The Business Transition Blog

Is Selling Your Business an Ethical Decision?

I met recently with a client who is transitioning his business. He’s a good man. He’s thoughtful and concerned about his employees – almost to a fault. He is generous, ethical and wants to do the right thing. So as we talked about preparing his business for sale some of his concerns pertained to the ‘correctness’ of selling his business as it related to employees. Some of them have worked for him for many years and have been loyal and contributing members of the team. “What would they think about me selling and leaving them behind?” he wondered. “Many of them have stuck with me through the tough times and I would feel like I was abandoning them.”

I respect his conscientious perspective. He’s a man who gives his employees more vacation time than he takes himself. He gives raises to others but hasn’t increased his own pay for several years. He would like to begin taking more out of the company, but part of his motivation is to give more to his church. He’s a nice guy.

But at the same time, he is undervaluing the contribution, the risk and the leadership responsibilities he has had to assume as the owner of a successful business. While he understands it at an intellectual level, something inside him thinks that any show of ‘success’ would make him appear greedy.

In addition to being a thoughtful and ethical individual, I think he may be suffering from imposter syndrome. While he rationalizes his behaviours from an ethical context, he is reluctant to acknowledge and display any signs of the financial success he has achieved. There’s an interesting blog and discussion site about this here.

He’s not alone. Many business owners have risen to success beyond their original dreams. They have worked hard, developed a strategy for the organization, hired good people, demanded quality work from themselves and their employees and as a result, may now be sitting on a business that is worth millions of dollars. How do they feel about that? Some of the questions on their mind might be:

  • What percentage of the business value is truly mine? I wouldn’t have this if not for my talented and loyal employees. What do I owe them?
  • How will my employees manage if I’m not here? Will the new owners treat them with respect and dignity and recognize the contribution they’ve made over the years, or will they be seen as dinosaurs?
  • I’ll be taking care of my pension with the sale of the business. But many of my employees don’t have any pension at all. Is that fair?
  • Should I share my good fortune with others? What charities should I support?

Many business owners will argue that they deserve all the success they’ve achieved. They put their house on the line, gave up many of the securities, amenities and comforts that employees have enjoyed over the years in return for a deferred reward. They created jobs, paid immense taxes, suffered the bureaucratic hassles of government officials, worked 70 hour weeks, sacrificed their free time and in some cases their families in order to make the business work.

On the other hand, some entrepreneurs have been quite generous in sharing the wealth. They give huge bonuses, favourable share purchase options, and build wings on hospitals. Still others will end up in a quandary because while they might wish to share the ‘wealth’, there may not be that much to share after they’ve paid their taxes, the business broker, the lawyer, the accountant and other advisors and the outstanding loans.

Is selling your business an ethical decision? There are certainly ethical dimensions to the process and how you go about it. But not selling your business raises other ethical questions as well. Are you still the best person to drive the business forward? Are you holding back employees that could take on more responsibility? Are you doing the right thing for your family, for your health, for your personal well-being? Only you know the answers, but the questions are worth considering as you get closer to the time to transition yourself and your business.

Being an Employer of Choice (EOC) Adds Value to Your Business

When you sell your business, you probably want to get the most value you can for it. This is when you literally capitalize on all the hard work, the risk and the sleepless nights you’ve endured as an entrepreneur. Getting $2 million for your business is better than getting $1 million and being an Employer of Choice could make that difference.

According to Roger Herman & Joyce Gioia who wrote the book, How to Become an Employer of Choice ( here are some of the benefits of earning that title:

  1. Recruiting and Marketing gets easier and less expensive. If people are attracted to your company, you have more resumes in your files and less need to advertise for people.
  2. Improved performance and productivity. “Long-term employees understand the processes, the suppliers and the customers, and they become more efficient and effective in a team-centered environment.”[1]
  3. Finding better employees. As an EOC you’ll attract an increasingly better quality of candidates from which to choose. This means you can be more selective, and put the right people in the right roles versus ‘bums in seats’.
  4. Less stress, more fun. Working with employees who want to be there, who aren’t fighting with management or each other, who want the business to succeed, makes for a better working environment for everyone.
  5. Business Continuity. When employees like their jobs, they tend to stay. Few are really looking to change for the sake of change if they are happy in their current role. With continuity, your clients and your company benefits from the skills, knowledge, and wisdom learned over many years of experience.
  6. Greater attractiveness to investors. Investors like predictability and a positive future. A company that is an EOC, and has the benefits listed above is simply worth more than one that isn’t. If I had to choose between buying a recently profitable business that wasn’t an EOC and a consistently profitable business that was, I’d go with the latter.

