Bruce Carlow, co-owner of Trio Hardware in Plainview, was on a different career path when his father asked him to join the family hardware store after his mother's death.
Then a teacher at Hewlett High School, he had never quite ruled out joining the family business, and in 1973 he left teaching to help run the store.
But Carlow, now 68, and his wife Francesca, 59, who took over the store in 1995, knew early on that neither of their children -- a teacher and a chiropractor -- had an interest in continuing the family legacy.
Just 15 percent of family owned companies make it to the third generation, says William Rothwell, president of Rothwell & Associates in State College, Pa., which specializes in succession planning.
"Don't assume your kids always want your business," says Rothwell, author of "Effective Succession Planning" (Amacom, $65). And, he adds, even if they do, don't assume "they're the best choice of managers for that business."
Carlow also learned another of Rothwell's cardinal rules of succession early: Put it in writing. Whether you're passing a business to a family member or an outsider, spell out the details "so no one thinks they're being cheated or really is being cheated," Rothwell says.
When Carlow's late father, Bernie, was ready to retire, they drew up a formal 5-year buyout agreement that allowed Bruce and Francesca to take ownership while paying off a promissory note.
A fire at the store one year after the Carlows took over provided the catalyst for them to put their own succession plan in place early on.
Bruce Carlow told employee Todd Kirschner, who had started at the store in 1990 at age 15, that if he helped him rebuild, he'd eventually sell him Trio for "below market value."
"I said, 'I'm in,' " recalls Todd, 39, who wed fellow longtime employee Ritsa Koinis in 2004. "I didn't skip a beat."
In 2012, the Carlows created a buyout deal that gave the Kirschners 50 percent ownership in Trio, growing to 100 percent by 2017. "It was a natural fit," says Francesca Carlow. "Todd and Ritsa were integral in rebuilding the store."
Just as Bruce Carlow had done with his father, both parties agreed on a formal buyout document, drafted by their accountants and reviewed by a lawyer. "We spoke to our accountants and said 'What's a fair price?' and then knocked off a certain percentage," says Bruce Carlow, who declined to reveal financial details.
Employee ownership is growing in popularity, Rothwell says. In addition to buyout deals like the Carlows', another method is to allow multiple employees to purchase shares, he says.
Owners who don't have family or employees to take over can seek outside buyers, but be mindful that a new owner might choose to replace longtime workers, Rothwell says. When you have "employees that sweated blood for the business, they deserve to be fairly treated for their loyalty."
The Carlows have turned over most daily management and operations to the Kirschners. Francesca still handles bookkeeping and public relations, while Bruce works the floor assisting customers. They haven't ruled out staying on in some capacity past the buyout agreement. After all, both families have strong ties to the community and last year, Trio was recognized by the Virginia-based advocacy group Independent We Stand as 2013 Independent Small Business of the Year, drawing 2,024 online votes.
What's next? Rothwell says the Kirschners should be looking ahead to their succession plan. "You should be thinking about this from day one, because something could happen to you," he says. "Transfer of the business doesn't necessarily wait until you retire."
AT A GLANCE
Name: Trio Hardware, Plainview
Co-owners: Bruce and Francesca Carlow and Todd and Ritsa Kirschner
Products: Carries more than 52,000 hardware-related items
Annual revenue: $1.8 million plus