Three years ago this month a business owner came to see me. Over Christmas I enjoyed watching again on Netflix the film The Kings Speech and I will for the purposes of this Blog call the business owner here Bertie. Bertie was the nick name the Royal Family gave to the brave man who unexpectedly found himself as our King during the War.
Whilst the business owner concerned most certainly did not have a stammer like the late King George this owner, despite being bright and very articulate, most certainly had a communication problem. Having come across several similar situations in recent years a pattern has become evident to me. I have come to learn that understanding this pattern is critical to being able to help those owners create a plan for their retirement.
All owners need to have what we at Everyman call a Business Owners Succession Strategy (the BOSS for short): without one, things may not end happily for either the owner or their company. Even if the owner does manage to exit before death or ill health strikes they will almost certainly not optimise that exit. Often optimising an exit is not about the money (although this is of course important) but about personal happiness and lifestyle. Owners are often trapped and unhappy, unable to take time off. The buck stops with them and the responsibility for the welfare of their employees and their own family can be a very significant cross to bear.
So what was my Bertie’s communication difficulty (and that of several other Bertie’s I have come across) that needed to be understood and addressed if an effective retirement plan was to be devised?
The issue was having the self confidence and the courage to tackle a non performing co-owner. For most of us it is all to easy to put off uncomfortable conversations about performance or lack of it. These Bertie’s had all managed to go into business with salespeople and in each case, after some good years, the co-owner with responsibility for sales had ceased to be effective. The organisation now needed a sales manager and had outgrown him and her. The skill set of the effective sales manager is very different to that of the sales person.
The confidence (or more accurately the veneer of confidence) of some skilled salespeople may make them prickly and difficult to challenge. In two recent cases it was hidden aggression (passive aggressive behaviour) and in another the implicit threat of physical violence. In another case there was violence!
Bertie, the modest owner with a strong technical skill set and ability (be it as an engineer or developer), struggles with summoning up the confidence to have a tough conversation about roles and responsibilities let alone exit plans.
For companies that are very dependent on one or two key customers the obvious route for exit, if their is a strong younger management team (or a team that can be grown), will be a sale to that management team. This can be done through a transaction structured as an owner (or vendor) funded MBO where the owners accept payment out of future cash flow.
But such exits require careful long term planning and great communciation with the young team. If a plan cannot be devised (and then communicated) the brightest and the best, sensing the disharmony and seeing that one owner is out of his or her depth, may well vote with their feet.
The answer (if there is one) is for the owner to work through skilled advisers. Those who understand human psychology as much as business and finance. The owners must be given the confidence to grasp the nettle. He or she must be supported and uncomfortable truths communicated in a diplomatic (and sometimes not so diplomatic) way. Using intermediaries, if they have the right communication skills can mean home truths can be spoken without relationships fracturing.
Where this does not happen the relationship between the business owners is likely to fracture in an uncontrolled way. The fracture may come about due to family stresses (a husband or wife pressing to know the owners exit plan which actually cannot be devised). Or it may come about as the less confident owner finds internal support from colleagues or perhaps a son or daughter. They may see what the less self confident Bertie cannot: that he or she is carrying the company and must find their voice.
Taking control may be an uncomfortable process. Not taking control is likely to be even more painful but at a later date.
Time for your New Year’s Resolution perhaps…..
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