Emotional Reasons Owners Stay Too Long
Many owners have spent years building their companies and during that period they built up a sense of self that is entirely wrapped up with their role as the leader of the company. There are different facets to being personally and psychologically invested in business ownership. An owner may, for instance, view retirement as confirmation of old age. If this is the case, he may resist any efforts to get him to retire because, in his mind, it means his life is over or nearly over.
Other people may not know who they are or what they would do outside of their business. Without the need to get up and go to work in the morning, what is there, they wonder? No one wants to live a life absent meaning or direction, and many owners have spent so much time working on and in their companies that they haven’t developed hobbies or outside interests. For them retirement is looking into the void. It’s too scary.
Some owners love their jobs. They have enough energy, and the work brings them enjoyment. It’s very difficult to talk someone out of doing something they love. A good exit planner will not try to manipulate an owner who is happy into leaving but will urge him to strengthen the company and set up a management structure for the day when he is ready to retire or sell the business so he will have all the options available at that time.
A Failure to Understand What Exit Planning Is
Beyond the common emotional and financial reasons for postponing exit planning, there’s one larger reason: most business owners don’t understand what it is. A large number of owners have only started and built businesses. They’ve spent their lives brainstorming, sacrificing, investing, and re-investing in them because, to them, a profitable company is an assurance of success in the present and in the future.
The unfortunate reality is that owning even a very successful company means nothing in terms of security for retirement or pursuing future goals if the equity that in the business cannot be extracted. Owners will need cash money and not intangible value in order to provide for themselves and their families after they move on from their companies.
Most people, if they think of exit planning at all, think of it like realtor services for businesses. That’s not what it is. Exit planning is not sales. It is an organized process that is designed specifically to meet whatever the owners’ goals are for their companies, their employees, their families, and themselves. For most that will involve optimizing the company’s value, making sure management is competent and stable, and limiting owner dependence.
A good exit planner is familiar with this process and will take the time to let the owner know what is involved and tailor the process to his needs. Sometimes that includes a sale to an outside party, sometimes it means transitioning to other family members, and sometimes the exit planner and the owner will decide the best path is for the owner to remain in a leadership position in the company.
If as an owner you’ve begun to think about what will happen when you’re ready to retire or wonder about what is involved in transitioning a company to a family member or employee, call us. Part of our job as exit planners is to explain what exit planning is and why it’s so important. The sooner you begin the exit planning process, the more options you will have as an owner. So don’t put off for tomorrow what you can do today – contact us at Prometis Partners.
