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Recognizing wise investments

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Lee Chilcote | February 24, 2011

 

The last thing that Tim Schnabel thought he wanted when he graduated from Texas A&M University was to work in the lawn care industry.

“My dad was in lawn care,” says the Houston native. “I wanted to wear a tie and be somebody important.”

So after college, Schnabel packed his bags for Colorado. He worked as a branch manager for an IT company, but two years of corporate sales left him restless.

“It was the opposite of what I’d expected,” Schnabel says. “There’s no loyalty in corporate America – you’re there for one reason, to make the company money.”

When he was 29, Schnabel started his own lawn care company, Integrated Lawn & Tree Care in Colorado Springs. He knew it was demanding to run your own business – he’d grown up around one – but he wanted to be his own boss, not push paper all day.

Using an old Lesco push-spreader given to him by his dad, Schnabel began to create his company from the ground up. He knocked on doors in the middle of winter and cold called at night. Within a few months, he had over two hundred jobs. For several years the company grew steadily, and before long it became successful. 

Then, just as quickly, his life changed again. Schnabel and his wife had a baby, and Colorado suddenly felt like a long way from Texas. They wanted to be closer to their families back home. Yet the company was just taking off. If Schnabel left now, he thought, all of his sacrifice and hard work would be for naught.

That’s when he met Jon Rick, an undergraduate student at the University of Colorado at Colorado Springs. He hired the 19-year-old as a part-time, seasonal employee, but Rick’s ambition and talent was immediately evident, and Schnabel saw something of himself in his new worker.

In 2007, Schnabel moved back to Texas and founded a new lawn and landscape company called Aggieland Green Lawn & Tree Care. He and Rick now own Integrated Lawn & Tree Care together, and have a plan to increase Rick’s ownership over time.

The story of this rare, productive partnership and how both entrepreneurs structured the change to meet their goals is a lesson in managing transitions.

The meeting


From Rick’s first day on the job, Tim Schnabel knew that he’d made a good hire. The college undergraduate was a step ahead of other student employees.

“Jon just stood out,” Schnabel says. “He always made good decisions with my equipment, trucks and customers and worked circles around everybody else. He led by example and earned trust from others. I knew that I could put him in charge.”

Rick came along at a fortuitous time. Schnabel was busy managing Integrated Lawn & Tree Care, but in the back of his mind, he was plotting out a transition plan.

“I made a lot of sacrifices, including knocking on doors when people couldn’t see their lawns, there was so much snow,” Schnabel says. “I wanted to realize my investment.”

Schnabel thought about selling the company, but he knew it wasn’t mature enough yet. Although he wanted to move back to Texas, he couldn’t give up what he’d worked for.  

“My personal needs didn’t match the maturity level of the business,” he said. “I’d made so many mistakes and learned so much – I knew I couldn’t sell yet.”

Then Schnabel came up with an idea. What if Rick agreed to work side-by-side with him before he took over as manager and co-owner? That way, he’d gain valuable experience and added income, while Schnabel and his wife transitioned to Texas.

The key to making it work, Schnabel thought, was ownership. “I knew I’d have to give up some of my share of the business, so Jon would treat the company as his own,” he says.

The offer

There was only one problem with this plan – at first, Rick wasn’t interested.

“I said, ‘I’ve got a great opportunity for you to begin running your own business fresh out of college. You’ll get valuable training, have a chance to buy into ownership over time, and I’ll offer bonuses of additional ownership,’” Schnabel says. “But when I sat down with Jon and told him this, he wanted to go into (the field of) financial planning.”

Rick declined the offer. Much like Schnabel at his age, Rick wondered, why would he want to work in lawn care for the rest of his life? Still, the ownership idea piqued his interest.

“I shared with him the things that I’d learned – marketing, being smart with money, accountability with customers,” Schnabel says. “I couldn’t have gotten that experience anywhere else. I just didn’t think sitting at a desk would be a good fit for him. It turned out that I was right.”

Over time, Rick began to see the wisdom in Schnabel’s plan. For the next two years, he worked closely with his boss and learned to run the business. His boss promoted him to manager and gave bonuses based on performance.

In 2007, the pair executed an agreement. “We set up a seven-year contract,” Schnabel says. “At the end of every year, we’d determine what the company was worth based on assets, the current value of our customers and industry trends. Then we’d determine how many shares he would buy. If he stayed seven years, the company would match the shares he’d purchased.”

To make the process easy, Rick set up automatic withdrawal from his paycheck, and a portion of his pay went into a reserve account and was used to purchase shares.  

If Rick stays with the company for the full seven year period, he’ll own 30 percent. The current agreement is set to mature in 2014. Schnabel, who has no current plans to give up his majority ownership of the company, is happy with the arrangement.

The transition


Making the transition wasn’t always easy. For the deal to work, Schnabel had to give up control and allow Rick to take the reins, even though they have different styles.

“When I first moved back to Texas, I wanted to know every single thing that was going on,” says Schnabel. “We had conference calls twice a week, and I talked to him every single day. That was the hardest part of the transition – I had to let go.”

Fortunately, Rick is a self-motivated leader, and he has been able to learn how to run the business quickly. “He’s grown so much more without me being there,” Schnabel says. “It didn’t take me long to figure out that he treats the company like his own. And because he’s excelled, I really don’t need to know everything that’s going on.”

Although they have a lot in common, Rick and Schnabel are different managers. “Jon is a directional manager, and I’m more touchy-feely,” Schnabel says. “I spend a lot of time explaining things to my employees, while Jon gives a direction, then leads in that direction. He doesn’t spend a lot of time on fluff – employees really respond to him.”

Under Rick’s management, Integrated Lawn & Tree Care has strengthened its systems, expanded its services and watched its revenues grow. 

The best part is that both partners have skin in the game. While Schnabel has become more of a passive investor over time, he still participates in the development of the company. Meanwhile, Rick has assumed control of day-to-day operations.

“I always want Jon to be happy, because he’s providing a lot of value while continuing to grow our business,” Schnabel says. “Even now, we talk three or four times per week.”

Schnabel says he’s learned a lot about managing transitions. “If someone else were looking to create a succession plan, I’d advise him to have the right person in place, hand over his responsibilities, and trust that person to do what they’re hired to do,” he says. “They should view and treat that person as a partner.”

“My situation is very rare,” he admits. “You have to know the person very well. You need to have very similar business and personal philosophies, and be on same page 100 percent. If you don’t, it will come back to haunt you.”
 
The leadership transition hasn’t always been easy. “Integrated Lawn & Tree Care was an extension of me,” Schnabel says. “Yet I understood that Jon had the skills needed to run the company, and to continue the work that I had started.”
 
Disagreement is healthy, Schnabel adds – and can even improve results. “You don’t have to be identical to the other person, but you have to understand each other,” he says. “Then you have an opportunity to accept or reject your differences.”
 
Schnabel has total confidence in his partner. “We have a mutual understanding,” he says. “I made my sacrifices, now Jon is making his, and we own it together.”
 

This is one of two stories that ran in Lawn & Landscape's Growing Green e-newsletter. To hear Jon Rick's side of the story, click here.

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