Tom Tritt and Brett Huston were doing electrical work as a side gig for a local swimming pool company when the owner asked if they’d be interested in buying the business. Along with their wives, twin sisters Rene Huston and Adrianne Morgan (Morgan and Tritt have since divorced and remarried), the couples decided to go for it. Twenty years later, in May, they converted Patio Pleasures Pools & Spas to an employee stock ownership plan.
The four are all still in their 40s, so succession planning wasn’t a high priority. But as Rene Huston, the company’s president, began attending industry seminars, she realized it should be.
“Life can throw curveballs at you,” Rene Huston says, pointing to the changing family dynamics as Tritt and Morgan remarried and both families’ children get older and leave for college. “When you’ve got four of us with different visions, there is some complexity in that. It was important to start having that dialogue and start talking about it.”
But while many family businesses and partnerships are riddled with conflict and heartache, that wasn’t the story at Patio Pleasures.
“There’s blessings in having four owners who are also family,” Huston says. “And then there are complications. You have four individuals who are very passionate about the business and what we do, and sometimes ideas don’t always align. And you’re also family. It certainly hasn’t always been easy, but the blessings outweigh the challenges.”
The ESOP was a solution they all supported early on. None of their children had shown interest in continuing the business, though they are still young. “We immediately, all four of us, saw value in [an ESOP],” Huston says. “There was no hesitation. It was intriguing for one specific reason: It was a way to continue to incentivize and give back to our employees. At Patio Pleasures, culture has been at the forefront of everything we do. We have created an incredible team over the last 20 years.”
An ESOP solidified the company’s future while also giving the four owners flexibility. While all of them plan to stay at Patio Pleasures for the foreseeable future, there is now a clear exit strategy that doesn’t put undue stress on the company or family if life throws a curveball.
After some initial research and talking to other local ESOPs, Patio Pleasures enlisted the help of ESOP Partners, a Wisconsin-based company that helps businesses in all stages of the ESOP process and administration. Once they checked the boxes determining Patio Pleasures was a good fit, a valuation was completed, an ESOP trustee was hired and the price negotiation began.
“What I liked about that process is none of us were saying, ‘Let’s get the most we can out of this,’ ” Huston says. “If that’s what we wanted, we would have sold it through a different avenue. What we were saying is, ‘Let’s get a fair price.’ But let’s do it so this company continues to grow and flourish for another 20 years and see the employees reap the benefits.”
The ESOP process wasn’t kept secret. Huston says they let employees know what was going on so there wasn’t speculation about why the owners were having so many closed-door meetings with suit-clad businesspeople. When the transaction was complete, they celebrated as a company.
“We had a dinner,” Huston says. “We celebrated it. We recognized longevity. We talked about what this means for their future from a retirement standpoint.”
The now-former owners decided to fast-track the vesting schedule for employees who had been at Patio Pleasures for at least six years. At the dinner, they presented those employees with watches as well. “We wanted to show that longevity and time has its rewards,” Huston says.
Now, the focus is on helping employees understand what being part of an ESOP means, both in their daily work and their mindset for the future.
“Our goal over the next few years is to continue to develop these leaders and get them to strategically think about our workflows, processes and pricing because it matters in the end,” Huston says.
For other companies looking at succession planning, Huston advises starting with profitability.
“My biggest recommendation in all of this, whether you’re looking at an ESOP or not, is your bottom-line profitability,” she says. “It’s easy for everybody to look at the top-line number, but for me, it’s that bottom line. By growing that by just a point or two, it’s significant. Although we haven’t continued to see sales grow as rapidly as we did during COVID, what we have seen is profitability growing. And that was pivotal in all of this.”
If an ESOP seems right for your business, Huston also recommends hiring the right professional team and being willing to pay for their expertise. “They are highly paid professionals, but it is worth every penny along this process,” she says. “This is one area that we don’t want to try to find the cheapest.”
Huston hopes being an ESOP helps attract a new generation of workers to Patio Pleasures and retain the core group they already have.
“It’s been fun to start working with our team on developing their skills and helping them think differently about business decisions,” Huston says. “They’ve got a little more skin in the game. For the younger generation that can see value in this and that’s willing to partner with a company and put in the time and effort, they can grow something incredible for themselves.”