Small Business Succession Planning Strategies

Small Business Succession Planning Strategies

Transferring Ownership to Financial Independence

Selling-Succession Methods versus Emotional Needs

Specific Emotional Challenges of Selling and Succession (Part 2 of 3)

 This month we’re looking at the emotional component of small business succession planning strategies. In other words, implementing a plan for transferring ownership to financial independence.  Financial independence means that we have income that does not require us to work.

I’m going to assume that you have not been putting money away all along while you’ve run your business because the majority of owners don’t.  Therefore, to get financial independence we either have to convert our business into liquid investable assets (selling) or we have to turn the business into something that can run without us but still provide us with income (succession).  Each of these paths has its own emotional issues.

When we’re selling, we are talking about a clean and clear break from our business.  This means totally revising how we live our lives.  No more going into the office.  No more meetings.  No more people problems. No more recognition of one’s place as a business owner.  No more being a member of a particular business community.  No more anything that has defined you as a person for the last 20, 30, or more years of your life.  That can be a truly scary prospect.

As the process of selling a business can be a very demanding, if you’ve not thought about what you will be doing in your next phase, you may very likely ‘kill the deal’ at the last moment as so many do.  You’ll do it even if the deal is a full and fair deal because you will be frightened to death of what you’re going to do with yourself for the rest of your life.

When we do succession, the problem is different because there isn’t a nice clean break.  Here the problem becomes one of us allowing ourselves to let go.  It’s definitely a more insidious emotional challenge.

In the sale, it is all or nothing.  In succession, you don’t have to do that.  You can still kind of be there.  You have every opportunity to meddle.  Your emotional ability to trust your successor management will be challenged because they will never do things exactly as you did.  Nothing derails a successor management team more than the owner coming in endlessly, changing the plan, questioning the decisions, and in general not giving the successors the authority promised.  Soon you’re back where you started because the managers leave or you let them go and you’re back running the company.

What do we do deal with these issues?  I’ll discuss that in our next post.