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Like many wineries that are family owned, succession planning vital

Shelly Rafanelli-Fehlman, winemaker at A. Rafanelli in the Dry Creek Valley, is in the midst of her 13th harvest at the winery. And at 37, the fourth-generation winemaker is also helping lead the winery through the challenges of estate and succession planning, all aimed at preserving a treasured family business and way of life.

The winery was founded in 1974, though the family had been selling grapes from their vineyards since the early 1900s.

Alberto and Leticia, Ms. Rafanelli-Fehlman’s great grandparents, came to the U.S. from Italy and settled in Healdsburg. Their first winery and vineyards were established in 1911.  Americo, her grandfather, bought the land where the winery is today.

Most things about the winery have remained the same. They have kept it small. Only 11,000 cases are produced per year, and the wine is not available in retail outlets. All tastings are done by appointment only.

[caption id="attachment_15581" align="alignright" width="288" caption="Shelly Rafanelli-Fehlman"][/caption]

While this works well when it comes to wine and giving consumers what they have come to love and expect from the winery, Ms. Rafanelli-Fehlman and the others in her generation are bringing in modern business practices.

“It was only recently that we started to accept credit cards,” she said.

Though her father David Rafanelli is set on making the wine the same way as he has in the past, he is no stranger to some kinds of change.

"When my father joined my grandfather, he had to convince my grandfather to start a cabernet sauvignon program," said Ms. Rafanelli-Fehlman. "When I graduated from college, I had to convince my dad to let me start a merlot program."

Ms. Rafanelli-Fehlman graduated from Cal Poly, San Luis Obispo, studying agricultural business and marketing. Craig Fehlman, her husband, is the vineyard manager for the winery, one of the most highly regarded in the industry.

"I think it would be hard to argue that Rafanelli isn’t one of the first cult wines, not only in Sonoma County, but in California in general," said Clay Mauritson, president of the Winegrowers of Dry Creek Valley and owner of Mauritson Winery. "The winery has stayed small and dedicated to quality. It is one of the great success stories in Dry Creek Valley."

And this is why, Ms. Rafanelli-Fehlman said, “We don’t change the way we think about making wine.”

But there will be changes to the business aspects of the winery.

And as far as the business succession and estate planning goes, there can be quite a bit of difficulty, both from a strategic point of view and emotional.

“Because business equals family,” she said. “Even if you are not in the business, you are still in the family.”

She said that when making the estate plan it was important to honor the work that she and her husband have put into the winery without neglecting the rest of the family.

Ms. Rafanelli-Fehlman said one of the most important things in getting things straight and worked out was to have a third party in the room – someone who is not in the family.

“We started having these monthly meetings,” she said. “The family would get together and start to talk about how things would work out and everything. It would quickly fall into an emotional mess.”

Nothing was getting done. Then they invited their accountant to the meetings, and things seemed to go a lot smoother.

“It keeps things at a professional level,” she said.

Ron Wargo, partner at the law firm Friedemann Goldberg in Santa Rosa, helped put together the estate plan for Mr. Rafanelli.

Doing the estate plan was a major step for her dad, said Ms. Rafanelli-Fehlman, a process that took more effort and time than anyone anticipated.

“Part of it is the emotional part of it. Just thinking about all of those issues and figuring what part of the business you want to stay involved in,” Ms. Rafanelli-Fehlman said.

“When your hobby and interest is the business it is difficult to get out of it,” she said.

Preparing the estate and succession plan “kept getting more complicated,” she said. “It was a two-year process, and it was expensive. It was emotional."

But in the end, she said, it's necessary to preserving everyone's interest, not the least of which is being able to keep making great wine.

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The Rafanelli family is not the only one that realized the importance of having outside people involved in the business.

Friedman’s Home Improvement in Santa Rosa recently went through a succession plan and discovered the value of having outside board members.

Barry Friedman, the youngest family member in the business who eventually will take over, said that of the seven board members, two are outside and five are internal.

“I think they keep us sharper, and having them a part of it keeps us on track. It is easier to be accountable to co-workers,” he said.

The outside members know what is going on in the outside world, he said.

He also said they did a retreat where they went out of the normal place of holding business. Being away, they were able to find a new direction of how to do things.

“We would not have gotten to the same conclusions normally,” he said.

As far as putting together a successful succession plan, he said, “It is nice to know we talked about this. I know other family businesses that wait until the person is ready to retire.”

He said he has so many people surrounding him that have been there a long time, it makes him comfortable.

For Mr. Friedman, the preparation for taking all of the business on has built confidence. He said he knows he will be able to get to the point he needs to be to lead the company.

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Submit items for this column to Jenna V. Loceff at jloceff@busjrnl.com, 707-521-4259 or fax 707-521-5292.

Rafanelli story keynote at forum

SONOMA COUNTY – Shelly Rafanelli-Fehlman will be the keynote speaker Nov. 5 at a family business succession planning event sponsored by the Business Journal and experts in accounting, law, the wine industry and banking.

The expert panel includes Jim Andersen of Burr Pilger Mayer, Mario Zepponi of Zepponi & Company, Michael Sullivan of Wells Fargo Bank and moderated by John Mackie of Carle Mackie Power & Ross.

A. Rafanelli is a member the Winegrowers of Dry Creek Valley, whose members are also participating in the event.