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Fear Factors
The Ultimate Reality Show-- Leaving your Business
Every day we, as business owners and professionals, are presented with hundreds of decisions to make. In the blink of an eye, we make the decisions which are easy-even instinctive-- both at home and at work. Other decisions are tougher. Often those get put on the back burner so we don't have to deal with them right now. Perhaps these decisions are difficult to make because they force us out of our comfort zone, offer too many complex choices, or make us address issues that could cause conflict in our lives. But in most cases, it boils down to fear--fear of the unknown and fear of making the wrong decision.
A PriceWaterhouse Coopers survey of privately-held companies ranging in size from $5 - $150 million in annual revenue tells the story of the Business Owner Fear Factor-only 22% have done real planning. In our Exit Planning practice, we see this all the time with business owners. Not long ago, we met with an 81 year old business owner who told us he had done no planning because he'd "been busy." He had made many of the right decisions in his business. He had been innovative in his industry, creating new products and gaining market share. He had wanted his now 55 year old son to take over his $8 million medical device business when he was ready to step aside. But the father never would commit to a formal succession plan. He was afraid of losing control. The son left and started his own company. This fear hurt his business and his relationship with his son.
We help business owners to face their fears. Identifying them is the first and hardest step. Then we help them to overcome these fears by creating an Exit Plan-concrete steps to take which allow them to sleep at night. We have found that most fears come in three basic areas-Control, Conflict and Money.
Control It is common for an owner to tell us "I am the business." This attitude devalues the business. A buyer is buying a company that stands alone -without the owner. There comes a day in the life of a serious entrepreneur when he or she must make the transition from an entrepreneur lead company to a management lead company. By handpicking and training a management team, an owner creates something bigger than him or herself. This allows the owner to focus on strategy and growth. This should not be seen as ceding control, but rather as a natural step in the growth of a professionally run company.
Conflict No one likes conflict--neither in the family nor in the business. A family business is a breeding ground for conflict. Deciding family succession issues can be so painful that we have actually heard parents tell us, "Forget it. Let them fight it out after we're dead." This has never been a succession plan that we have recommended. Non-related parties can also face severe conflict. It can begin as early as inception of the company, when two partners can't agree on terms in a buy-sell agreement, so they never get around executing those provisions in their shareholders agreement.
Money Many fears revolve around money. "If I retire, will I have enough?" "If I turn over responsibility to my managers, will they run my business into the ground, leaving me with nothing?" For many business owners, a high percentage of their net worth is tied up in the business. The ability to monetize that asset is the most important financial event of your life. Transferring wealth to the next generation... minimizing tax...minimizing financial risk if you carry a note when you sell...these are all important questions but also fear inspiring topics.
The best way to get past fear is to recognize that it is irrational and to acknowledge that it stands in the way of achieving your goals for your family, your estate and your legacy. The Exit Planning process allows a business owner to put fear aside in order to achieve those goals.
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