John P. Calabrese, the founder of Welcome Magazine and lead salesperson for the visitors guide, suffered a fatal heart attack in December 2001. ¶ Carl E. Brown, the owner of Minute Print, a Cheektowaga print sales business, succumbed to pancreatic cancer in March 2010. ¶ And Darin M. Hughes, the owner and public face of the energy-efficiency contractor Hughesco, died unexpectedly in his Grand Island home in August 2011. ¶ All three men were in their 40s, and their premature deaths left business partners and family members facing tough decisions about the futures of their companies. ¶ “When you’re that young, you’re not thinking about life insurance, or what happens when you die,” said Julie Kianof Fink, the good friend and business partner of Calabrese, who was 46 when he died. ¶ The owners of small or family businesses often don’t plan for what happens to the business, and their partners and employees, after they die.
But experts recommend preparing for the death of a business partner because it’s a personal and professional blow that can raise complex questions about who will continue to run the company or whether the business will have to be sold.
Business owners should consult with attorneys, accountants, insurance agents or business counselors to plan in advance for this worst-case scenario.
“They’ve got to think of their employees, and their families,” said Susan A. McCartney, director of Buffalo State College’s Small Business Development Center. “It’s very complicated.”
Fink hadn’t wondered too much about what would happen if Calabrese died suddenly. The pair had worked together since 1984, when Calabrese started Welcome Magazine and hired Fink as creative director.
The hard-bound, annual publication – “an in-room concierge,” as Fink put it – is distributed for free in area hotels and other venues and subsidized by advertising.
Fink was the designer while Calabrese sold the ads, but he encouraged her to try her hand at sales.
In 1991, Fink bought into the business, taking 49 percent of the company while Calabrese retained 51 percent.
“It was easy for us to get along because we kind of complemented each other,” she said.
To gain more expertise, Fink went through a program at the University at Buffalo’s Center for Entrepreneurial Leadership, and her mentor urged her to protect her interests by arranging a 50-50 partnership with Calabrese, which she did in January 2001.
Fink and Calabrese did start making plans. They worked out a “buy-sell” agreement that allowed the surviving partner to buy out the shares of the deceased partner, and they arranged to use the proceeds from a business life insurance policy to fund this agreement.
The life-insurance papers were sitting on Fink’s desk, waiting for her to sign and submit them, when she learned Calabrese had died of a heart attack.
She used her own money to buy out her partner’s shares, but she worried about the short- and long-term prospects for their company.
The magazine’s advertisers were “just amazing,” Fink said, telling her when she made a sales call in Calabrese’s stead to sign them up for their usual order and to mail them the bill.
“They said, ‘Don’t worry, we know you have a lot on your plate,’” Fink said.
For Fink, the first months after Calabrese’s death were exhausting, and she still prefers the creative side of the process to drumming up sales. “When we were running it together, we had a lot of fun. For a while there, it wasn’t fun,” she said.
Keeping the presses
Penny Cutler, Brown’s recently remarried widow, wasn’t involved in Minute Print, the print sales business her husband ran while she worked as a registered nurse.
The company had seven employees, including Brown, who was diagnosed with cancer after seeking help for a severe pain in his hip. The treatment left him weakened and unable to work as the company’s main salesperson, and he died nine months later under Hospice care.
“It was fast, and it was shocking,” Cutler said of the decline in her husband’s health. “We didn’t have a salesman, but our customer base was very loyal during that time. It was a very scary time.”
His wife was given power of attorney so that she could sign checks for employees and vendors, but Brown’s death at 48 left Cutler facing the wrenching decision of what to do with the company her husband had worked so hard to build up.
The employees did what they could to manage without Brown, and after his death the couple’s oldest son, Dan, took a job with Minute Print after graduating from Geneseo State College. He later left the company.
“I was thinking of selling, but I couldn’t do it to the employees because they had been so good to him,” Cutler said.
Some competitors reached out to Cutler to urge her to sell the company to them, implying that she couldn’t maintain the business – a message that made Cutler more determined to hold on to Minute Print.
She tried to familiarize herself with the company’s finances and she consulted her brother, a small-business owner. “He was strongly encouraging me to give it a shot,” Cutler said.
The summer of 2010 was “very bleak,” she said. “Everyone was mourning Carl.”
The company barely broke even that year, with Cutler taking one quarter of her husband’s salary, ending the company’s 401(k) match and cutting back from four annual bonuses to two.
Since then, sales have grown considerably – rising 34 percent between 2011 and 2012 – and the company has restored the 401(k) match and the quarterly bonuses. And Cutler has hired a general manager, David Zalenski.
Cutler, who works as a nurse at the Gates Vascular Institute, visits Minute Print twice a week, for two hours at a time, and keeps in regular contact with Zalenski and other workers.
While Welcome Magazine and Minute Print are examples of companies that survived the death of a founding partner, Hughesco closed down, in December 2011, four months after Hughes’ unexpected death at 48.
Hughes started Hughesco, which grew out of his DMH Construction, in the mid-1990s, according to his brother, R. Burke Hughes.
Darin Hughes was the country’s first “Energy Star” contractor, but after a decade running the business, which made him wealthy, he sold it to GreenHomes America and sought new challenges, Burke Hughes said.
Darin Hughes started Hughesco in 2007 and continued as the face of the company on billboards and TV ads.
At the time of his death, Hughes was dealing with a divorce, a downturn in home construction, a legal settlement against Hughesco and tax issues, his brother said, but none was an insurmountable problem.
When Darin Hughes died, his 19-year-old son, Zachary, inherited the business, but the younger Hughes had enlisted in the U.S. Air Force and wasn’t in a position to try to run the company, which had 10 to 15 employees then, Burke Hughes said.
An effort was made to keep Hughesco going, but no one was generating new business and the company was sold off piecemeal to try to keep it afloat until Frank’s Commercial & Home Service bought the remaining assets – including the prominent 691-HOME phone number.
“The company still could be open today. The problem is Darin died prematurely,” said Burke Hughes.
Most fail to plan
It’s no surprise that small businesses such as Welcome Magazine, Minute Print and Hughesco didn’t have detailed succession plans in place, experts said.
“It’s a typical problem,” said Thomas A. Palmer, a partner in Jaeckle Fleischmann & Mugel’s business and corporate practice group. “Every entrepreneur, every person who owns a company, should have a strategic plan.”
These entrepreneurs prefer to focus on growing the business and don’t want to, or can’t, think about what happens to their company when they’re gone, said Thomas R. Ulbrich, executive director of UB’s Center for Entrepreneurial Leadership.
“They are definitely optimists by trade,” he said. “That goes with the territory.”
Buffalo State’s McCartney contrasts this with the situation at larger companies that have shareholders, or a board of directors, where this is less of an issue because those firms are more likely to have transition plans in place. “These things are just standard operating procedure,” she said.
Smaller companies need to do the same long-term thinking to prepare for events such as the death, incapacitation or divorce of a business owner, Palmer said.
He said those company owners need to think about whether they want to pass the business on to their children, for example, and, if so, whether the children even want to run the company, whether they have the expertise to do so and what’s a fair way to handle the company as an asset if some children are involved with the company and some aren’t.
“It’s more complicated for a small company,” Palmer said.