John and Dave Zavoral spend a lot of time together. For one, John is Dave’s uncle, so there are birthdays, holidays, and racquetball — every morning at 5:30 a.m.
“I used to pick him up and bring him to racquetball, but now he drives himself,” John said.
The early start time is not negotiable because the two have to get to work at RJ Zavoral & Sons, Inc., a construction company in East Grand Forks, Minnesota.
“Does it seem strange from the outside that the people that I go to work with every day are the same people that I hang out with on the weekends or spend holidays with?” said Dave, the vice president of the company, which employs 29 family members. “Yeah, I’m sure it does seem strange. I often get the comment from people like, ‘well how do you make that work?’”
Five family members own equal shares of the company. John, the 65-year-old second-generation CEO, is teaching them everything he knows about running the business, because the family is about to make a big decision: They’re going to vote on who will take over when John retires.
“Right now, they’re being groomed, and we meet once a week and we all kind of do a consensus of what direction we’re going,” he said. “I think it’s going to be based on strengths. Family dynamics are involved, but I think it’ll all work out.”
RJ Zavoral & Sons is one of 6 million small and medium-sized businesses expected to change hands over the next decade as baby boomers move into retirement, according to the McKinsey Institute for Economic Mobility. The generation accounts for more than half of the country’s total wealth, and their transition away from work will have deep implications for the economy.
“There’s going to be an oversupply of businesses that are going to be available,” said Nick Noel, a senior fellow at the McKinsey Institute for Economic Mobility. “And if they can’t find folks that are willing to buy those businesses that are otherwise viable, [they] will have to shut down.”
Noel expects 1.5 million viable businesses will disappear. And in states like Montana, Vermont, and Maine, small and medium-sized businesses make up half of total employment.
“It really does become a crisis for economic development, for community vitality, employment, and economic mobility in those places,” he said, unless new buyers emerge.
Even if businesses do find buyers, it’s not an easy transition. It takes a lot of preparation to get a company ready for sale. Kris Schumacher, co-founder of New Majority Capital, a nonprofit that helps connect aging business owners and new entrepreneurs, ran into this issue a handful of years ago when he bought a company that makes garden trellises.
“The owner didn’t have a computer, he did all his work on lined paper,” Schumacher said.
Plus, older business owners are at a life stage where they are thinking not just about how much money they can make in a sale, but what they’re leaving behind.
“They’ve built a business for 20 to 30 years,” Schumacher said. “They have a legacy. They have their names on the trucks that they see driving down the neighborhood that they’re going to be living in. They want to see that continue.”
It’s something the family at RJ Zavoral & Sons is grappling with.
“These guys are going to make a decision to either keep it as a family business or to sell out,” John said.
The firm has grown so much it’s become the second-largest employer in town, and, in a way, it has turned the work of excavation and asphalt paving into a totally different job.
“The hard work and technical skill made us really good at what we did,” Dave, said. “And now this business is becoming about running a business really well.”
