Relationships First or Business First? How to Set and Keep Priorities
If you were asked by a young entrepreneur to identify the three most important lessons you’ve learned over the course of your career, how many of the three would have to do with the logistics of a product launch, mechanics of installing cyber-security measures or mastering the intricacies of the Federal Tax Code?
All are certainly major accomplishments, but most successful entrepreneurs cite lessons learned that involve people; specifically, how to spot talent and trust our guts, how to draw out the best in others, how to build relationships, and how to mentor skillfully.
We’ve found that these lessons serve owners well as they begin to think about, plan, and implement the transition of their businesses to successors. In fact, we’ve found that the most successful transitions are created by owners who draw on these lessons and put relationships first (just behind business).
That’s a primary reason we made “Put Relationships First” the first of the Seven Guiding Principles (click to download) for the process we use to help owners craft business transitions.
Fools rush in where angels fear to tread.
If you transfer your business in a way that damages or destroys your relationships with the people you care about, what have you gained? For many owners, just the possibility of damaging relationships is the reason they hesitate to (or do not) create succession plans.
And there is good reason to think carefully about “relationship questions,” such as: How will the capable employee who has always dreamed of owning your business react when your daughter becomes the new owner? How will your other children (and spouse) react when your daughter becomes the sole new owner?
The fear of damaging relationships is understandable, but we assure you that there is a way to prioritize and protect your relationships during the transition of your business. In fact, the owners we work with tell us that their succession journey not only did not damage their relationships, but the journey actually strengthened them.
Five Relationship-Building Behaviors
We’ve observed five behaviors in owners who will settle for nothing less than succession plans that keep their most important relationships intact.
1. Communicate your feelings (including fear) and desires with others. We don’t mean to say that you share every feeling with every person. Instead, acknowledge what you are feeling and find a trusted person in whom you can confide.
2. Listen to the feelings (including fear) of others. Successors have fears and aspirations of their own.
3. Become a champion fisherman. Long before you put you finalize your transition plans, we encourage you to go fishing. Test the waters to see what others are thinking with questions like, “I’ve been thinking lately about my future and the company’s future. What direction do you see the company going as I get older?”
4. Make no promises. It can be tempting, especially when celebrating a win, to make offhand remarks like, “If I ever decide to leave, I want you to have part of what I’ve built.” None of us knows what will happen in the future so keep your options open.
5. Accept reality. There are no perfect business successions. Great ones, to be sure, but none perfect. At the core of every great transition is an owner who has set goals, prioritized them and acted according to a set of guiding principles—including putting relationships first.
We hope that these tips, behaviors and strategies helps you to put people as one of the highest priorities in your business and keep them there.
For more insights and guidance, download your complimentary guide “7 Principles of Successful Business Succession Planning” here.
Have you created an estate plan even though you have no intention of leaving this earth anytime soon? Making the appointment with your attorney probably wasn’t high on your list of “fun things to do,” but you did it — partially for tax reasons, perhaps, but ultimately out of love for the people and causes you care about. You now enjoy the comfort that comes from knowing that those you love will be taken care of. Read about: The Four Reasons It’s Never Too Early To Start Business Succession Planning
Planning to transition out of your business is another action item that may not appear on the top of your priority list, but it is a step that owners take ultimately out of love for the people they care about, both inside and outside of the company. Estate and business succession planning share another feature: In both, we know when someone has taken action too late. But is there really such a thing as too early? It comes down to how you think about it.
Estate and business transition planning differ in one important respect: mindset. Business transition planning requires you to adopt a new way of thinking. Why not start today?
Four Reasons It’s Never Too Early To Start Business Succession Planning
1. A change of mindset
Business succession is not (or doesn’t have to be) a one-time event. It can and should be a journey — one of the greatest projects and achievements of your business career. It is a privilege for the owner of a successful company to create a vision and a transfer plan that generates successful outcomes for you, your company, your successors and your family. For many of us, recognizing that privilege is a huge mindset shift.
2. More time equals more options
When she was in her nineties, my grandmother told me that as she aged, time moved faster. She fully expected that by the time she reached 100, a year would seem like a day. When owners tell me that they will begin to plan for the transition out of their businesses at some point “down the road,” I wish I could introduce them to my grandmother.
