As I get older, the thought of what happens after an Owner transitions out of the family business seems to occupy more of my thinking. I question what kind of statement they might leave to future generations by the actions taken while building the company and toward the end of their time running the family business. I've written two very different scenarios from the perspective of how a Family Business Owner might be perceived by future generations of family.
Legacy A - Something to be proud of.
Our parent/grandparent (your name here) was a successful business owner. They grew a tremendous business from nothing. All the while making sure family, staff, customers and suppliers were always well taken care of.
We all have fond memories of many experiences enjoyed with our parents/grandparents from holiday dinners to weekends at the cottage and incredible vacations to exotic destinations. They always made sure to be with us and to participate. Work was second to family.
Charity and good deeds were part of the fabric of the company and his/her life. Integrity was a basis for all negotiations, encounters and relationships. Working their way with internal and external resources are still referred to as the benchmark for how it is done best.
They planned ahead and when it was time to transition the company, all was in order. People and processes were in place. Accounting was thorough and up to date. Contracts in place. Strategies for the future growth of the business were established and being executed.
Regardless of who the company transitioned to, family (with or without their direct involvement), outside buyer or staff, the ship was well equipped and moving in the right direction. By the time the transition began, key management were trained and already excelling at their new responsibilities. It was a smooth and mostly stress free experience. In a business transition there will always be something to upset someone.
As descendants, we are lucky to have the choices we do today. We are financially set and equipped to follow in his/her footsteps in business and in life. To live life to its fullest, give generously and appreciate our good fortune every day. We are the proud stewards of his/her legacy, and continue to live by their example.
Legacy B - Not sure you'd be proud of this.
Our parent/grandparent (your name here) was a successful business Owner. Loving what they did and 'dying with their boots on'. They couldn't see themselves living any other way and never took the steps necessary to transition the company properly. We talked to him/her about it all the time and nothing ever happened. Everything would be taken care of tomorrow.
As for memories, he/she was always working. Never had the time to take holidays. Family time was had grudgingly. Excuses were made by us as they loved what they did. Real memories of time spent with him/her are few and far between. They could have easily spent a week here and there with us but didn't. Now it's too late.
While we admire the passion, the series of events that happened after his/her sudden and unprepared for passing have devastated our family. Legal and financial frustrations tore our family apart.
The company revolved around him/her and no one was really trained to take over. Not family or other. The business started to falter the minute word got out that he/she was no longer running things. Customers got nervous, Vendors demanded quicker payments and staff began to panic. No leader, or at least no capable, prepared true leader could step up. The dream that the children would take over was a non starter as some of us were not interested and the others not qualified.
Competitors and Buyers began to circle the company like sharks smelling blood. Our surviving parent/grandparent didn't know what to do and chose to take the first offer that came along. Some of our family, who worked in the business and a few long time employees were immediately let go.
The cash received was nowhere near what our parent/grandparent had assured the surviving spouse would have to live on. Fortunately our family rallied and are taking care of him/her as family should. But it has been an unbelievable strain on everyone. It could have been avoided.
As for future generations sharing in the success of our family business, we have all recognized that while it would have been nice to have some financial assistance for our lives and to leave for future generations as part of our own legacy we do not always get what we expect.
We will succeed on our own and ensure we don't make the same mistakes as our parent/grandparent.
Remember, as the Owner of a Family Business, it's up to you to write the story.
You've been reading my emails for a few years now. Perhaps it's time we talked.
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Topics Covered in this interview.
Excerpt from my book.
1. The dream of many entrepreneurs and often times their spouse is to save the business for the kids. A few important questions first, before contemplating selling to your kids.
Answer All These Questions
a. Do they want to take over? Have you actually sat down with your children and asked?
b. Are they old enough right now to have the conversation?
c. Are they involved in the business today, either full or part time? Or even interested?
d. Are they qualified to run the business today? Working in the business is very different from working on the business. Are they even qualified to do the job they have now in the company?
e. Could they be qualified over time and with the right support? Can you afford to wait?
f. Can they afford to buy the business? The fastest way to kill a business is to give it to someone. You've heard the joke. How do you make a $1,000,000 business? Give your kid a $3,000,000 company. Sad but true.
g. What about the children who elect not to be involved? What do they get?
h. There are so many more questions you will need to ask them and yourself.
2. Someone still has to run the business day to day. Unfortunately you have not planned for this. If you have a larger company you may have staff to run the show for you. Typically if you have a smaller company, with under $3 million in annual sales the staff relies upon you for many of the day to day decisions and the business can stutter when you're not available.
3. You're overwhelmed by the process and don't have a qualified, experienced transition team in place. You think you have trusted advisers to help with the process but sooner than later you will discover they can't help you if they have little experience buying and selling businesses. I need to reinforce this!
4. Your partner has a different agenda and doesn't want to sell. Or at least not right now. Not for the price you think is reasonable. This is when you realize you and your partner have not had the heart to heart conversation you've been meaning to have and just how important it is. Get on it now!
5. In order to take advantage of the capital gains and other assorted exemptions, you need to have planned well in advance. In fact, there is so much wealth management planning you need to do, you should have started a few years ago. This financial planning and tax advice is about moving the proceeds from the sale of your business to your personal side. Only advisers with the proper experience can do this. We've all heard about the Owner who sold his company for $4 million and then wrote a cheque to the government for $2 million because he got the wrong tax advice. It happens all the time.
