Focus on what you can control in Family Business Transition
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Focus on what you can control in Family Business Transition
Nick Anderson, Business Consultant
Don't waste time worrying about things you can't change – Direct your focus to things you can control: Consider your options to transition well out of your business. In this recession Baby-Boomer business owners still face the clock. If you don't think ahead: you will be in the herd! 9 out of 10 owners who don't get anywhere close to what they expected or want for their business, delay in making a decision and for mature businesses.
I was reminded of the topics we covered two years ago through a number of conversations with Financial Planners. Two things stuck out in terms of their frustrations, especially with business owners.
1. Clients don’t want to reveal all their assets the planner
2. Clients will “dither” on the end game.
Some listeners will be thinking, rather skeptically, about the self interest motivating such frustration. But, for a minute, most financial planners are well motivated and they can’t build a book of business by not doing two things really well:
1. Know their clients really well
2. Act in their best interests
Other related conversations with businesses owners about when and how to transition:
• A fast expanding food broking business which is rapidly expanding and the founder is 59yo and his son is 32yo have no transition plan
• A printing company where the 52yo owner was returning to work after a major illness and his 28yo son ran the business very well in his absence. The owner wants to retire at 60 yet thinks it is too early to plan his transition
• An environmental remediation company’s owner got caught by the recession and had to pull back control from his inexperienced management team.
So, Nick, what is your theme this week?
“May you live in interesting times” Old Chinese curse
Listeners don’t want another recital of the recession litany. Yet, there is opportunity in any downturn.
Yes, conditions are unpleasant with loads of troubling BUT….
"If you can keep your head when all about you are losing theirs and blaming it on you; If you can trust yourself when all men doubt you, But make allowance for their doubting too; . . . If you can meet with Triumph and Disaster And treat those two impostors just the same . . . Yours is the Earth and everything that's in it."
My message is for business owners this month is - Don’t waste time worrying about things you can’t change – Direct things to things you can control: this choices on how are you going to move forward.
That’s easier said than done in this economic climate
Oh I am not talking about easy but I am talking about the need to be proactive…Since I have been on the radio, 4years? for those business owners who are baby boomers the dynamics of their condition has not changed.
1. 78m Boomers of whose wealth is held in 12m privately owned businesses
2. 70% will change hands in 10-15years
3. Trillions of dollars will transfer
Now think of the business owner with 180,000 hours, say, invested what are thinking
• Work less in next five years
• Consider leaving the business
• How do I get out?!
• Don’t know what the business is worth
• What is the best time to sell
Surely, though, most owners are in survival mode and need to protect their business
But why not combine the two. Expand strategy to accomplish both – the reality is they are not mentally exclusive. In fact, there are real problems if you don’t keep them integrated.
Remember the quote “keeping your head” This is not the time to abandon business planning.
It takes 2-3years to successfully implement in NORMAL Times. You can argue now is the right time to put in place tactics that will increase value when the recession ends.
OK. So what can business owners do now?
Well, the business cycle is alive and well, there’s still timing when you business is at its optimal value for rejuvenation merger, acquisition.
If you don’t think ahead: you will be in the herd - those 9 out of 10 owners who don’t get anywhere close to what they expected or want for their business. Delay in making a decision for mature businesses, especially erodes the transaction value.
The fact is that less than 40% of businesses successfully transition their business…. Yet 84% say the need the proceeds to finance their retirement.
There’s been no change to owners lack of urgency:
• 58% don’t have any plan
• 33% informal
• Only 9% have a formal written plan
Ummm, what’s the connection between 1 in 10 get what they want and 1 in 10 have a formal plan.
When are owners thinking of exiting their businesses?
28 % within 5 years, 52% plan on exiting within next 10 years
Like retirement and personal investment planning, the longer the timeline to plan and implement, the better results.
With such compelling stats for just how much is on the line, what’s holding people back?
There are the three fears of transition:
• Fear of Loss Wealth
• Fear of Loss of Control
• Fear of Conflict
What are the main reasons for not having a succession plan?
It’s a bit like Letterman’s Top Eight Reasons (Excuses) for not getting the right return on 180,000 hours of blood, sweat and tears!
8. Too scary
7. Thoughts of the end
6. Family/Employee conflict
5. Don’t want to think of leaving
4. Can’t get adequate advice
3. Too complex
2. No Time
No. 1 – No time to plan!
(Comment) then ….In this recession why has transition planning become even more important?
There will be more market competition – fewer buyers than sellers
With downward pressure on business values a premium will be placed on well run businesses that stand out5 from the pack and can differentiate themselves in the market place
Planners 10-0: Non-Planners: 0-10
Which team do you want to be on?
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