As a new venture develops and grows, the roles and relationships of the original entrepreneurs inexorably change. If the founders refuse to accept this, they will stunt the business and may even destroy it. But even among the founders who can accept that they themselves need to do something, few know how to tackle changing their own roles and relationships." 1 - Peter Drucker
Tackling the challenge of changing one's role in any relationship is not easy and businesses are no exception. Yes, as advisors to business owners, we can be the catalyst to help our business-owner clients make the change that they must make to build transferable value in their companies.
If owners tell you (as 58 percent of owners did in BEI's Owner Survey 2 ) that they don't have time to engage in Exit Planning, one can assume that almost every one of their waking moments is devoted to the operation of their businesses. For them, the old saying, "How can I drain the swamp when I'm up to my armpits in alligators?" is the motto they live by.
This presents a seemingly insurmountable problem: To exit successfully almost all owners rely on the sale proceeds from the transfer of a valuable company, whether it is by sale to a third party or a transfer to insiders. But to buyers, a company is valuable only if it can operate with minimal disruption to cash flow without the presence of its owner. In other words, the very definition of transferable value implies that owners must be "dispensable." If owners are up to their armpits in alligators, they hardly meet the definition of dispensable, yet they feel they have no time available to work on making the company less dependent on their efforts.
This reminds us of a Catch-22:
If owners can't break away for the time it takes to plan and act for themselves and their business' future, how can they become dispensable to the success of their companies?
But unlike the classic Catch-22, a situation in which someone is in need of something (time to plan to create transferable value) that can only be had by not needing it (because they've already planned), there is a way to avoid its application to Exit Planning. That solution is to bring in an outside force so that the owner doesn't need to take time until she has time. That force is an outside advisor.
Once again Peter Drucker shows us the way:
"The founder does need people with whom he can discuss basic decisions and to whom he listens. Such people are rarely to be found within the enterprise. Somebody has to challenge the founders' appraisal of the needs of the venture, and of his own personal strengths." 3
How do we, as advisors, challenge and convince owners of the need to act to change their role in and the relationship to their businesses?
When an owner feels overburdened and crunched for time, suggesting that he or she must take action now to reduce their role is ineffective (and may be dangerous!). As Exit Planning advisors our role is to:
Of course, allowing key employees and perhaps outside advisors to take on some of an owner's duties requires owners to develop role-changing/transferable-value-building attitudes. We'll look at those attitudes in next week's article, but they include:
1.Drucker, Peter F., The Essential Drucker, HarperCollins, 2001, p. 156
2.BEI's North American Business Owner Survey, 2014
3.Ibid. Drucker, 159-160