Business Scenario: Two By Four Enterprises

Two By Four Enterprises, Inc. is a C-Corporation with 47 employees and gross sales of $42 million. It manufactures food processing equipment. Founded in 1992, the company has long term recognition and respect within the industry which traditionally has been slow to change. However, recent trends in the market have spawned innovation which Two By Four has not embraced yet. Although the business has been successful, profitability has reached a plateau.

At 65, Bob Sprout, the Founder/CEO and majority owner is considering retirement, but has not decided how to transition the management and ownership. Both business and family are central to Bob’s life. Two By Four was named to reflect the importance of his family – two parents and four children. Two of his four children work in the business. Bob wants one of them to become CEO, but he is concerned that neither has the leadership skills yet.


The long-time VP of Sales, Ed Coalson, has an ownership interest in the company. While Bob feels it might make more sense to name Ed as the CEO, he's concerned about the impact on Chip Ogawa, the Operations Chief.

Chip and Ed have different opinions about business priorities and decisions. Bob thinks that Chip might leave if Ed becomes the CEO, or that Ed might leave if one of the children is put in charge. He feels loyal to both of these valuable employees.

Over the past few years, Bob has seen several of his competitors sell out. He wonders if it might be better to just sell to a third party and let the chips fall where they may. This could mean that his children and others in the company could lose their jobs. He wants to avoid this, however, a buyer would provide a large sum of money and enable him to retire comfortably and travel.

Bob feels that the company is in fairly good shape, but is concerned that profitability has plateaued. He knows that the company needs to invest in new technology to remain competitive in the future. He is not sure he has the energy, knowledge, or enthusiasm to oversee this large project that could take several years to complete. There is a board of directors made up of himself, Ed Coalson, and family members, Margaret, Jasper, and Janine, but Bob has always run the company by himself. Bob tends to be a micro manager and is involved with many decisions throughout the company. The leadership team is fairly capable, and Bob is confident that most of them will continue with the company.

Bob knows he needs to make some important decisions and begin the leadership transition process to new management and possibly new ownership. He doesn’t have time to focus on all of these variables. Worrying about how he will do everything needed, keeps him awake at night. His wife, Margaret, worries about his stress level, the impact of this change on their relationship, the future of the company and their family. Lately, she hasn’t been sleeping well either.

Read The Secret to a Successful Transition

Who’s Who: Meet all of the people who are involved

Bob Sprout, CEO: I’m torn between what’s best for my family and the company.
Margaret Sprout, Spouse:  I don’t think Bob can let go and the kids aren’t ready.
Jasper Sprout, Older son:  I’m frustrated because Dad isn’t giving me more responsibility.
Janine Sprout, Older daughter:  I have the courage to make the changes we desperately need.   
Megan Sprout-Jackson, Younger daughter:  I think my husband would make the best leader.
William Jackson, Son-in-law:   43, son-in-law, married to Megan
Charles Sprout, Younger son:  I think we should sell the business and be done with it.
Ed Coalson, VP of Sales:  I want a lead role in the business or I may leave.
Chip Ogawa, COO:  I believe we need to change how we manage to keep up with the competition.
Nancy Nair, HR Director:  I think we need better communication and we need to start training people now.
Maya Patel, CFO:  I hope we don’t change our systems. Change means more work for me.     

Additional Stakeholders/Advisers:
Banker:  I need to know who will take over the business and if they plan to upgrade their IT system.
Insurance Agent:  If I know the key players, I can create strategies to keep employees.
AttorneyI think we need to protect the intellectual property.
Vendor  I’m afraid the new leadership might not value our business.