Like so many in this industry, Chris Martin, this month’s cover subject, is the owner-operator of a family business. And, like so many family businesses, succession planning is never easy.
“I’ve done a lot of estate planning,” Martin said during an interview from his office at C.F. Martin & Co. last fall. “So, I’m pretty confident that we won’t have to sell the business to pay estate taxes. That’s the first thing you have to consider when you have a closely held business. There’s going to come a bill, and you got to pay it some way or another. So in my case, upon the advice of estate planners, life insurance is there that, on the event of my demise, there will be this chunk of cash that can be used to pay the estate taxes, rather than having to liquidate.”
With that hurdle cleared, the next question is who takes over the company. That’s a lot of pressure for one of the most iconic brands in music. Martin is the sixth generation of family ownership of this 186-year-old business.
He and his wife Diane have one daughter, Claire Francis Martin. She is 15 years old. Recently, when Martin asked her what she sees in her future, she said she wanted to become a writer.
“I think, when she’s willing to listen, I’m going to say this is complicated,” Martin said. “When I took over, we were one-tenth this size, hanging on for dear life. But now, this is a big, sophisticated business.
“There’s a lot of work being done around how to do these transitions right. One of the standard practices today is you say to your children, ‘Go to college, get a degree, hopefully in business, and go work somewhere else for a couple of years so that you don’t think that this bubble is the way it is for everybody.’”
But Martin said that’s not the only option. It’s his daughter’s choice. The company does have a fiduciary board of directors. Claire could become a board member someday, and when she’s ready, become the board chair.
“Just manage it as the owner if you don’t want to be the operator,” Martin said. “So we go out and get good board members. Make sure you hire good people, hold them accountable. It might all work out.”
As Martin hints, nothing is for sure or forever. All a business owner can do is plan ahead to give the next generation the best chance for success.
Martin added that he’s closely watching other guitar builders and retailers because many are heading toward their own transitions.
“Look at those people who opened a shop back in the ’60s,” he said. “If you don’t have a succession plan, that’s a problem.
“We are seeing some dealers who are my age, who started and built up their companies into something, and they’re starting to go, ‘Look, I need to give a lot more responsibility to the next generation.’ If you don’t let someone, I hate to say it, younger take over—because we’re not going to live forever—this thing is going to blow up.”
In other words, the best time to start succession planning was 10 years ago. The next best time is now. MI
