The Business Transition Blog

Take Charge of The Future: What Every Boomer Business Owner Needs To Know About Business Transition. (Before it’s too late.)

If you own a business and are over the age of 50 you should join us for breakfast on March 29th at Langdon Hall, Cambridge, ON for a seminar on preparing yourself and your business for transition.

Details

The Buzz is Building

So far this week I’ve spoken to:

  • Martin, a partner in an accounting firm in Bedford, Nova Scotia,
  • Paul Cronin and Jack Beauregard with the Transition Planning Institute in Boston,
  • Dennis Gano with the Exit Planning Institute in Chicago
  • and a few other advisors to business owners,

and the common refrain is that everyone knows there is a problem on the horizon for business owners, except… wait for it… THE BUSINESS OWNERS! They continue to believe it’s too early to think about, worry about or plan for the transition of their business.

I understand where they’re coming from. If I hadn’t had a health scare I’d be thinking the same thing. Who really wants to admit that there’s a time in the near future when they won’t be in charge of their business, that their vision of who they are as a person must change and they have to BEGIN (not finish overnight) but begin the process of transitioning themselves and their business for the next chapter.

Why do they have to?

Because if they don’t they’re being totally irresponsible. Because they can’t predict the future and know that they might not be able to do it later. Because life is full of surprises. Because employees, suppliers, and family members are depending upon them and trusting them to do the right thing. And if they haven’t prepared, then it could all be lost. The money. The reputation. The jobs. The security. All down the tubes.

“It won’t happen to me.”

Famous last words.

ESOPs: Not A Fable

I met recently with one of Canada’s leading authorities on ESOPS, (Employee Share Ownership Plans) Perry Phillips, who has written two books on the subject. He has some very interesting statistics about how ESOPs are helping business owners and companies to change and thrive, even in difficult markets. Quoting a study done by the Toronto Stock Exchange comparing ESOP and non-ESOP public companies, he stated that ESOP companies had:

  • 123% higher five-year profit growth
  • 95 % higher net profit margin
  • 24% greater productivity
  • A 2 to 10 per cent premium on the stock market
  • 92.26% return on average total equity
  • 65.52% higher return on capital
  • 31.54% lower debt/equity ratio.[1]

Why do ESOPs work? According to Phillips, they help address many of the workplace issues that plague employers today: productivity, competitiveness, survival, succession, recruiting and retention.

When employees have real ownership of the company they work for, they are more inclined to make it more productive and profitable. While employees will rarely have as much drive and passion as the founder, they will narrow the gap and cut expenses, reduce waste, and encourage co-workers to be more productive and efficient. They will be more inclined to speak out when they see someone goofing off or stealing from the company. They will take a more active interest in the fiscal health and well-being of the business. They will look for others who would make a positive addition to the organization, so recruitment challenges and costs are reduced. They won’t leave over petty differences or a small gap in pay.

“But,” says Phillips, “the mere fact of setting up an ESOP does not automatically transform a corporate culture. It takes more than a shareholder’s agreement; employers and employees must embrace the special dynamics of share ownership and commitment.” [2]

A successful transition to an ESOP doesn’t happen by chance. It requires a thoughtful, planned approach. It requires commitment and participation from the owner and employees. Philosophy and values must be aligned in a culture of transparency and trust. Phillips goes on to say, “The goal of most ESOPs is to have each employee reach his or her maximum potential as a person and as an employee.”[3] He suggests that all employees get training to be the best that they can be in their area of responsibility.

From our perspective, that reinforces and aligns with the holistic and positive approach we take to work with our clients. A company that taps into the strengths and abilities of their employees; encourages full ownership and participation; has a leader who is willing to be transparent and share control;  and, develops and trains people to become as good as they can be, is “growing their business intelligently.” A carefully planned and executed ESOP, combined with a strategic people development program could help you transition your business and leave a strong legacy.

You can reach Perry at: perry@esopbuilders.com


[1] Perry Phillips, Employee Share Ownership Plans, (John Wiley & Sons, 2001) p. 11

[2] Ibid p. 8

[3] Ibid p. 135

The Business Transition Crisis and How to Avoid It

There’s a brand new, free presentation on our site. I’ve been a little distracted lately so this blog has suffered. Sorry. We’ve been very busy. We’ve trained ten Directors of Membership who will be meeting with business owners and inviting some to join the Business Transition Coach Forum in their community. We now have Directors in Halifax, London, Cambridge, Guelph, Oakville, Waterloo and Aurora. And they are excited about helping owners who are interested in preparing themselves and their business for transition. When you contact us, we’ll connect you with the Director nearest to you.

I’ve also been working on a presentation that will help to explain the issues, the concerns, the challenges and some of the solutions that will help business owners to move forward. I’ll warn you that it’s a little long – 43 minutes – but if you’re serious about understanding the issues and what to do about them, I promise you won’t be disappointed. So grab a coffee, put on your headphones and enjoy   The Business Transition Crisis and How to Avoid it

We’ve also set the date for the next Business Transition Coach Forum as well as a free introductory breakfast. The Forum starts on Thursday, April 28 from 9:05 to 2:00 and the introductory breakfast is on March 9 at 8:05 – 10:35.

The buzz on business transition and succession planning is building. Join in!