Was it really the kids fault?

Or did they never have a chance?

Succession planning always focuses on the process – timing, advisors, taxes, valuation. What’s missing is what matters…is the business in any shape to be run by new owners – regardless of who they are?

Over my years working with private businesses I’ve seen many that were ‘successful’ – generating nice profits and a great lifestyle for their owners. However, I see lots fewer that could be run by new owners – including the kids.

Why?

First, many businesses are milking the same markets in the same fashion they have been doing for years.  Particularly when there has clearly been success in the past, evolving beyond ‘tried and true’ approaches seems almost impossible for many. Change feels risky and it does not come easily.

Second, many owners play key roles in their businesses that are unfillable by others so long as the owner has a role – best sales person, best engineer, best operator, bank.

Over the years, I’ve seen many owners recognize the risk of their role in the business but watch them struggle mightily to move beyond it.  Loosening the reigns when it’s your baby is a really tough thing to do.

The 4 Questions

From these 4 questions I can always tell whether a business can be transferred successfully or not.

  1. what’s your market share?  “I don’t really know” or, “it doesn’t matter in our business” shows a blissful lack of awareness.
  2. what are the key drivers of growth in your business? “The economy” is not an answer.
  3. when do you plan to exit your business? “When we get to $x million in revenue” shows almost a complete lack of understanding of what drives business transfer value.
  4. what is the culture in your business? “We are a family” always translates to low accountability and fear of change.

For the kids to succeed, simply being ‘entrepreneurs like their parents’ isn’t good enough. The business itself must be prepared properly so it doesn’t faulter simply because the kids aren’t their parents.

About Boardroom Metrics

Boardroom Metrics provides a private business assessment tool that measures business sustainability and transferability. Sustainability measures market factors impacting the future of the business. Transferability measures the effectiveness of internal procedures for operating the business.