During the next 10 years, half the 20 million family-owned and closely held businesses will face a decision on how to exit. No wonder business owners are all hyped up about exit planning. They are trying to figure out whom to involve, which option to choose, when to start and how to implement. However, the answers to these questions can be found somewhere else.
Rather than worry about exiting, business owners should turn their attention to enhancing the value of the company while they are still at the helm and in the driver’s seat. By taking deliberate steps to boost the value of their business before exiting, they ensure that a desired return on investment (ROI) is included in whatever exit option they choose.
This was the case for Carl, 52, and Travis, 48. For these brothers, the option they had "written off" turned out to be the answer to fulfilling their dream.
Developing an exit plan
The brothers co-owned a construction company they inherited after their father’s unexpected death 20 years earlier. When the brothers took over the company, it was a $4 million firm; by the time they invited me to help them develop an exit plan, it was a $15 million operation. Their plan was to own it for another 10 years and figure out what to do then.
Despite having an exit date, the co-owners had no succession plan — no one in line to assume ownership of the company. The three senior managers were reliable, capable and competent, but not capable of running the company. The business was vulnerable, and the family risked losing the value of their life’s work.
After learning more about the company, I discovered a real succession planning blocker. The brothers had a silent and unwritten agreement to never talk about work at home. They didn’t want to concern their wives or children — they didn’t want to involve their families at all. They felt obligated to take over their father’s business when he died, and they took pride in continuing his legacy, but they were opposed to saddling their children with this burden.
During the initial phase, we took the following steps:
- Broke through faulty assumptions that clouded their thinking about their exit options
- Determined the company’s value and examined the gaps in their expectations
- Explored their reluctance to involve the next generation and found that the brothers had an important story to tell
As the second phase evolved, the brothers were compelled to tell their story to their children. They arranged a series of family retreats, introduced the history of the company to their children, talked about the privilege of running their father’s company and why the next generation should have the opportunity if they desired.
Ultimately, Carl’s oldest son took a huge interest in the business and had enough time during college to refocus. Travis’s daughter quickly started thinking about how her interest in business management and marketing could be used in the business someday. The company had two potential family successors, and we began to prepare them for leadership with a curriculum, assessments and training opportunities.
Three years later, the two oldest children were working with their fathers to determine if they could run the operation. Carl was thrilled about remaining with the company for the duration of the transition to the next generation, while Travis had options — which was what he felt he lost when he joined the company. As a result of this transition planning, the legacy of the company would continue in a way the brothers never thought possible.
Dr. Stacy Feiner is an executive coach for the middle market at BDO USA and author of "Talent Mindset: The Business Owner’s Guide to Building Bench Strength." Stacy brings psychological strategies to business owners that help them improve their performance and advance their organizations. Her methodology enhances complex dynamics within owner-operated companies, family businesses, boards and management teams. Stacy is a licensed psychologist, coach, author and national speaker.