As I network around the country, I frequently hear advisors talk about business owners who procrastinate about taking action on their transition plans. Clearly, the owners are thinking about transitioning, otherwise they wouldn’t have met with an advisor. And it seems like they’d be ready to act on their advisor’s recommendations. But often, they don’t. So, it raises the question, why do they procrastinate? Why do they avoid taking action?
The truth is that most owners procrastinate for one reason – fear.
For the most part, these fears are unspoken. And the result is that their fears cause an owner to keep “kicking the can down the road”.
The key to moving past these fears is to first uncover any unspoken fears and then to offer perspectives or solutions to address them. If you’ve ever had an owner procrastinate, you already know presenting a logical argument rarely moves someone to take action. The reason is that people “buy” emotionally, rather than logically. It doesn’t matter whether you’re selling TV’s or cars or ideas or strategies. People buy into it emotionally and then rationalize their decision logically.
The process of allaying an owner’s fears about a transition and helping them feel good about moving forward starts with uncovering those fears. Once you’ve identified the issues that are creating anxiety, you can then make suggestions to help alleviate them.
The most effective means of uncovering these unspoken fears is by asking “good” questions. A good question is one that doesn’t cause them to become defensive and gives you insights into their perspectives and their thinking. It may require you to ask a number of questions about a particular issue in order to get the insights you need to help them, but once you have those insights, you’ll be able to offer just the right perspective or solution they need.
Here are the most common fears that owners have, along with some sample questions to ask. The key is to ask questions about each of these issues to determine whether that fear exists.
GENERAL FEARS RELATED TO A TRANSITION:
>> The fear that their company won’t be worth what they had hoped for
They’re afraid of being disappointed and having to alter their retirement plans
● What do you think your business is worth?
● How much would you like it to be worth?
● What if the value turns out to be lower?
>> The fear that they don’t know whether to sell to an outside buyer or an inside buyer and they don’t know how to make that decision
● Would you rather sell to an outside buyer or a successor?
● How will you decide?
>> The fear that their transition experience will be poor
Just like another owner they know or have heard about
● Do you know anyone who transitioned out of their business?
● How did it go?
● Why do you think that happened?
>> The fear that the transition process will take up too much of their time so, they feel they need to wait until things are slower
● How long do you think a transition takes to execute?
● How much of your time do you think it will take will it take?
>> The fear that their identity is tied to the business
And they will lose their purpose, prestige, and identity when it sells
● What will you do after your business sells?
FEARS RELATED TO AN EXTERNAL SALE:
>> The fear that they won’t find a buyer
And they’re not sure what they’ll do if that happens
● What if you/we can’t find a buyer?
● What will you do if that happens?
>> The fear that an advisor or a buyer will find flaws or shortcomings with their business and they won’t be able to fix/address them
● What if a buyer finds shortcomings that we’re unable to fix/correct?
>> The fear that they aren’t as profitable as others in their industry
And therefore, their business will be less desirable and/or worth less
● Are you as profitable as others in your industry?
>> The fear that they’ll have to agree to terms they don’t like
Such as a long payout or the requirement to stay on for one or more years
● Are you OK with possibly getting some of the money up front and the rest over time?
● How do you feel about the possibility of staying on for a year or two after the sale?
FEARS RELATED TO AN INTERNAL SALE:
>> The fear that their successor is not yet ready to take over
And may never be…
● Do you have a successor in mind?
● Are they ready to take over?
● How do you know?
● How long are you comfortable being away from the business and leaving them in charge?
>> The fear that they need to choose one successor (child/exec) over another, and don’t know how to choose. Plus, they’re afraid of the fallout once they do choose.
● Is there more than one possible successor?
● How will you choose?
● What will happen to the one (or ones) you don’t select?
>> The fear of the fallout that will occur when someone (child/exec) wants to take over, and they find out they’re not being considered.
● Will you need to reject anyone as a successor?
● What will happen when you don’t select them?
● How will you go about finding a successor?
● How will you keep a successor on board until you feel they’re ready?
Once you’ve determined the various emotional issues an owner is wrestling with, you’ll be able to offer useful perspectives and solutions, including bringing in experts to help with specific problems. Addressing their fears, and providing solutions and perspectives, will establish you as an insightful, thorough, and caring advisor. And it will get them to act sooner than later, thereby helping them maximize their results.