Some entrepreneurs claim to not be ready to plan a succession. Some know they need to, but are scared to even think about it because “they don’t know, what they don’t know”. Some are simply in denial, “why would I leave?” they ask, “I love my business”.
Why, you may be asking, is this so?
Here are some problems that can prevent a business owner from creating a successful Transition Plan:
1. Lack of information about what to expect and about your options
2. Unresolved emotions and fears about leaving your company
3. Limited thinking about your future possibilities
4. Lack of a clear vision for your future
5. Lack of clear goals for your personal and business futures
6. Lack of a plan for how to achieve your goals
7. Lack of support from professional advisors experienced in the Transition Process
So, for all of you not planning, stuck on planning, or simply afraid, are here fifteen ways to leave your business unsuccessfully (we hope these are a wake-up call):
A. Not leaving
1. An R&D approach (repression and denial)
Owners don’t even want to think about leaving, so they don’t plan ahead. They do nothing. Doing nothing makes owners and their companies vulnerable when unexpected events occur, and can lead to business decline, financial loss, or to personal and family upheaval.
B. Leaving involuntarily
2. Unexpected illness or disability
If an owner has to leave suddenly due to unexpected illness or disability, but has made no plans for the future of the company, then the owner, their family, and business can all suffer.
3. Sudden death (“Dying at your desk”)
If an owner has made no plans for the future of the company and dies suddenly, their family and business can both suffer.
C. Trying to leave (but being unsuccessful at it)
4. Making an impulsive decision
When owners suddenly decide they want to leave their companies, but don’t take time to prepare or plan. Making an impulsive decision often happens when some negative event occurs – for example, the business is doing badly, or the owner unexpectedly develops a medical condition and suddenly has to think about leaving. But suddenly deciding to leave your business, or quickly trying to pass it on to someone else doesn’t give you time to explore all your options. You can’t make the best decisions, and you probably won’t be able to get the money you want for your company.
5. Owner’s Indecision
Owner’s Indecision refers to owners who think that maybe they want to sell their companies, but they’re really not sure. They might go to an M&A firm, investment banker or other business intermediary and say “I’m interested in selling my company.” But very soon the owner goes back to the intermediary and says, “I changed my mind. I don’t really want to sell,” and take the company off the market. In fact, the owners are really only “kicking the tires” or “just looking.” They are not serious sellers.
Because of this, owners who change their minds can develop a bad reputation, and may not be able to find an intermediary willing to work with them when they really are ready to transition out of their companies.
6. Seller’s Remorse
Seller’s Remorse is, unfortunately, a very familiar scenario. An owner decides they want to sell their company and goes to a business intermediary to help them find a buyer. The negotiations may actually have begun – and all of a sudden the owner gets “cold feet.” The owner wasn’t emotionally ready to sell, and stops the deal.
The owner who feels Seller’s Remorse may lose more than the retainer they paid to the intermediary. Some intermediaries now charge penalties to owners who get Seller’s Remorse and pull out of the selling process.
D. Trying to transfer the company to new ownership (but doing it unsuccessfully)
7. Making a limited or incorrect decision
In this scenario, the owner has a fixed idea of what they want to do with their company (for example, “I want to leave it to my son.”) But this may be the wrong choice. It may be the wrong person, or the person selected may not be ready to take over. Or the company may fail later because it was passed on to the wrong person, which can be problematic for the former owner (and their family) if they were depending on future income from the company to support their new lives.
Owners need to be aware of and compare all their options before making a decision about who the best new owner should be.
8. Trying to do it all-by-myself
This refers to an owner who is trying to personally sell the company to new owners, and at the same time trying to keep the company running successfully day-to-day. The business owner may lack the expertise to find a new owner, may not have enough time and energy to focus attention on both goals at once, and may fail at both. This owner needs to work with a team of professionals experienced in the transition process, who can help the owner create and implement a transition plan.
Stay tuned! Part 2 of this article will be here on Tuesday!