The Question Some Company Owners Don’t Want to Deal With

Ivo Puidak, who cooked for Presidents Jimmy Carter and Ronald Reagan as the head chef at the Federal Reserve Bank in Chicago, built the Galena Canning Company into a thriving specialty food business, selling premium barbecue sauces, salsas and seasonings around the country.

But Mr. Puidak, who based his business in Galena, Ill., a resort town about 160 miles west of Chicago, never put a succession plan in place, not even after he learned he had cancer in 2017 and was given only a few months to live. Neither his wife, Shelly, nor their only child, Max, wanted to take over the business, so the family decided to sell. The sale was set to close on March 30, 2020. But two weeks before it could go through, Mr. Puidak died.

At the same time, the pandemic brought shutdown orders in Illinois, and the company’s sales plummeted 90 percent in April. The buyer’s financing fell through, and the deal, which had been 13 days from closing, was postponed indefinitely.

By September, Ms. Puidak, who was retired and had never worked in the business, was ready to liquidate the company. “When things went downhill, they went down quickly,” said Max Puidak, who was working in New York at a start-up when his father died.

“Part of the problem was my dad hadn’t been willing to let go,” Max Puidak said. “He made an amazing product, but he didn’t understand many parts of the business.” Like many entrepreneurs, he knew how to create a product that people liked, but he was not as well versed in the details of the business.

Financial advisers worth their fees will always discuss the need for succession plans with clients who own businesses. But that doesn’t mean business owners will listen.

“We can tell them they should do something for 1,000 years, but business owners hate to be told what to do,” said Brian Baum, managing director at Interchange Capital Partners in Pittsburgh. “Last week, I had five or six people say they weren’t interested in exit planning that covers different contingencies. People just don’t want to do it.”

In Galena Canning’s case, there is a happy ending. But that ending offers lessons for other business owners.

Mr. Puidak, 27, said that immediately after his father’s death, he was trying to do his day job and keep the sale moving — all from Florida, where he had gone to be with his mother. But when it became clear that his mother would have to liquidate the business, he decided to move to Galena to run the company.

Despite working in his father’s business every summer until his junior year of college, Mr. Puidak said, he quickly realized that he knew less about the business than he had thought. On the positive side, he noticed there were easy fixes that could quickly improve the company’s outlook.

“Prior to coming back, the only thing I understood were the financial statements and what I learned from talking to the guys on the ground and using what my mom knows.” he said. Once he was back in Galena, he began to update the company’s e-commerce platform and distribution system, which were both 10 years old.

And as he got involved in the work, he realized that running his father’s business was an interesting opportunity. “Initially, I was going to get back, clean up the financial statements, take care of the website, grow the business a bit and get it back on the market for sale so I could go back to my life in New York,” he said. “But after talking to some people, I realized it’s a very unique opportunity to have a cash-flow-positive business to run. So then, staying humble and not moving too quickly was key.”

Mr. Baum said that was the right attitude. “In a perfect world, as tough as it is, you need to slow down,” he said. “You don’t know if the same people Dad used are the right group. You don’t know what the intracompany dynamics are. You need to shore up the foundation, plug all the holes, then you need to take two months to understand what is there before you keep it or sell it.”

Besides a succession plan, a type of life insurance policy on a person crucial to a business — what’s known as key person insurance — can provide a lifeline to the business.

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