Tuesday, June 18, 2024


Diversification for the Next Generation


Energy business consultants offer advice on expansion and succession planning

Whether tomorrow’s homes are heated by renewable liquid fuels, electric heat pumps, or some combination of the two, the writing is on the wall: fossil energy’s days in the building sector are numbered. Not altogether coincidentally, as the heating oil industry looks to transition to the next generation of products and services, many heating oil companies are also transitioning to the next generation of family business owners and employees. In “Growth and Diversification Strategies for the Next Generation,” consultants Steven Abbate, Aimee (LaBrake) Allen, and Kendall Rawls discussed both of these transitions before a multigenerational audience of home heating professionals in attendance for the 2021 HEAT Show.

Kicking off the session, Abbate suggested that many heating oil delivery businesses have already positioned themselves for the kinds of growth and diversification that are being talked about so much today. “Ten to 15 years ago, companies started taking oil of their name and putting energy in,” he said. “That was a good move!” The founder of mergers and acquisitions advisory firm Cetane Associates, Abbate noted that heating, ventilation and air conditioning is a “hot item” in today’s market, with many HVAC-only businesses getting gobbled up by bigger organizations that offer a range of residential products and services.

In considering major changes, such as adding a new service or entering a new market, Rawls advised businesses to engage in “scenario planning” – a tactic that has become all the more valuable in light of COVID-19. A company that is debating whether to acquire a business or diversify an existing service department, for example, might first consider what would be the best possible circumstances for executing each plan, as well as “medium-to-bad” scenarios and worst possible cases.

“Give yourself a runway of 12 months, have your team come up with five to six strategies, and debate them all given each scenario – best, bad or worst,” Rawls explained. “Those strategies that remain viable given all three scenarios should be implemented now.” Using her own business as an example, Rawls noted that years ago when engaging in this exercise, she considered “not being able to fly” to meet with clients as a worst possible scenario for her family’s succession planning firm, the Rawls Group. It might have seemed crazy at the time, but when COVID-19 grounded flights across the country, the company was able to continue operating because they had planned for the worst.

The presenters also recommended contingency planning for any family business looking to transition to the next generation. Additionally, such businesses might consider prerequisites for employment and then establish those criteria under a kind of ascendancy “road map” to help prevent relatives from getting involved with the company for the wrong reasons. “This might be even more important for valued non-family employees,” said Aimee (LaBrake) Allen of Aimee LaBrake Consulting. “Going through this process and creating this template takes some of the entitlement out of the family-business environment, but also helps that employee feel closer to the family and that they’re not being taken advantage of.”

As a final suggestion, Abbate, Rawls and Allen agreed that advisory boards can be invaluable for companies undergoing major transitions. Abbate, who himself sits on several heating and energy businesses’ advisory boards, said they help next-generation business leaders get “outside perspectives” that aren’t colored by family dynamics.      

 “If you do have an advisory board and it’s only made up of your accountant, your banker, and your lawyer, get someone else involved who has less of a vested interested,” Allen recommended.

“People you trust,” Abbate added.

Business Management
October 2021
Family Business

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