Becoming an EOC doesn’t happen overnight. It’s one of those business strategies that has to be done deliberately, with planning, actions and determination over time. It has to come from the top. If the owner isn’t on side and pushing forward on this strategy, it is unlikely to happen.

It will require an investment today to get that ROI, but the great news is that becoming an EOC pays off now as well as in the future. The key is to get started. Make a decision. Do you want to create a company that is considered an EOC or not? If yes or even maybe, give me a call. It’s well worth the time to discuss what steps you need to take to become an Employer of Choice before making any commitments. But it’s hard to get to that destination if you are unsure of where you are now.

[1] Roger Herman & Joyce Gioia, How to Become an Employer of Choice – Oakhill Press, 2000.

Who’s Accountable for Selling Your Business?

Gord was finally ready to sell his business. He’d had enough. He was 63 years old and he felt time ticking away. Not only had his children grown up while he was working, but now his grandchildren were also missing his attention. The truth was, Gord was exhausted. By the time he finished his normal ten or eleven hour day he just didn’t have any energy left to play with his grandchildren. Even his weekends were taken up with work that he couldn’t seem to get ahead of through the week.

He had thought about selling his business on many occasions. He liked his business. He started it 33 years earlier and it was his baby. And he waffled between a desire to let it go and a need to hang on. The need to hang on and the day-to-day momentum of old habits were powerful currents while the thought of quitting was like paddling upstream. Was it irresponsible to quit, or not to quit? Was selling the business really ‘quitting’? The conflicting emotions paralysed him and as a result he never got past the ‘thinking about it’ stage.

In the quiet moments when his wife was off to church and he had the house to himself on a Sunday morning, flashes of insight would intrude on his thoughts and he would be consciously aware that he had to do something. It was his business. He ran it. It was his responsibility. If he didn’t take charge of the situation and initiate the actions required to sell his business, no one else would.

Then doubts would flood in. “What do I tell my employees? Will they be able to carry it on? Who will buy this business? What’s it worth? Is it worth anything without me there to run it? If I tell my suppliers will they stop giving me credit? Will the bank pull my line of credit? Will my managers start looking for another job? Will my customers start dealing with that new place around the corner? Who knows anything about selling businesses and what will it cost to hire them? My lawyer has been on my case for a couple years to get started on this. I’m sure he’s licking his chops at the fees involved. What about taxes? What about my kids and their interest? What will I do if I’m not working? What about… The complexity and enormity of the change seemed overwhelming and so he would go back to reading the newspaper, effectively shutting down the logical side of his brain that knew his problem still lurked in the background.

One morning he woke up from a restless sleep and knew it was time. He had to do something. As a responsible individual who prided himself on doing the right things and doing them right, he knew that putting it off any longer was being irresponsible. But now that he was ready to get started, he had no idea where to begin. His banker? His lawyer? His accountant? His financial advisor? His management consultant? He wasn’t even sure he wanted to tell his wife in case she put pressure on him to follow through on a journey that was still unknown to him.

Gord isn’t a real person, but his situation is typical and  is reflective of many entrepreneurs I’ve met who have built their business, become part of it and then have a hard time taking the next step to transition away and do something else. A few years ago, I travelled across North America on a six month sabbatical and I interviewed a number of ‘Gords’ who had sold their businesses. They had struggled with the decision – sometimes more painfully than if they were getting a divorce. They didn’t know who to talk to, who to consult, who to trust with their secret decision.

