We have a model we use when advising a private company owner who is planning their business transition. It involves three key elements:
- Business Readiness
- Owner Financial Readiness
- Owner Emotional Readiness
While each of these elements has its unique challenges, the one that most often stands in the way of a good transition is the owner’s emotional readiness. Having worked through this process with many owners, we have found that there are two principal reasons achieving emotional readiness is so hard:
- Many owners define themselves by their role in the business. The business that they founded becomes like one of their children and they have a high degree of emotional attachment to it. As a result, the business often defines who they are. Separating their identity from that of the business is very difficult – and for good reason.
- There is no playbook on how to do this and everyone tackles this complex issue differently. There isn’t a one-size-fits-all checklist to guide you through the process; it is highly individualized.
We don’t have any guaranteed answers either. However, the one thing we do know is that this complex issue does not solve itself and inaction does not make it go away. Doing nothing should not be an option for an owner. But that is what most do because it is easy to avoid the subject. The reality is, though, that you can proactively work to figure out your path or not – but both are conscious decisions.
We view the fact that there is no set playbook as a positive because this process, by its very nature, should be unique and personalized. We have worked with numerous owners who have successfully transitioned to their next chapter and none of their stories are the same. Some stayed with the business in a chairperson’s role, some have great hobbies they took more time to enjoy, some served on boards, and some had no idea what to do but experimented with lots of things and slowly figured it out.
Through our work with many CEOs and business owners a few common themes have emerged on this topic. Here is a sample of their feedback and advice:
- Put time on your side. Set a timeline to come to a conclusion and stick to it. Force yourself to make progress within that timeline.
- Whether it is a continued role in your business or another activity, find something you are excited about and stay engaged and active. The notion of a leisurely retirement spent entirely in a rocking chair or on the golf course belongs to another era. That picture of retirement is not as relevant today.
- It is not a problem to stay involved in your company if you choose to – so long as the company is not dependent on you. If you enjoy being involved in your business then you should stay with it. But be open to changing your role to give successors a chance to step up.
- Seek advice to help you frame and solve the issue. For some, this means a team of advisors; others use their board. Either way, use advisors to assist you and take some of the burden off your shoulders.
- Change will come whether you like it or not. Look for opportunities to learn, grow, and develop in the next chapter. Don’t only look at the downsides to change.
- Talk to others who have walked in your shoes and learn from their experience. There are several good books on the subject; however, finding people who have walked the path is often a more effective and faster way to learn. We find that most people are more than willing to share their experiences and help others.
Private company owners are an independent lot and build their businesses on their own terms. Your transition out of your business should be equally as unique and be done on terms and in a timeframe that makes sense to you. There is no right answer; everyone discovers their own path.
As I mentioned, we have interviewed a number of CEOs on this topic and have presented our findings on a pretty regular basis as part of our seminars on transition. In fact, we have a seminar on how to structure a successful family transition coming up in October. But if you would like to see a more formal survey or written report on this subject, please let us know; we would be interested to get your feedback.
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