In our business, we meet many CEOs who have built family businesses.
Often, they have grown their companies over a 20- to 30-year period and expect to transition the business to their children. This dream is not only a source of pride and legacy, but also how they planned to fund their retirement.
But over the last year, a common theme has emerged. A number of baby boomers are learning that their kids either do not want to run the business or do not have the skills to manage the business. I recall the owner of one very successful Bay Area consumer-products company saying, “Help me! How do I get out?”
To avoid this scenario, owners should:
- Write down your exit vision and legacy.
- Develop a plan to achieve this vision.
- Transition the business when you achieve your goals.
EXIT VISION: DEFINE YOUR LEGACY
Achieving the transition or exit you desire, starts with knowing what that will look like. Write down your exit vision now even though you do not plan to leave the business for years and maybe decades. The vision can change over time, but is important to get started. Part of the exit vision is knowing what the legacy is you want to achieve.
What is a legacy? Technically, a legacy is something handed down from one generation to another. For example, do you want the business to remain in the family or do you want to sell the business? Because leaving the business to family may not be a viable option, we want you to think of legacy in a larger context.
Ask yourself questions such as:
- Do you want the business to remain in its current location?
- Do you want the workers to stay employed?
- Do you want to leave money to an institution, perhaps a church or school or local nonprofit?
Writing down your exit vision and the legacy you want to achieve is critically important for you to achieve your vision.
DEVELOP A PLAN
Yogi Berra said, “If you don’t know where you are going, you might wind up someplace else.”
While humorous, this is so very true, especially when it comes to transitioning your business. Assess where your business is today and develop a plan to reach your vision.
For most companies, this means annually making time to develop a high-level three- to five-year plan to chart with guideposts where you want to be heading and a more detailed one-year plan to achieve these goals. If this is new to you, work with trusted advisors to help you chart this path.
One business owner surprised me when we started talking about vision and legacy. This business owner said that when they sold the business they planned to give each member of the leadership team about $4 million. Wow! I asked what the leadership team thought about this. The owner said that he had not told them yet.
Sharing your vision and your plan with your family and/or leadership team is important. If you are planning to transition the business to family (or employees), you need to have open and honest communications regarding this transition to ensure everyone is on the same page.
Consider allowing family members to participate in the planning process to build buy in and commitment. Learning too late that your kids do not want to run the business when you are ready to retire should not happen (though it still could) if you are having open honest communications along the way.
Gil Roberts is a partner with Assay Advisory (415-906-6070 ext. 255, email@example.com). He was most recently the CEO for an international consumer products company in the Bay Area .