There are some business owners, most I’d guess, who have no succession plans for their businesses. There are other business owners who simply don’t care to create a lifetime succession plan for the transfer or sale of ownership of their businesses. These owners plan to work until they die. Possibly they’ve made preparations for their businesses to transition through their estates and perhaps using life insurance judiciously in their plans to ensure family well-being. Other business owners have created succession plans that allow them to monetize their businesses, and retire when they want to and under their own terms. It is this third category of a business owner’s succession plan I’d like to briefly discuss.
It probably comes as no surprise that business owners attach a great deal of personal identity to their business interests, “It’s what I do and who I am!” Creating a viable succession plan involves training succession leadership or finding a company to purchase the firm, then negotiating the price and creating the legal documents to make it all happen at the appropriate time.
If the deal is good, the terms are satisfactory and everything is agreeable to customers and employees, why then does the current owner often feel so uncomfortable and unhappy? Didn’t he/she just arrange for the sale of their business and secured a future for themselves and their families? Yes, but there is a missing component and that’s the sense of loss of purpose some owners may feel. They have spent years building their business, investing their resources of time and dollars fully engaged in the quest to make something from nothing. The prospect of giving up that purposeful existence is both frightening and emotionally painful. It comes down to a question, “what am I going to do next?”
Arriving at a successful transition plan involves two components. First is the transition of the business itself. The second component is a game plan for the selling business owner. Does the selling owner stay on with the business for some years after the sale? If so, what will be their new role? How can they add value and continue to have a place to go and to earn some income if they need or wish to? How do those things play against a desire to begin a retirement transition – from full-time work to part-time to retirement? Will they have time for their other interests?
At the end, a successful transition plan may not generate the most dollars for their business interests but if coupled with a retirement readiness plan to meet the needs and wishes of the retiring selling owner, it could be well executed.
It will likely take time for the selling owner to evaluate what they want, what they’ll do next and how things could be arranged to facilitate that. Start early; a retirement readiness plan could take six months or more. Allow enough time to work through the emotions of letting go. The best way to do that is to figure out what to grab onto next!