Small Business: Family succession - John Eady, Lewis Eady

John Eady, owner of Lewis Eady.

Small business editor Caitlin Sykes this week interviews a handful of small business owners about how they manage family succession.

John Eady is the fourth generation of his family to run the 131-year-old music business Lewis Eady.

What was it like growing up in a business that had been handed down through the generations?

I didn't really think anything of it - it was just normal for us. I do distinctly remember celebrating the 100th anniversary of the business and helping out in the showroom at that point, but I was really too young to have a full appreciation of just how special it was to be involved in a business of that age. And I did work part time in the business on Saturdays and in school holidays from about the age of 10.

So was it always part of the plan for you to take ownership at some point?

It was never really my intention to get involved in the family business. I studied music in London and played professionally over there for a number of years before returning to New Zealand. Then I somehow got involved in doing up old houses and building, so I worked in the construction industry for a number of years.

What triggered you transitioning into the family business?

My father was rapidly approaching 60 and at that point I stopped and thought 'maybe I should take a closer look at this business and see if it's something I want to be involved in'. That was when the penny dropped that this was something quite special; it had a very strong brand within the industry and I thought there could be an opportunity to get involved.

What practical steps did you take from there?

I just started a conversation with my parents one day saying 'I'd be quite interested in getting involved in the business with a view to eventually taking it on'. It happened that my parents had just been given notice that the lease on their showroom space in Newmarket was up, so there were some other changes that needed to happen and it seemed an opportune time.

I started as an employee in 2001, and I assumed the role of piano sales and marketing because I'd had a bit of experience in those areas. That was something my father was quite happy with me doing, and we had differentiated roles from day one. I also said to them if I was going to be involved with the business I didn't want to be leasing, so I persuaded them to purchase a building, which is where we're still based now. Because I had experience in the construction industry we handled a lot of the refit ourselves and that gave me an immediate focus and impetus for a wider change.

When did you take ownership of the business?

In late 2006 I bit the bullet and took out a big loan to purchase it outright from my parents. We discussed various options, including my parents leaving some money in, but I came to the conclusion that if I wanted complete control I needed to buy it outright.

What factors made that transition successful?

Right from the outset, I had discussions with my parents about the eventuality of me purchasing the business and we established early on that I needed to work in the business for a period to determine whether that was what I actually wanted to do. In my case it cemented that this was the business I wanted to be in.

From the time I entered the business I also had quite a lot of influence on how it was run, so by the time I purchased it I was pretty much in control. I did employ my father for the next three years after the sale, to keep him interested in what was going on, and having his 50 years of industry knowledge around was very useful.

How about any challenges?

They were probably around the finer dealings and negotiations over price. Every owner thinks their business is worth X and everyone buying it thinks it's worth less. That process probably stretched out for nine or ten months. At that time there weren't as many specialists around in the field of succession to help. We took the old-fashioned route, where my parents used their accountant and lawyer and I used my accountant and lawyer. But I don't think that's the most efficient way of resolving these things because each party is working in their own best interests and it can be hard to find the middle ground.

What advice would you have for a family going through this process now?

It would be to source someone who could act for both parties and essentially act as a mediator. I talk to a lot of other people in family businesses and a lot of them have had the same issues we had going down the traditional route of primarily employing lawyers and accountants. But there are now specialists whose role is to work together with the family to get the best result, which I think is a much better solution.

• Coming up in Small Business: What do small business owners do when they have a baby? If you've got a story to tell about how you've handled your own parental leave as a business owner drop me a note at nzhsmallbusiness@gmail.com.