Some, who believed it was the best decision for all involved, still felt guilty. They believed that some of their peers saw selling as a failure. They believed that their employees felt betrayed or disappointed. But in the end, they realized that it was an executive, leadership decision that had to be made and they were the only one capable of making it.

One fact is undeniable. Your business will be sold. Some day it must happen. It will happen. With or without your consent. With or without your conscious choice. With or without you in control. When you begin to wonder if it is time, start the process, take charge. Be accountable to those you care about and who care about you.  Talk to someone you trust to help you identify the steps to the journey.

Learning Organizations Make Succession Easier

Organizations learn only through individuals who learn. Individual learning does not guarantee organizational learning. But without it no organizational learning occurs.[1]

In 1990, Peter Senge published The Fifth Discipline, a seminal work that outlined the critical importance of developing learning organizations. Senge maintained that organizations which don’t learn, adapt and grow will fail. This prediction is even more relevant today.

But organizations don’t learn. People do. It is individuals who seek out new ideas, information and insights and apply them to their organizations in order to improve. To create a vibrant learning organization, we must first employ individuals who love to learn.

If you’re thinking of transitioning or selling your business, there are powerful reasons why this would be important to you now:

  • It adds value to your business.
  • It makes it easier to bring about a planned transition.
  • It increases your chance of successfully enabling your employees to take on more responsibility, freeing up your time to do more of the things that you’d rather be doing.

Consider the challenges you would face if you employed:

  • An IT manager who resists learning a new operating system.
  • A marketing manager who isn’t interested in social media.
  • A production manager who doesn’t want to learn better leadership skills and how to deal more effectively with employees from different generations or diverse backgrounds.
  • A vice-president who avoids learning about succession planning, strategic planning, process development, or open book management.
  • A HR manager who refrains from learning about new employment laws, hiring practices or assessment tools that would improve employee retention.
  • Any salesperson who refuses to learn about Customer Relationship Management programs or better ways to prospect.

Would you put such employees on the asset or liability side of the ledger? When employees don’t like to learn, they devalue your business. If they succumb to their fears, they sabotage any attempts at succession planning.

What about you? Have you set an example for your employees? Do you invest in business books, courses, seminars, professional development and coaching? Have you offered your employees learning opportunities?

When you look at the companies on the list of “best employers to work for” you’ll notice that one of the traits that makes them attractive is their support of continuous learning. If your people aren’t learning, you don’t have a learning organization and your attempts to transition are likely to fail.

[1]Peter Senge, The Fifth Discipline, 1990: p. 139

Start With Small Steps

“A journey of a thousand miles begins with a single step.” Lao-Tzu

If you were to advise the next generation as they enter the workforce, you would probably tell them that real life is very different than school. It’s possible to cram for exams, pull an all-nighter and get a reasonable pass on the test. But life isn’t like that. Steady, intelligent effort over time builds a business.

And yet, when it comes to selling their business, many entrepreneurs – even those in their sixties – think that it’s too early to plan. Perhaps they are thinking they can cram for the big event.

Business owners generally find that day-to-day activities and urgent tasks tend to consume the bulk of their time, leaving little opportunity for focused thought and planning. Then the less important but urgent tasks take over, forcing you to cram on the big issues.

It’s easier to tackle a huge job like selling your business if you take it one small step at a time. Can you find two or three hours per week to begin the journey? Surely for something this important, you could. But you need to slot it into your calendar.

What can you accomplish in only three hours per week? Not much if you only give yourself six months. But a great deal if you give yourself four or five years.

Start with these steps:

  1. Take a day or a weekend away from the business. Reflect on what’s important to you. Visualize what your world would look like in five years if everything was going perfectly. Capture that vision in words or pictures and find a way to look at it every day. This is your motivation – the vision you are moving towards and the reward that will keep you going if you get tired on the journey.
  2. Set some specific long-term goals that, when accomplished, will help make your vision a reality. For example, “By January 1, 2018, I will have created a Due Diligence binder that could be given to a prospective new partner or owner, enabling him/her to clearly understand the value of the business, the advantages we have over our competition and all the data required to make a confident decision to purchase my business.”
  3. Break your long-term goals into smaller, short-term goals. For example, “In the next 90 days my team will have committed to working on the Due Diligence Checklist and will be able to report at least 10 items have been accomplished.
  4. Commit to completing or making progress on one item on the Due Diligence Checklist every week.

