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Psychic Benefits of the business owner – how it impacts Exit Planning
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By Paul Cronin, partner and Director of Business Development at STPI
In a recent article by Malcolm Gladwell* titled “Psychic Benefits and the NBA lockout”, he posited that owners can sometime gain so much psychic benefit from the sports business, it can color their decision-making and cause the horrendous labor strikes that seriously erode the value of the business.
This led me to think how baby boomer owners may be treating their companies. While their businesses lack the sexiness of a sports franchise, there are a number of benefits that owners gain from a business, and that the thought of losing these benefits, may dissuade them from transferring the business so they may retire.
Here are a few benefits that we have heard from clients and discuss in our book, “Finding Your New Owner“
“Employees are family” – As advisors, we may see this as “nice”, but in fact, dangerous. Having once been a non-family employee in a “family” business, I can assure you that many employees do not regard their boss as mom or dad. You can be fired from a job, but it’s pretty hard to get fired from your family. Over-focus on “family”, may lead an owner to hang onto long-term employees who don’t add value, or worse, can sabotage a good transfer, if they see it as threatening their position.
“Vendors are my friends”. It may well be true that an owner and his vendors enjoy meals together, play golf on occasion or even share personal stories, but the fact is the owner is their customers and part of the friendship is commercial. Once the commercial aspect is gone, the number of vendors who continue the friendship is likely to be small.
“Industry Colleagues are a good network”. Technically true, but it is also a trading place – who you know and what you offer is your currency. If you are no longer an owner, you lose currency. Also, former colleagues need to work with the new owners, and contacting you may be seen as interference.
There are of course many other benefits too numerous to mention. However, these and the other benefits all stem from a central issue: Identity of the Owner. If an owner cannot see herself as anything but a “business owner”, she will suffer an identity crisis upon the transfer of the business. Many owners foresee this at some point in the transition process and panic. As advisors, it is our role to help avoid this panic, as it will cripple the transfer and may also damage the business.
This is a principal reason that helping an owner split their identity from the business, is the first order of business for personal advisors. The process of helping the owner discover who he really is can help him understand the process of planning to move past the business life, and into a new life.
*(Malcolm Gladwell has authored numerous many thought-provoking books, including the “Tipping Point” see link)
About the Author:
Paul Cronin – partner, STPI
As Director of Business Development for STPI and a contributor to the new book: “Finding Your New Owner: For Your Business, for Your Life” by STPI. Paul focuses on strategic initiatives and spreading STPI’s optimistic and practical message for Baby Boomer business owners, executives and professional practitioners. www.successfultransitionplanning.com.
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