The Business Transition Blog

Gleanings From the Internet on Business Transition

As part of my ongoing research, I scan articles and new releases about succession planning, business transition and business exits. I’ll share some of the more interesting ones here from time to time.

TORONTO, March 14 /CNW/ – Nearly half (49%) of Canadian family business owners have not chosen their next business leader, exposing a lack of succession planning, according to the Canadian results of PwC’s latest Global Family Business Survey. More…

Myths and Realities of Succession Planning. This article dispels the view of succession planning as just training young employees to take over when the retired employees leave. Instead this author defines succession planning as developing talent from within an organization and recruiting qualified outside candidates. Also lists and discredits a number of succession planning myths. More

CFIB Report on Business Transition. While this document is a little dated, much of the content is still interesting and provides a good backdrop to what entrepreneurs in Canada are thinking about business transition. More…

Start planning today!Preparing for a business transition is a complex process involving a variety of considerations, all of which require meticulous planning. These aspects form a whole, and each component is intricately linked. Some words of wisdom from BDC. More

Responsible Entrepreneurs Make a Business Transition Plan

  • Are you a business owner over the age of 50?
  • Is your business still dependent upon you to run successfully?
  • Do you have trouble getting away for more than two weeks to vacation?
  • Are you expecting your business to be an important part of your retirement income?
  • Have you made a plan that will provide a step-by-step approach to making it all come together – with milestones, action steps, and measurements to indicate you’re on track?

Let me be blunt. There is no downside to planning. None. Zero. Nada.

There are many potential problems if you don’t plan:

  • You could die, leaving your employees, customers and family in difficult if not desperate, straights. At age 50, your chance of dying before age 65 is 15 percent. While insurance can soften the blow, it doesn’t replace you, your skills, your knowledge and your relationships.
  • You could become disabled, making it difficult if not impossible to carry on your duties. The uncertainty of whether or not you’re capable of running the business could lead your employees to quit, customers to leave, and suppliers to withhold credit. At age 50 your chances of having a serious disability before 65 are one in three.
  • You could receive an offer for your business; however, because you weren’t prepared, you could sell it for less than it’s worth, miss your best opportunity, or give up confidential information to a prospective competitor.
  • You could blindly continue to expect your business to provide for your retirement when you sell it. Less than one of four businesses put up for sale are likely to find buyers, so if you’re part of the majority, what will you live on?
  • Your valued employees could ask you what your plan is and if you can’t answer the question, they might leave. They need the security of knowing that when the time comes for you to move on (either by design or default) there is a sound strategy for growing and sustaining the business. Forty-six percent of employees would leave if they had another job to go to.
  • You could get bored, tired or burned out and decide one day that you’ve had enough. At that stage you may not have the mental stamina or right attitude to do what’s necessary to get the most value from your business while ensuring that it continues as a viable business.
  • Your industry or the economy could slump. Customers could stop buying through no fault of your own. Many companies are still recovering from 2008.
  • You could count on your senior manager(s) to be there to run the company, but they have the same human vulnerabilities as you and might decide to retire early.
  • A major competitor could set up shop next door and have deep enough pockets to drop their prices until you go out of business. Think big-box operations like Wal-Mart or Home Depot.
  • Technology could change and render your business redundant or too expensive in its traditional form. Think e-Bay, call centres in India and book publishers.
  • Your best customers could go out of business leaving you with their outstanding accounts receivable and facing a loss of future business.

The list of risks is lengthy. Without a plan you can be surprised and vulnerable. A plan won’t prevent all these problems; however, a plan puts in place strategies, relationships, contingencies, and funding to minimize the negative impacts that lack of planning can have on your business and those depending upon the health of the business for their livelihood.

Planning doesn’t solve all the problems, but it gives you an opportunity to assess the risk objectively and thoughtfully in advance and then come up with alternatives, options and strategies that may require time to implement. Without forethought, your options can be very limited.

Although I’m an optimist by nature, over time I’ve become a realist and I look for ways to mitigate my risk and increase my odds of winning. There is no downside to planning and many good reasons to do so. If you’re not sure how to get started, join us for a very informative seminar on March 29, 2011 at Langdon Hall in Cambridge.

What Every Boomer Business Owner Should Know about Business Transition (Before it’s Too Late!)

See details here.

What Entrepreneurs are Thinking about Retirement

A recent article by Marlene Habib in the Globe and Mail provided some new insights into the minds of small business owners who are approaching retirement age. The survey, done by American Express, contacted 555 small-business owners across Canada gave some views on retirement and I’ve added my own comments/questions based on my concerns about this group.

30 per cent expected to fund their retirement at least in part with profits from their ongoing businesses; 27 per cent planned to sell the businesses to fund their retirement.

It’s interesting that only 27 percent plan to sell their business to fund retirement. But if we overlay that number with a statistic from a US source that less than 1 in 4 businesses that go up for sale will actually find a buyer, there will still be a lot of disappointed retirees.

50 per cent wished they could retire tomorrow, but only a third have everything in place to do so.

Wow, half of the entrepreneurs interviewed wished they could retire now! What are they doing about it? Wishes don’t often come true, but plans can.

48 per cent have savings such as RRSPs that could help them finance retirement.

That means 52% are reliant on their business to fund their retirement – either by continuing to work, or by selling it. Looking at it another way, they have all their eggs in one basket. That’s like betting your retirement on one stock. No financial advisor would let you do that.

70 per cent planned to play a role in their businesses after retirement, 30 per cent planned to maintain an ownership interest, 41 per cent planned to work part time.

Ok, I’m beginning to see some real disconnects here. 50 percent wish they could retire now, but 70 percent plan to continue to work in the business after retirement. Sounds like they’re a little confused. It appears they haven’t figured out how to retire, what they are going to retire on, what they’re going to do with their time after they retire and how to make it all work. So the easy response is to do nothing and hope for the best. Hmm. Not very smart and it’s uncharacteristic of those intelligent, driven, results-focused individuals who grew a business from scratch and made it successful. How come they’re so foolish at this juncture?

17 per cent planned to retire before age 60, 40 per cent between 60 and 65, and 34 per cent after 65; 8 per cent don’t expect to retire at all.

Well we know why a lot aren’t planning to retire by age 65. They can’t afford to! Some prefer to work because they love what they do and that’s fantastic. I wonder how many say that because it’s easier than saying I don’t plan to retire because I can’t afford it.

There is a better way and it’s painless. Begin today to plan the future and what you need to do to make it happen. We’ll be discussing some intelligent options at a seminar on March 29th. Check it out here: BTC Breakfast Flyer – March 29, 11