3. Overwhelm is common but avoidable
I cannot count the number of business owners I have met who have put off even thinking about the eventuality of transitioning their companies to successors simply because they have more questions than answers. As soon as they begin to consider how they will make the transition in a way that does not damage relationships with people they care for, they become completely overwhelmed and paralyzed. Without access to a principle-driven transition planning process, they remain stuck in the web of possible answers for years. As time passes, of course, their options diminish. At the end of the day, you don’t have to have all the answers. Simply start to ask the questions.
4. Come on in — the water’s fine
When it’s done right, business succession planning generates remarkable outcomes for everyone involved. If you just aren’t ready to dive into the planning process, stick a toe in the water. For example, you can start by recognizing the incredible opportunity you have to put a successful business in the hands of someone whose dream is to own a business.
Ultimately, it’s important to keep in mind that not knowing all the answers before you begin is the norm — not the exception.
Elizabeth Ledoux and Laura Chiesman will soon launch their latest book: It’s A Journey – The MUST-HAVE Roadmap to Successful Succession Planning. Available NOW on Amazon! Click HERE to learn more.
During their virtual book launch party, Elizabeth and Laura will share what inspired them to write this book and how it will impact family and private business owners nation-wide. This relationships-first approach to business transition will help you arrive at your destination—the next chapter of your life— financially healthy, relationships whole and your business in capable hands.
– Meet the authors of It’s A Journey and hear from clients
– Enjoy behind the scenes sneak peeks, special guests, and giveaways
For business owners, the critical event of transition can be a joyful and inspiring culmination of a lifetime of hard work and dedication. Or it can be tumultuous and emotionally complex, causing conflict and rifts in relationships. Which would you prefer?
Join the group of 100 percenters: business owners who have used the authors’ tools and processes to choose and mentor capable successors, position their companies for success, and go on to live happy and meaningful lives. Ledoux and Chiesman layout the step-by-step actions you must take to:
• Set and meet your emotional and material goals
• Communicate compassionately and effectively even in difficult situations
• Resolve dilemmas to achieve the outcomes you desire
• Maintain and enhance relationships with those you value
• Mentor and teach a successor, then step away
• Assess various succession strategies
• Calculate how much you need to live the next chapter of your life
• Create wins for yourself, your successors, family and company
You can achieve these outcomes and move forward with clarity and confidence. Your Next Adventure is waiting…
DISCLOUSURE – Investment advisory services offered through FirstWave Financial, Inc., an SEC Registered Investment Adviser. Succession planning services offered through The Transition Strategists. Elizabeth Ledoux/The Transition Strategists and Laura Chiesman/FirstWave Financial are not affiliated with each other. This presentation is designed for informational and educational purposes. It is not designed as a substitute for advice from professional financial advisors or succession planners. Each individual’s circumstances may be different. Individuals should seek financial, legal, and tax advice or other professional or expert advice based upon their particular circumstances.
Move Beyond Fear:
You Can Have A Successful Business Transfer
Do you know any business owners who can visualize a crystal-clear transition path from where they are—running a successful company and living a great life—to where they want to go—happily out of their business and living their Next Adventure? If you do, or if you are one of these owners, you are remarkable.
Remarkable because we’ve found that very few owners (if any!) can clearly visualize their business succession path. Often clouding their vision are the financial and relationship dilemmas that they know they will encounter and must resolve related to their own, their business’s and, in the case of family businesses, their family’s well-being.
Fools Rush In Where Angels Fear To Tread
We don’t think that Alexander Pope was talking about business succession when he wrote these words, but they apply perfectly. You anticipate that you will have to make multiple decisions and that the choices you make will impact the lives, not only of your successors, but of all the people who rely on your business for their success and well-being. You may suspect that the very mention of “moving on” will elicit strong reactions from those around you and some of those reactions may not be positive. You know that if you get the transfer wrong, you could destroy important relationships and, if your successor is not as adept as you were in running the company, you could send your company into bankruptcy. Finally, you may wonder how your life will have as much meaning and satisfaction as you found in running a successful business.
Of course, every owner has concerns that are specific to their unique situation, but do any of these sound familiar?
There’s no one inside my company who can take the reins and I don’t really want to sell to an outside third party.
How can I name one of my children as my successor when three of them are active in the business?
