Clear plans needed when two families own business.

IT'S not that uncommon for two sets of unrelated family members to run company side by side.

In fact, sometimes there are even three or more families sharing ownership and operational responsibilities for the same firm.

But because those situations involve multiple sets of values and ideas, each family "set" must first agree on shared family expectations, then find a way to match those expectations with those of the members of the other family, in an effort to form a common ground from which to work and grow the business.

One Valley company attempting to do just that is the Mid Valley Athletic Club in Reseda, launched in 1979 by two local developer/partners, Marshall Ezralow and Gary Left.

Ezralow's son, Marc, 39, a former film industry executive, joined the business in 1993. Leff's son, Robb, 29, came on board in 2001. The younger two are now taking over primary responsibility of the club's operations, including the hiring of a new general manager and what has so far amounted to a $400,000 overhaul, with each of their fathers preparing to take back-seat roles.

It's a transition all four say is managed primarily through daily one-on-one meetings, via cell phone or in person, and what Marc Ezralow called a plan to "agree to disagree."

"We talk every day, and although Robb and I are primarily managing a transition into leadership, our fathers are still very much involved in the day-to-day process and in making decisions," he said. "If we don't agree, that's OK. From the beginning there have been differences. When I first got here I wanted to put up big billboards with beautiful girls on them to help boost membership. Both my dad and Gary told me it wouldn't work, but they let me do it anyway. Sure enough, it failed."

Robb's father, Marshall said he has few doubts about the younger generation's capabilities.

"These guys (Robb and Marc) have really done their homework and we trust them explicitly because we know they have the best interest of the club in mind. If we (Gary and I) didn't have absolute complete and utter faith in them, believe me, they wouldn't be here. And we consider it an honor and a privilege to have them."

Both founders say they have always sought to capitalize on trends in the fitness industry and revamping the club to accommodate changes along the way. The younger two say the new focus is on sports-specific training for young athletes.

"We heard about this new craze when we first started called racketball," said Gary. "So that's what we brought in for our members. And we've continued to stay in touch with trends and offer members (the club has about 5,000) what it is they want, not what we think they ought to have."

Collectively, the four say they are in complete sync with one another. Yet there are some red flags: There are no succession plans in place. There is no written plan establishing titles and responsibilities for the future, and, although the founders are concentrating more on other business ventures, they have yet to put together estate plans.

"We're planning on longevity," says Marshall.

"One thing that is absolutely essential when you are talking about more than one family in a business is that there are clearly defined rules about the future of the company," says Marta Vago, a business consultant and member of the board of directors of the California State University Northridge Family Business Center.

Ditto, says, Jim Ellis, director of the Marshall Family Business Program at USC.

"They may be loving each other now, but it's unrealistic to think they are all going to love each other 20 years from now, especially when we are talking about a difference of 10 years between the two younger principals," Ellis said.

Developing a plan

Vago suggested that, if nothing else, that Robb and Marc come up with a plan for how they intend to share responsibilities down the road, with each of their fathers' input, if desired. In addition, she said if there are wives involved in the decision making process regarding the business, even if they don't have an active role, there can be complications down the line if the interests of those individuals are not taken into account.

The founders claim they have never had a serious argument regarding Mid Valley, or other business ventures they've entered into together. If that's true, says Vago, the younger partners could stand to gain quite a bit from their fathers.

"The sons also need to have the same kinds of conversations their fathers did years ago," said Vago. "They need to talk about why they are in business, what they share as goals and how much do they want to grow the business five, 10 years from now, and what capacity will each take."

Finally, said Vago and Ellis both, the founders would serve the business and their sons well now to establish an exit strategy so that there is a roadmap for the future, which, if successfully done, will allow third generation family members to later take over.

"In order for there to be a smooth transition now, even if the elder two are still involved to a minor degree, clear exit plans must be put in place," said Ellis.

Family News

Program Changes: Cal State University Northridge radio station, KCSN 88.5 FM, has revamped its weekly radio program geared toward issues impacting family businesses. The 20-minute broadcast airs on alternate Mondays at 6:30 p.m. and is hosted by Dr. Marta Vago, a business consultant and member of the board of directors for the CSUN Family Business Center. The next broadcast is Sept. 15.