Do you know any business owners who can visualize a crystal-clear transition path from where they are—running successful companies and living great lives—to where they want to go—happily out of their businesses and living their Next Adventures? 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 paths. Often clouding their vision are the financial and relationship dilemmas that they know they will encounter and must resolve related to their own, their businesses’ and, in the case of family businesses, their family’s well-being. Read more about: Move Beyond Fear: You Can Have A Successful Business Transfer.
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, that successor 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?
Move Beyond Fear: You Can Have A Successful Business Transfer
Common Owner Transition Concerns
- 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 dilemmas 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.
Financial Issues
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.
Relationship Issues
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?
Move Forward and Increase Your Options
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.
Read our book: It’s A Journey – The MUST-HAVE Roadmap for Successful Succession Planning. Contact The Transition Strategists today for a complimentary consultation.
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.