I don’t see how the employee I’d like to take over for me can possibly come up with the cash to provide a fair return on all I’ve invested in my company and that I want to live the way I want to live.
If I transfer my ownership interest to my daughter, I’m fairly certain that my junior partner will leave.
I’m afraid that once I leave, the business won’t do as well as it has under my leadership.
Will transferring ownership to my nephew ruin his life? Is owning a company really his life’s dream? Will he be able to handle the tough times?
No wonder so many owners pause before they jump into succession planning! They are considering a project with incredibly high stakes; a project that will affect the rest of their lives, the business that they’ve worked years to build, and all of the people they care about.
Fulfillment happens not in retreat but in engagement.
Unfortunately, some owners become so overwhelmed by these justifiable concerns that they simply freeze. Somewhere in the back of their minds they know that business succession is inevitable, but they just can’t move forward. As understandable as that reaction is, it robs owners of the opportunity to determine what they want the transfer of their business to accomplish for themselves, their companies, families and successors. Similarly, procrastination cheats owners out of the time they need to consider and implement various options that they require if they must pivot in a new direction.
Transferring a business to a new owner is never easy, and it is a high-risk endeavor, but it can also deliver huge rewards.
You gain the choice of time and money; meaning, you can live the way you want during next phase of your life (your Next Adventure).
Everyone you care about moves closer to their own Next Adventure.
Your business continues to support the people who depend on it.
It is a privilege to be able to create a vision, a plan and a business transfer that generates these outcomes, and a testament to your hard work to be able to place your successful business in the hands of a capable and engaged successor.Engaging Dilemmas
Naturally, your business transfer will be uniquely your own, and the obstacles in your path will be specific to your situation. Let’s look at a few of the most common before we discuss how you can anticipate and avoid as many as possible and design a plan to prevent one choice from resulting in consequences from which you cannot recover.
Been there. Tried That.
Occasionally, we meet owners who have dipped a toe (or an entire leg) into the succession planning pool and found the water to be icy cold. For some, when their spouses learned of plans to transfer a business to one child, marital harmony flew out the window. Others found that the key employees they expected to be “honored and thrilled” at the prospect of ownership were instead definitively uninterested. Ouch.
Just a few of the financial issues that might come to mind when you think about your business transition include: 1) figuring out how much you need (or want) to live the life you envision after you leave your company, 2) enterprise value, 3) taxes, 4) personal assets and 5) your successor’s ability to pay.
That’s a fairly extensive list, but believe it or not, financial issues, while important, are not the only issues that make successful succession planning so difficult or that stop the majority of owners in their tracks. Look back at the list at the beginning of this article and you’ll see that an equal or greater number of concerns fall into the relationship category.
One of the strategies that we use to help owners create a successful business transition is to put relationships first. That’s a radical recommendation in a profession saturated in succession strategies devoted solely to financial outcomes. But it is eminently reasonable to us and to owners who have spent their lives taking care of others and do not want to damage relationships with those they care about.
(Relationship issues apply to you, your family, successors and anyone you care about, such as longtime employees, customers, vendors and business partners.)
We ask you to consider yourself and honor the effort you have invested in building a successful business:
How will you be fulfilled? What will make your life meaningful after stepping out of ownership?
How do you envision the company continuing the legacy and culture you created?
We ask you to honor your spouse and family:
Will your successor choice effect family dynamics and how?
How does your spouse envision his or her Next Adventure?
How will you manage your financial success going forward for the health and well-being of your spouse, your family and you?
We ask you to consider your successor:
Is it their dream to run and own your business?
Does their spouse share that dream?
Does your timetable align with theirs?
Succession planning can be a scary prospect because there is so much on the line and tempting to ignore because there are more questions (at least initially) than there are answers. Retreating, from succession planning, however, does not make those questions disappear. It simply reduces the number of options you have and your ability to change course, if necessary.We encourage you to tackle the questions that give you pause or keep you from moving forward. We guarantee that your confidence and clarity will increase as you do so.If you’d like to share some of the specific issues that concern you, give us a call. We’re happy to share some of our experiences and stories of the past 30 years with you. You may be amazed to find that you are not alone in your challenges.
