Life mimics business. Business mimics life. | Compass Point Skip to main content

Life Mimics Business_600

There seems to be a false notion floating around – and we all buy into – that somehow we’re going to get everything in order tomorrow. Tomorrow, when we wake up, it will be the perfect day, where we will have ample time for the planning and legal work needed to minimize risk in the future. We talk a good game, but that’s not what happens. Life is messy and full of distractions.

Today will not go as planned. So what was planned for tomorrow remains undone for yet another day. I’m not referring to mundane tasks. I’m referring to the heavy lifts in business around succession, governance, and transition that most owners just do not want to tackle. There is always tomorrow, they say until there’s not.

As a family business owner, it’s critical to understand there are events that will affect the transition of your business. In fact, one out of every two reading this blog will be impacted by an event beyond your control.  And if you haven’t run through the checklist to prepare your business, you’re not only putting the business at risk but your family as well.

Think all this is a bit dramatic? Below are REAL situations I’ve witnessed over the years:

– If the owner/husband died under the current shareholder agreement, his wife would remain a minority shareholder, even though she worked every day by his side.

– No insurance in place for the employees to buy out the family and continue the business.

– No succession plan because the owner stubbornly remains the hub despite failing health.

Yes, we talk a lot about the 5Ds – Death, Disability, Divorce, Distress, and Disagreement – with good reason. 100% of business owners will exit their business yet only 50% will do it on their terms. The other half is scrambling.

And by the way, a 5D event doesn’t have to happen directly to you to disrupt the business. Think about the fallout if it involved a:

–  Key member of the leadership team (tribal knowledge gone and no documentation exists)

–  Ownership member (out of date shareholders agreement)

–  Family member (owner can’t truly step away to grieve or care for a loved one)

Begin by adopting the mindset of, “my business is always for sale” (and actually, that’s the way it should be).

Working with the mindset that your business is always ready to be sold, means:

– You’ve got great financials

– You play in a growing market

– You have a competitive advantage in the marketplace

– You have limited customer concentration

– You have customers who repeat and refer

– Your business generates cash like a spigot vs sucking it out like a drain

– You’ve got a strong cash balance and balance sheet

– The business doesn’t rely on you as the owner

– And you have good governance in place, with an ownership council, a board of directors, a family constitution, and a family council

All these things will not only make your business successful today but attractive to potential buyers as well, including internal successors. Ultimately, building a business that’s transferable means that it can run without you and that’s also the best way to survive one of these 5Ds.

Do the right things – the hard things ­– to position your business for whatever life throws your way. It will be more financially successful, more fun to operate, and better protect those you love.

Life is messy. But the future of the business doesn’t need to be. Make the commitment to tackle one “what if” today, and check it off your list so it’s done.

Not sure where to start? Download this checklist and reach out if you have questions.

To receive the complete 5Ds of Life eBook, click here.

You may also like…

BLOG | STRATEGY

Where’s your road map for 2023?

Do you have your plan for first quarter 2023? Is it written down for the team to see, understand and act upon? Or is it still tucked away in your head, and shared as needed?

Read More

BLOG | EXECUTION

Business Lessons Found in One of History’s Biggest Battles

Here’s the first lesson from the Allied victory on D-Day that’s directly relevant to business in 2022. Planning is essential because things rarely go as planned. Sound like a day in your life as a business owner?

Read More

BLOG | NEWS & EVENTS

The Journey Starts Here

We are consultants. We are coaches. But more importantly we are change agents for the family who wants to build a more successful business, align the ownership, forge a stronger family and leave a legacy for generations to come.

Read More

Where Family Businesses Come to Grow & Learn

At Compass Point, we make it easy to get insights, training, tools, and articles straight to your inbox and help family business owners and their team continue to grow, learn, and lead.