Measuring Your Emotional IQ is the Key to Successful Ownership Transitions
By: Sarah Beyne of Growth and Acquisition, LLC and Michael Stuart, JD, CPA of Family Legacy Alliance, LLC (FLA/GA)
Edit: A version of this article is also featured in Advisors Magazine, published January 6, 2020.
With more than 60 percent of privately-held businesses owned by those in their sixties and older, transition is a reality. It requires proper planning and action from owners who are rarely prepared for the emotional impact that transition brings.
Understanding the emotional requirements of transition is where the process begins. If the owner’s emotional IQ is not up to the task, the process is derailed at the outset. We can easily work with owners through operational, organizational and financial assessment; however, we will never ‘push’ an owner into a transition decision if they are not ready. Here are just a few examples of not being ready:
Owner A: “I really want to retire and either transition the business to a senior manager or sell it. But I would expect to continue to earn my current compensation in either case.”
Owner B: “Well, I’m 68 years old, my most senior manager is retiring in six months and I wake up every night stressed out by the business. I am the only one who understands the technology…but I really don’t think I want to sell.”
Owner C: “I’d like to sell, but I don’t want the name changed. I also want the top five managers to have guarantees of jobs and I want assurances that I can have a continued role in making business decisions.”
Embrace the Realities of Ownership Transition
Let’s first understand what ownership transition and the planning process means and entails.
Ownership transition can mean legacy, management members, mergers and acquisitions. It can involve developing a buyout agreement, working with an attorney to transition to family members or seeking business advisory support to work through acquisition processes with investment bankers, private equity firms, merger and acquisition firms, synergistic buyers, etc. It means knowing and understanding your options and how to best work through these options. It means surrounding yourself with the proper team to be able to work through the issues.
Most business owners have spent years building their businesses. They have invested tremendous emotional, intellectual and physical energy. And now, it is time to think about and plan for transition because of scenarios that include a) the company will benefit from new leadership; b) the business is flatlining and needs capital infused to survive; c) the business is growing, profitable and it’s a perfect time to pursue personal objectives; or d) the market dynamics are changing creating competitive pressures — requiring capital infusion.
Assess Your Emotional Intelligence Before Selling Your Business
Most business advisers, merger and acquisition professionals, attorneys, brokers and financial planners are united in saying that owners ‘lack of emotional readiness’ is the first and most important hurdle that must be overcome in order to properly plan for transition and/or plan for the future. It all starts with the owner’s emotional views and perspectives.
Take the Emotional IQ Test
Assess your Emotional IQ and determine if you’re ready to pursue a business transition.
Sarah and Michael specialize in providing transition advisory services as they work with owners and, with respect to asset protection, their families to prepare for ownership transition prior to, during and following transition. Collectively, they have more than 75 years of experience in working with business owners as well as experience building, enhancing and selling their own companies. For more information, contact them today at moc.noitisiuqcadnahtworgnull@haras and moc.ecnaillaycagelylimafnull@leahcim.