Planning is a bore compared with running a business. If owners want to fully benefit from their lives' work, they need to grit their teeth and start tackling those three life questions before they get answered for them by life's forces.
The problem is, most owners avoid thinking about their next stage, their businesses don't get sold properly, and they lose the wealth they spent their lives building.
"One business owner that we came across had no transition plan, no successor, a son in the business who did not have an interest in running it, and no estate plan at all," says Maria Milanetti, a partner at MarchFifteen, a consulting practice specializing in business transitions.
"The owner was 70 years old, running a highly successful business, and utterly oblivious to the risks for his family's future wealth."
This scenario is common in Canada.
Too often, the only part of a business that can be salvaged are its assets, but not a great deal more, leaving the family in a precarious position. The economy also loses a company that could have continued under new leadership.
Why is this sad lack of transition such a common scenario for too many privately owned businesses?
Milanetti says, "It's quite natural for founders and those running the business successfully to 'want to keep a good thing going' and to feel that they need to keep running the business themselves."
"Often they want to 'protect' others from this responsibility."But their reluctance to share how they make decisions or influence stakeholders with their next generation leaders can have long-term negative effects. Milanetti acknowledges it can be difficult to start the conversation around transition or succession. She recommends starting with the following three questions:
Have you thought about the next chapter in your business?
This question may prod an owner to be able to describe verbally a picture of the business within the next five years. As an extension of this question, it can be useful to include the next generation of leaders if there are any tapped to take over the business. Ask them to share how they want to build the business in the longer term. Like the son working with the 70 year old owner encountered by Maria, the truth will come out that they have no interest. Many next generation family members are not wanting to take over the business and doing this type of exercise will bring this urgent issue into the light sooner than later.
How can we plan that future together?
Suggest setting aside some time with a facilitator or business adviser and describe how critical conversations can be shared in a relaxed, reflective and safe situation. It makes it a safer process. It also means someone else brings energy and an outsider perspective to winkle out those tough questions business like to avoid but that need to be addressed.
What will your life look like in three years?
It can not be underestimated how difficult it can be to step away from a business, even if the Chairman role is still offered with a desk at the office. The emotional challenges of giving up control over a privately owned business and transitioning into a new role as “ex-entrepreneur” – whatever this new role may be – requires reflection about one’s identity and about other family members. This is not a natural state for most high-action owners. Dealing with this identity change can be very important to helping the transition to take place. However, this can be the most tricky question to bring up as it starts to deal with the prickly topic of the business transition. Peter Pan whispers that planning for life after the business means retirement, and that's for old people, not a dynamic business owner, no matter the biological age. That way of thinking can be disastrous for a family if the owner is forced to reduce his or her time at the business or stop altogether. It is better to address changes while everyone is healthy and has the time and energy.
"At every juncture," Milanetti says, "We recommend planning. That is planning for the mentoring of next generation leaders, for the transition between current leadership and successors and, most importantly, planning for the owner to be clear what will make their lives meaningful in their next chapter. These are not people who are used to doing nothing. they need to see the door opening to welcoming place."
