Are you really open minded in your search for a business successor?

Are you really open minded in your search for a business successor?
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I attended a workshop for business owners recently and heard many conversations about the search for successors. Several mentioned that because they couldn’t find “the right successor,” to continue their legacy, they were resigned to selling to an outside third party. When these owners explained to me why their children, business partners or longtime key employees weren’t “right,” I left these conversations wondering what ever happened to curiosity? I was tempted to ask, “Are you really open minded in your search for a business successor?”

As I recall these conversations, there were variations of five reasons why some owners overlook possible successors.

Reason 1: Past behavior

Past behavior can be a valid reason to exclude a person from consideration if that behavior is chronic rather than a one-time event. For example, a chronic inability to make business decisions may indicate that a person is not cut out for business leadership.

More often, however, owners cite an isolated incident or ancient history. “My now-45-year-old child took my car for a joyride before she had a license when I was out of town. I just don’t trust her.” Or “Six years ago, my key employee led our unsuccessful attempt to penetrate the marketplace with a new product.” I wonder if these owners were perfect teenagers or ever made a poor business decision?

Reason 2: Biases

Many of our biases aren’t obvious to us or to others. On the other hand, a bias is on full display when a founder tells grandchildren that “A woman will never run this company” or an advisor tells an owner “Your college-bound sons would never want to run a window installation company!”

Reason 3: Gossip

Some owners will rule out successors based on second-hand information, such as “I heard he always brags about his accomplishments” or “They say she has mental health issues.” I can’t help but remember Mark Twain’s words “A lie can travel halfway around the world while the truth is putting on its shoes.”

Reason 4: Lack of Information

It’s very common for owners to tell me that a key employee or business partner “just doesn’t have the money to buy my company.” That may be true, or it may not. Every day motivated successors find ways to finance their purchases of ownership. Owners who are motivated to keep their companies in their communities and take care of loyal employees find ways to help successors to continue their legacies.

Reason 5: Myopic Vision

In Elizabeth Ledoux’s book, It’s A Journey, she tells the story of an owner / engineer who built a successful cell tower communications company. Her son was a CPA and had experience as the CFO of a furniture manufacturing company. When the son told his mother that he was interested in running her company, she was thrilled and concerned: “How could anyone but an engineer run this company?” As she thought more about the situation, she recognized that if she sold to a financial buyer, it would not likely install an engineer as CEO. Instead, that buyer would put someone with leadership and financial skills as well as some knowledge of the industry in her chair. Her son met all these qualifications so she helped him hire an engineer who could replace her expertise and a management team that filled her son’s skills gaps just as she had once hired a team to fill hers.

Another version of myopic vision is the owner who believes that a potential successor will never be able to do what she does and / or do it how she’s done it. To those owners we say, “You are right: No successor comes to the job with the same experience and skills as the departing owner.

Are you really open minded in your search for a business successor?

Owners who eliminate potential successors from consideration for any of these five reasons, shrink the pool of successor possibilities and often become stuck. When that happens, the only way to overcome biases, a lack of information and myopic vision, and a reliance on grapevine reports and outdated examples of behavior is to engage in conversation.

Engage in Conversation

We’ve written extensively about communicating with successors and recommend that when testing the waters with a potential successor, that owners “go fishing.” To a key employee who made a past mistake, you might say, “We’ve never really talked about that unsuccessful product launch. Can you tell me what we could have done differently?” To a key employee who you think might not have the funds to buy your company, you might say, “In the past we’ve talked in general about you taking over the business. Are you still thinking about whether you want to do that and how that might look?”

We suggest that owners greatly improve their odds of finding the “right successor” for their businesses by bringing curiosity rather than assumptions to conversations with possible successors.

For more hints about how to engage in effective conversations with possible successors, check out: Five Communication Tips for Owners Contemplating Business Transitions, Five Relationship Building Behaviors for Business owners , Six Tips for Talking About Your Business Transition, and Three Rules of Engagement for Successor Development in Succession Planning.

Elizabeth Ledoux is a co-author of the award-winning It’s A Journey: The MUST-HAVE Roadmap to Successful Succession Planning,  as well as Accelerate Your Entrepreneurial Flight and Understanding the Growth of the Entrepreneur. She frequently speaks to organizations and business owners about challenges and opportunities in private and family business transitions, business and individual growth, and the business succession journey.

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