Regardless of whether your business is big or small, perhaps the most rewarding legacy you can create is opportunities for your children. That most certainly has been the case with the Tagawa family in Brighton, Colo.
Tagawa Greenhouses just completed one phase of a succession plan involving 26 family members, passing the ownership and management of the business from one generation to the next. The family business was founded in 1967 by Frank and Hazel Tagawa and their six children, Ken, Albert, Dave, George, Jim and Caroline. Frank and Hazel came from the Yuba City area of California and grew vegetables before being sent to a camp at Amache, Colo., during World War II. After the war, Frank worked as a sharecropper and truck farmer until saving up enough money to purchase 120 acres outside of Brighton.
The family grew vegetables and seedlings in a few wooden-frame greenhouses and then diversified into carnations, roses and spring bedding plants. Today, Tagawa Greenhouses is the largest producer of bedding plant plugs in North America through its partnership with Ball Seed. The operation is also a strong producer of retail-ready, finished product for The Home Depot, Costco, supermarkets and other retailers in the region.
Tagawa Greenhouses is actually just one division of the family enterprise, Tagawa Inc., which also includes:
•Â 60 percent ownership in Denver Wholesale Florist, which has 14 wholesale branches across the United States.
•Â Tagawa Garden Center and Florist, a premier independent garden center in the Denver area.
•Â Ball Tagawa Growers, a 50/50 partnership with Ball Seed in California.
With $35 million in sales, Tagawa Greenhouses is the second largest of the four divisions and was the first to undergo succession planning.
A Smooth Transition
Ken’s son, Randy, had the benefit of working closely with his father, uncles, siblings and cousins his entire life before taking over as CEO. Although he graduated from Colorado State University with a degree in hort/business, there was a point in which he almost became a franchise owner of a pizza restaurant 15 years ago. But a much better opportunity came alongâ€“managing the new Ball-Tagawa production greenhouses in Arroyo Grande, Calif.
He stayed there for five years and then came back to Colorado to manage Tagawa Greenhouses. At that time, 10 years ago, a more corporate management structure was put in place. Before, each brother ran a section of the company.
“Even though I am the CEO, my dad and uncles are still very active in the company, as well as a total of 15 family members within the Tagawa organization,” Randy says. “Dad helps me oversee the administration and overall business aspects of the company, and George keeps a close watch on production and culture.”
In recent years, Tagawa Greenhouses has been transitioning from a business that is family run to family owned. Outside consultants and long-term employees who are not family members have been a big part of that.
“We at Tagawa have developed an infrastructure that is both vertically and horizontally integrated, from growing, wholesale, distribution, merchandising and retailing, which has provided the flexibility and ability to strategically plan and react to the always-changing business environment we encounter every day,” Ken says. “This has provided numerous opportunities for not only the family, but for the dedicated employees of our companies.”
When asked for advice for other family businesses undergoing succession planning, Ken says, “It does take a dedicated effort over a long period and it’s important to emphasize the process of building relationships, both with family and employees, and to communicate, affect good planning, and where possible, try to engage competent professional third-party consultants.”
A Plan With Values
The Tagawas retained one of the largest accounting firms in Denver, EKS&H, to help with the estate planning and succession plan. The process began with the family identifying family guiding principles:
•Â Maintain the family business legacy.
•Â Shift from a business to support the family to what’s best for the business.
•Â Provide retirement funding for uncles and aunts.
•Â Maintain profitability within each business segment.
“We wanted concentrated ownership as the businesses pass from the first generation to the second,” Randy explains. “We felt that in our business, it’s hard to have people who weren’t in the business or interested in the business making decisions for the company.”
Ken adds, “It’s important to note that Tagawa has always emphasized that a career path within the companies is a choice, and in order to be successful, one has to have passion in their job.”
The next step was developing objectives and a plan to meet the principles:
•Â Organize Tagawa Greenhouses’ ownership for future success.
•Â Give all cousins the opportunity to become owners of Tagawa Greenhouses. All owners must be dedicated, full-time employees and willing to put all their personal assets on the line for the business.
•Â Maintain flexibility for uncles and aunts to make decisions regarding individual estates.
•Â Protect the family enterprise.
Of the 15 cousins and in-laws, six became new owners of Tagawa Greenhouses: Randy Tagawa, Yoshi Tagawa, Aiko and Yuji Kimura, Glenn Tagawa and Cheryl Tagawa. Ownership was also opened up to two long-term managers who are not family members: John Williams, who is production vice president and has been with Tagawa Greenhouses for 22 years, and Bill Kluth, who is in charge of legal and technology and has been with the company 10 years.
“I was very honored to be asked to participate in the future of the company as an owner,” Kluth says. “The Tagawa family values are the company’s values. Their tradition of hard work, dedication to employees and customers and producing high-quality products make it a great place to work and a great opportunity.”
When Williams handed Randy the envelope with his personal assets for the bank, he wrote, “This is everything that we own. We feel that it’s a good investment. We are investing and believing in ourselves, our people and the business.”
Randy couldn’t agree more. “I think that’s what all of us feel in the new organization,” he says. “The next generation of owners will have the same dedication, passion and energy to take the business into the future.”
Yuji Kimura says he was impressed by how fairly things were presented. “Everyone had the opportunity to become part of ownership, and because there was a financial commitment, also to become owners. It truly did feel as if we were starting something new with all the benefits of an established business.”