This year is very special for me and for Dunn Lumber in Daytona Beach, Fla. In 2005, I have the distinct honor of serving as the chairman of the National Lumber and Building Material Dealers Association (NLBMDA), and I am fortunate to celebrate Dunn Lumber's 100th anniversary serving builders and contractors in Central Florida.
Dunn Lumber began as Dunn Bros. Hardware and Crockery in November 1905. It wasn't until 45 years later that we ventured into the building supply business by purchasing an existing lumberyard. Like many other longtime businesses, we have changed over the years. In addition to shifting our focus from traditional hardware to strictly building materials, as market conditions have changed in Central Florida, we also have been forced to clearly define how we do business. Currently we are approximately 95 percent contractor sales.
Since becoming active in NLBMDA, I have met many individuals from across the country whose companies are as old, if not older, than Dunn Lumber. The Austin Family Business Program at Oregon State University reports that roughly 70 percent of all family businesses fail to survive into the second generation. Of those that do survive, only 50 percent make it from the second generation to the third generation. Besides the hard work and dedication needed to make a company flourish, what helps companies beat the odds and survive for the long term? My assessment (and it certainly is not based on scientific fact) is that those companies survive because they planned for the future and have leadership that is open to change.
Over the past year, Dunn Lumber's stockholders developed a plan for our company's future by forming an employee stock ownership plan (ESOP). This ESOP was just recently unveiled to our managers and employees in October. By forming an ESOP, a company creates a trust to which it makes annual contributions. The funds that flow into the ESOP are used to purchase shares of stock from existing family stockholders. The shares are then allocated to the members of the ESOP based on a vesting schedule. Forming the ESOP in this manner, although there are many other ways to do so, best suited our needs at this time.
My wife Cheryl and I were blessed with three wonderful daughters who now have growing families of their own with interests outside of the company. My cousin Barry, the only other family member working in the business, and his wife Deborah also have two daughters and similar circumstances. For this and other reasons, an ESOP facilitates estate and business succession planning while securing a future for our 100-year-young and thriving lumber business.
As I mentioned earlier, through NLBMDA I continue to meet other dealer executives from second-, third-, and fourth-generation companies. And I don't have to look very far for another shining example of business longevity: NLBMDA's chair-elect, Kevin Hancock from Casco, Maine, is a vital part of a sixth-generation company. Kevin and his brother Matt operate Hancock Lumber and Hancock Land Cos., respectively. Established in 1848, their company is listed in Family Business magazine as America's 57th-oldest family company. Now that's perseverance!
Because of the exciting work being accomplished at NLBMDA, the successful planning of our ESOP, and Dunn Lumber's 100th anniversary, 2005 is shaping up to be a special and memorable year! With careful planning, the future looks bright for countless other companies in our industry, as well.
Sam Dunn is President of Dunn Lumber in Daytona Beach, Fla., and is chairman of NLBMDA.