "We could not run this company without our supportive colleagues." According to Rebecca, he treated his employees like family, and that has helped to create a supportive, dedicated, and knowledgeable team. For example, he made sure that his employees had time to attend to their own children's school and sporting events, much as he was able to do for his daughters.
Another lesson is to not talk business at family gatherings. Friddle's is a family affair that includes Frank Jr.'s brother and sister, Reed Friddle and Treci Williams, who have been with the company since 1998 and 1990, respectively. Reed is in charge of purchasing and Treci is in charge of the sewing/fastener department. Rachel's husband, Mike Johnson, is an account executive and the accounts receivable manager; he has been with the company since 2001. Despite this intermingling of work and family, it has always been understood that the two remain separate after hours.
Finally, they have learned to not make hasty decisions, and the art of saying no, which Rachel says can sometimes be even more important than saying yes.
"We don't have to be the best at everything...," she says. "We do what we are good at, and we don't do what we are not good at. Knowing when to say no so that you can still grow in the areas that you are good in is a key to making a successful business."
Laura Fonda Hochnadel can be reached at .