Pleased to have appeared on SET for Success on 680 CJOB with Richard Lannon discussing my new book, Defusing the Family Business Time Bomb. Since many business leaders expect that their company will be sold at some point in time, often to fund their retirement, it is critical to understand the many challenges that could stand in the way of this goal, some of which might be surprising. Business leaders tend to not fully appreciate potential problem areas, failing to realize just how high the likelihood is that their company will be impacted, putting their future plans at significant risk in the process. Some hold the view that they “have it all figured out” or “don’t need to address those issues”, bringing a false sense of security and trouble at the worst possible time. These scenarios are, unfortunately, all too familiar in the case of family business.
While it is typical for many family businesses to experience the “aches and pains” that are associated with members of a company having longstanding, personal relationships with one another (think conflict, role uncertainty, and the strife that comes with life developments such as divorce, illness, and death), there are other challenges that are just as important. The world in which we live includes a number of external factors that make these days like no other, including:
- Demographic factors: aging Baby Boomer business owners have a limited number of potential successors. Do they know it?
- Disruption of key industries: new and complex business models and rapid digital/technological advancement could reduce expected valuations and make transition to new owners either irrelevant or much more costly. Is the company of relevance to customers, now and in the future?
- Dramatic change in the global economy: making strategic planning difficult, increasing competition, and escalating the cost of doing business, thereby shrinking profit margins. Can the company compete on a profitable basis?
- Uncertain tax rules: new and complex tax changes, restrictions to family income sprinkling, and a clawback of the small business deduction all impact profitability, investment opportunities, and access to capital. This challenge could be especially difficult for young entrepreneurs or successors who want to scale up the business for the future. Is the company getting the right advice?
Take a moment and think about each of these significant developments. Any of these areas is a lot to deal with on its own, but when combined, these factors have the potential to stop a company in its tracks, making succession or sale of the business unattainable. Consider what the impact of this discovery could mean to a business leader, their retirement, the future of the company, and the family.
This book helps business leaders to understand the areas that need to be addressed, now, including practical guidelines for facilitating important conversations with key advisors. Doing so not only helps to improve how a company operates today, but can also address the issues of tomorrow, including succession, sale of business, strategic partnerships, and seeking investment capital. These areas are also of key relevance to entrepreneurs and potential successors, who face unique challenges of their own.