If the topic of choosing a business successor is one that you’d rather put away for a rainy day, this article is for you. Here you’ll find two lists: the five perspectives shared by business owners who have successfully transitioned their businesses to successors and the five most important characteristics these owners looked for and found in their successors. Here Are The Top Five Must-Have Characteristics in a Business Successor.
The second list will help you to evaluate possible successors as objectively as you can. More importantly, incorporating it into a transition process that puts relationships first gives you peace of mind that your successor is the right one for you (and you for them) and your business.
Let’s begin with you, a business owner thinking about possible successors. What characteristics should you possess before you start to make a list of characteristics your successor should possess?
• Abundance: First, consider how very fortunate you are. Choosing a successor is not a dilemma for owners of unsuccessful businesses because there are usually no interested successors.
• Leadership: You control the successor selection project. Please do not let anyone pressure you into naming a successor, and equally important, don’t put off making a choice due to fear of making a mistake or destroying relationships. The purpose of giving you a list of characteristics to look for in successors and of designing business transitions that put relationships first is to prevent both of these outcomes.
• Confidence: Again, you have created a successful business. You have calculated risk and made far more correct choices than incorrect ones about what products/services to develop and how to deliver them. Choosing a successor? You’ve got this.
• Humility: Your choice of a successor will affect your business, legacy, employees, family and possibly community, as well as your own financial security. This is a big deal, and you are not alone. As business owners, we are so close to our businesses that it can be difficult for us to step back to see the broader picture. Our advisors, if they are future-looking, help us to spot trends and alert us to changes (e.g., legal, tax, regulatory, competitive) that can affect our companies and protect us from undue risk. When considering possible successors, rely on your advisors.
Approaching the choice of a successor with confidence and humility emboldens many owners to move forward.
Now we turn to the most important qualities that make a great successor.
Top five must-have characteristics in a business successor
1. Ability to learn how to do what you do
Great successors are not carbon copies of great predecessors; instead, they have the ability to learn how you do what you do. If the qualities you’ve put on your “ideal successor” list bear a striking resemblance to your own characteristics, please set it aside for a moment, and meet fictional owner “Giselle.”
Giselle was a brilliant engineer who started her communications company shortly after graduating from college. She anticipated the explosion in cellular communication and began to construct radio towers and antennas. Thirty-five years later, she had a nice asset in her radio and cellular towers and one of the best reputations in the radio industry.
Giselle’s son, “Gordon,” did not follow his mother’s footsteps into the hard sciences. Instead, he put his gift for numbers to work in finance and accounting. He became a CPA and then went on to become the CFO of a furniture manufacturing company. When he indicated to Giselle that he was interested in running her company, she was thrilled. She was also uncertain because she could not imagine how anyone but an engineer could run the company successfully.
Gordon was not an engineer like his mother, so we asked her whether he had leadership and people skills similar to hers. He did, so she could check that box. Giselle was confident that once Gordon understood how to do what she did (drawing upon her knowledge, wisdom and practices), he would be able to drive the business forward and build on her success.
The “right” successors have their own skills and their own definitions of success. Pushing for an exact replication of your skills and methods may not work. Recognizing your successor’s abilities and building upon them does.
2. Willing and eager to assume ownership
We talk to owners a lot about their next adventures (contact us here): what they want to do and how they want to live after they leave their companies. Next adventures are equally important to successors. You want a successor whose dream it is to own and run a business. And not just any business — yours.
3. Fits with your timetable and you with theirs
It is not unusual to meet 65-year-old owners who want to wait to name a successor until their 15-year-old offspring are old enough to join the family business. More often, however, we watch 45-year-old offspring grow frustrated by their parent’s unwillingness to turn over the reins of the business. The common problem for both is the timetable: You are looking for a successor whose timeline aligns with yours.
4. An entrepreneurial ability to recognize new opportunities
The person who steps into your (very large) shoes will encounter opportunities that will differ from the opportunities during your tenure. Their ability to recognize opportunities will play a huge role in your company’s future success.
5. An entrepreneurial openness to new challenges
To take advantage of an opportunity or meet a challenge, entrepreneurs:
• Embrace new ideas.
• Can tolerate uncertainty.
• Understand that nothing goes as planned.
• Do not fear failure.
• Learn from their mistakes.
Having this list of the top five must-have characteristics in a business successor removes some of the emotion from the selection process.