In the recession: downturn has slowed sales to third parties, but a revenue dip could be a family value for company heirs.

• Author: Taylor, Mike
• Position: SUCCESSION - Statistical data

On April 25, 2006, Michael Van Gilder took over as CEO of Van Gilder Insurance Corp. In doing so, he succeeded his father, who succeeded Michael's grandfather, who succeeded Michael's great-grandfather, who started the Denver firm back in 1905.

Michael Van Gilder, 42, has seen the studies and appreciates how rare this is. Fewer than 30 percent of family businesses make it to the second generation, and only 10 percent survive to the third, according to Family Business magazine. The ColoradoBiz Top 50 Family-Owned Companies list is exceptional in that regard, as nearly a quarter of the firms (12) have made it to a third generation, and six - including Van Gilder Insurance Corp. - are into their fourth-generation.

Ned Minor, a longtime Denver transaction attorney in the field of mergers and acquisitions and author of the book, "Deciding to Sell Your Business: The Key to Wealth and Freedom," cites a survey by Mass Mutual in which 80 percent of business owners said they wanted to ultimately sell or transfer their business to key employees or family members.

The same survey, he says, showed that happens less than 20 percent of the time.

"Why? Because for the vast majority of business owners, their business is their largest asset," Brown says, "and it's only when they sell that asset and trigger a liquidity event and go from paper wealth to cash do they really achieve their definition of wealth and financial independence."

While the recession has had the predictable effect of slowing sales of businesses to third parties as lowered valuations have made selling an unappealing option for owners, the same downturn has made this an advantageous time for transferring ownership shares within families.

"Two factors are converging in this market to create a tax-planning opportunity and a transition opportunity for family-owned businesses," says Tony King, also with Minor & Brown P.C., where he is a partner. "When the value of the business is down, you have an opportunity to transfer more value to a daughter or a son or a family member. Second, the tax law - at least for now - allows you to take discounts on interest transferred to family members. So that represents more value that you can transfer to a family member without paying taxes on it."

_TOP 50 FAMILY-OWNED COMPANIES Ranked by number of employees '09 '08 Company Projected '08 % change or actual revenue '09 (000's) revenue (000's) ranks 1 2 American Furniture N/A $310,000 N/A Warehouse 2 3 Natural Grocers by Vitamin N/A 185,445 N/A Cottage 3 1 Tuff Shed Inc. N/A 170,000 N/A 4 4 RK Mechanical Inc. $164,908 151,781 8.6% 5 C and D Enterprises Inc. 36,000 28,500 26.3% 6 5 Burt Automotive Network N/A N/A N/A 7 7 Baxa Corp. 150,000 131,000 14.5% 8 8 Ralph Schomp Automotive N/A N/A N/A 9 Cigarette Store Corp. (dba N/A N/A Smoker Friendly/Gasamat) 10 6 Productive Data Solutions N/A 44,000 N/A Inc. 11 9 Brannan Sand & Gravel Co. N/A 100,000 N/A 12 13 Mike Shaw Automotive Group 220,000 233,416 -5.7% 13 14 Hercules Industries Inc. N/A N/A N/A 14 10 Haselden Construction LLC N/A 266,000 N/A 15 15 Publication Printers Corp. 64,401 75,300 -14.5% 16 10 Clark's Market Inc. N/A N/A N/A 17 16 McGuckin Hardware Inc. N/A N/A N/A 18 10 Johnson Storage & Moving Co. 33,500 42,000 -20.2% Holdings LLC 18 21 Rocky Mountain Instrument 21,500 100.0% Co. (RMI Laser) 20 18 Van Gilder Insurance Corp. N/A N/A N/A 21 17 Fiore & Sons Inc. 55,190 -100.0% 22 Merritt Equipment Co. N/A N/A N/A 23 Lehrer's Flowers Inc. 14,000 14,000 0.0% 23 19 Swingle Inc. 16,100 17,300 -6.9% 25 21 Porter Industries Inc. 5,629 -100.0% 26 24 Johnson's Corner N/A N/A N/A 27 Gallegos Sanitation Inc. 13,000 13,000 0.0% 27 19 Guy's Floor Service Inc. N/A N/A N/A 27 26 Dellenbach Motors N/A N/A N/A 30 FMH Material Handling 38,200 43,260 -11.7% Solutions 31 23 Wanco Inc. 33,000 43,000 -23.3% 32 Heggem-Lundquist Paint Co. 13,000 13,000 0.0% 32 28 DeBourgh Manufacturing Co. N/A N/A N/A 34 29 General Air Service & Supply N/A N/A N/A Co. 35 31 Roche Constructors Inc. 166,570 143,998 15.7% 36 31 Rockmount Ranch Wear N/A N/A N/A Manufacturing Co. 36 Mountain Man Nut & Fruit 12,000 11,000 9.1% Co. 36 31 RE/MAX Alliance 2,400,000 2,500,000 -4.0% 39 47 Affordable American N/A N/A N/A Insurance 40 30 Greiner Electric LLC 13,000 17,500 -25.7% 40 36 Horan & McConaty Funeral N/A N/A N/A Sevice/Cremation 42 27 Republic Financial Corp, N/A 234,930 N/A 43 37 Good Day Pharmacy N/A 21,000 N/A 44 Moody Insurance Agency Inc. 9,738 11,663 45 39 CEAVCO Audio Visual Co. 17,000 17,000 0.0% Inc. 46 Houg Special Services Inc. 26,500 28,000 -5.4% 46 31 Palisade Greenhouse Inc. N/A N/A N/A...