The 8 Family Business Transition Options. Will You Choose Your Path?

According to a recent survey conducted by the Exit Planning Institute, a staggering 75% of privately held business owners regret selling or transitioning out of their business within 12 months of the transaction.

How is it possible that owners are so disappointed in just one year after what should be the happiest day of their life?  There is a disconnect between their head and their heart.  

Most business owners are analytical and driven by data and results.  But when it comes to matters of the heart, they typically (not always) blow it off and think ‘that will take care of itself.’  But it doesn’t.

Business owners need to think through the practical and emotional factors that can lead to disappointment after an exit.  It is very different to go from a life of: 

- Managing by objectives with nearly every minute accounted for… to not knowing what you are going to do for the day. 

- Making the decision you are ready to move on…to staying because you can’t find your successor.  

- Having your phone ringing constantly…to suddenly no calls. 

- Having all of your closest connections revolve around work… to suddenly losing daily interaction with that social circle. 

- Being the “buck stops here” person… to no longer being in control.

- Barely seeing your spouse… to spending 2X+ more time with them.  

- Assuming the business will provide money when you need it… to questioning if you got enough money in the transition to fund the lifestyle you want.

I promise you that golfing everyday is not going to fulfill you.  It might be a part of your new routine, but finding and designing your Next Chapter is critical to your transition success.  

How can you tell if you are ready to enjoy this next phase or destined for doubt?

PREScore is an assessment that we have owners complete to evaluate their preparedness to transition to a new role within the company or transition completely out of the business – and to do so with no regrets.  As I mentioned in my video, PREScore also highlights unseen factors that could lead to regret if left unaddressed.  If you are a business owner, take the assessment – it’s an invaluable tool to help you start developing your transition roadmap. 

I advise owners to be careful not to get locked into only one path without considering all the other options.  Getting this right is a critical part of post-transition satisfaction. Think about what is going to be best for you, your family, your employees, and your community.   

There are 8 transition paths you could take:

1. Sell or gift to your family 

2. Management buy-in or buy-out

3. Sell to other shareholders

4. ESOP (employee stock option plan)

5. Sell to a 3rd Party

6. Sell to Private Equity

7. IPO (Initial Public Offering)'

8. Liquidation

Stop and compare the first option (selling or gifting to family) to the last option (liquidation). How does that feel? They are at opposite ends of the transition spectrum and the first can be source of pride and accomplishment while the latter can feel like disappointment and defeat.

There is one more key factor in transitioning successfully. It is figuring out what you are transitioning to vs transitioning from. This subtle mind shift is an important part of transitioning without regret.

Most business owners, if they are in relatively good health and begin their Next Chapter in their 60s, have nearly 1/3 of their life in front of them.  Don’t wing this! Transition success is achieved by aligning your head with your heart.  

Start thinking about your post-transition life NOW while you still have 3-5 years of runway to design a plan. It WILL be the difference in achieving those things that are fulfilling and important to you and your legacy.

If you want to talk more about the 8 options or your PREScore results, email me or connect with me on LinkedIn.

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