One small step a week adds up to 250 steps in five years. That’s a manageable way to get your business ready!

For a free download of a Due Diligence Checklist, go here.

Beat The Boomers and Sell Now

We’ve all heard about environmental climate change. But what’s the climate in the Canadian business market? Where’s the tsunami? Here are some insights from three business brokers on the street in my latest article in Profit Magazine.

Those Were Heady Times

My wife is ‘de-cluttering’. Deep in a closet was a box that probably hasn’t been opened for 30 years, maybe longer. In it were remnants and reminders of my youth; birthday cards, letters from friends, (mostly girls, long since forgotten) photographs and at the very bottom, a newspaper from May, 1977. 35 years ago!

It was The Owen Sound Sun Times. The paper was much wider than today’s papers, and heavier. It had substance. So too did the stories. I read the whole front page and didn’t find a single spelling mistake or grammatical error. The articles were well presented and relevant. Too bad that today’s newspapers can no longer afford to have editors, publishers and journalists that have the time to do as good a job.

Interestingly enough, the stories haven’t changed that much. Here are some of the headlines:

Ottawa will decide when to end controls… a story about wage and price controls; the government involved in trying to manage the economy – something that rarely works.

Trudeau loses temper… a story about Prime Minister Pierre Trudeau uttering under his breath, “Shut up for Christ sake.” A comment he later apologized for, which was directed at NDP MPs. Will we be hearing an echo in the near future with another Trudeau?

Election to cost $15 million… The numbers are smaller but the press still focuses on the cost of elections. 2011’s Ontario elections cost approximately $100 million.

Lewis, compensation board head tangle… Provincial NDP leader at the time, Stephen Lewis was sniping at the ruling Conservative government over neglecting the manufacturing sector of the economy and the operations of the Workman’s Compensation Board. Today, Lewis is still a force to be reckoned with but is advocating now for eliminating the devastating effects of HIV and AIDs in Africa. Still passionate and working for the disadvantaged.

Tragedy can be avoided… a story about the dispute in Canada over Quebec separation. Will that ever be resolved?

I lied but I won’t grovel: Richard Nixon… a reminder that political scandal, unethical behaviour and a sense of entitlement and unbridled power, has been with us for a long time. Too bad we still haven’t learned a way to enable highly moral people to survive and thrive in politics without losing their way.

It was a walk down memory lane. A reminder that 35 years can go by in a flash. Where did that time go?

Salespeople Need Feedback – especially in tough times

When and how you give feedback to your salespeople is critical.

Sometimes, as sales managers and coaches, we have to dig deeper for honest answers in order to reach a level where we can provide constructive feedback.

Read more…

When Are You Going To Sell?

For a while now, my wife has been asking a question I should be able to answer. But couldn’t.

Here’s my latest article in Profit Magazine

Taking Advantage of a Snow Day

It’s one of those days we used to love as kids. From the inside looking out, it is beautiful! A winter wonderland. Pillows of virgin snow weighing down the branches of pine and spruce trees. The house down the street a soft, hazy apparition. Kids that aren’t stuck on their computer are heading for the nearest hill with anything that will slide. Toboggans, fancy ski machines or a piece of plastic. Even a a broken down cardboard box will work in a pinch.

But today, I’ll simply catch up on loose ends and check off items on my to do list. If you’re interested in a neat little program that makes a simple to do list even more simple and easy, check out this website.

If you want to know more about what’s happening at The Achievement Centre, go here. There are a few great events coming up in which you may wish to participate. There’s a symposium in Guelph Ontario on February 19th. I’ll be one of 5 speakers dealing with the legal, taxation, selling and practical business transition issues that business owners are or will soon be facing.

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