6. Your partnership agreement is out of date or nonexistent. Try getting an agreement where all partners are happy, after you've been working together for years. You will suddenly realize how different your respective views are on the business and life in general.
7. You've been taking money out of the business in various ways and that has to be normalized. In other words you have been using the business as your personal piggy bank and now you have to show your financials to prospective Buyers. They will be looking into every line of your reporting and will want to see the real story. No, you can't fool them!
8. Sales have been stagnant for too many years. Usually because you chose to stop growing. You were thinking, more sales means more work, more trouble and why bother when you're taking more than enough cash out of the business to pay for your lifestyle as it is. It may be catch up time!
9. There is no viable candidate internally to transition to. If there was, they would have raised their hand by now. Or maybe you just haven't been listening and someone terrific for the job is right in front of you. They may require some training, mentoring and management support but they do exist.
The list goes on and on. Makes you question whether selling even makes sense. Well here is one more sobering thought. Likely 80% of your wealth is wrapped up in the business. Kind of like having all your eggs in one basket. It's your move, what are you going to do?
I was thinking about grandchildren and legacy. What statement an Owner might leave to future generations by his actions taken toward the end of his time running the family business. I've written two scenarios from the perspective of how an SMB Owner might be perceived by future generations.
Legacy A - Something to be proud of.
Our grandfather/great grandfather (your name here) was a successful businessman. While he grew a tremendous business to leave behind, he made sure his family and staff would be well taken care of.
Charity and good deeds were part of the fabric of the company and his life. Integrity was a basis for all negotiations, encounters and relationships.
He planned ahead and when his time to transition the company came, all was in order.
We are lucky to have the choices we do. To follow in his footsteps in business and in life. To live life to its fullest, give generously and appreciate our good fortune every day.
He left a legacy of wealth and example. We are the proud stewards of his legacy, and live by his example.
Legacy B - Not sure you'd be proud of this.
Our grandfather/great grandfather (your name here) was a successful businessman. He loved what he did and 'died with his boots on'. He couldn't see himself living any other way and never took the steps necessary to transition the company properly.
While we admire the passion, the series of events that happened after his sudden and unprepared for passing have devastated our family.
No one was trained to take over. Not family or other. The business started to falter the minute word got out that he was no longer running things. Customers got nervous, vendors demanded quicker payments and staff began to panic. No leader, or at least no capable, prepared true leader stepped up.
Competitors and Buyers began to circle the company like sharks smelling blood. Our grandmother/great grandmother didn't know what to do and chose to take the first offer that came along.
Some of our family, who worked in the business and a few long time employees were let go. The cash she received was nowhere near what our grandfather/great grandfather had assured her she would have to live on. Fortunately our family rallied and are taking care of her as family should.
As for future generations sharing in the success of a family business, we have all recognized that while it would have been nice to have some financial assistance for our lives and to leave for future generations as part of our own legacy we do not always get what we expect.
We will succeed on our own and ensure we don't make the same mistakes as our grandfather/great grandfather.
It's up to you to write the story.
Listen to this audio recording of the Roundtable Discussion On Business Transition live and online April 18, 2018. With Eric Gilboord, CEO of WarrenBDC and Elisabeth Colson, Commercial Lawyer with Devry Smith Frank LLP
I didn't start out to become a family therapist. It just happened. If you're the Owner of a family business perhaps you can relate to this week's message.
Working with family business owners is fun, challenging and very rewarding for me. Their business and personal lives are intertwined. More interesting is when you add in partners (and their families) who also own and run the company. Another layer of complication. Blood family or work family they typically interact very much the same. They are family and that means holidays and special occasions together, personal conversations and typically some fighting. Sometimes resolved and sometimes not.
If they are fortunate, respectful of each other and work hard at it the experience can be quite wonderful. If not it can get messy. As with any family dynamic everyone has their role and typically home actions are seldom different from work actions.
To keep the peace, you've learned to accept and deal with their peculiarities, their specific needs and the lack of change - no matter how hard you try to accommodate them. People don't change and hoping they will is a common theme in family businesses. Sometimes it only affects the family. Often the behaviour can reach into the success of the company and have a very real negative impact on non family/owner staff.
At some point you will determine that it's time to deal with the idea of transition. This is where I come in. If you think what I've written so far is even close to the truth wait until you start the transition process. The opportunity for challenges multiplies exponentially. Issues and ideas that have been tabled in the past, now need to be dealt with. Ambitions come out and the jockeying for position heightens.
Family therapy is only one part of the process, but it can be as key to your success as cash flow, sales & marketing, human resources and production. You will be riding two sides of the same sword, family and business.
You may think you have the family side handled until the serious conversation starts about the business. Who will run what, who gets what and about a thousand other things you never thought you would be dealing with. This is why I take on the role of a 'family therapist' as well as a Transition Advisor.
To address the many family and business issues that can come up we've created the Custom Transition Roadmap. In our process, both sides are covered and one without the other is not advised. Remember it's a 'family business'.
If you'd like to know a little more about our Transition Roadmap please click here.
Excerpt from my book Moving Forward ' Get the Triple Effect - Sell your business for 3 x more and 3 x faster.'
If you don't prepare properly, the fallout will be far worse than you think:
1. Your spouse/family will be left to run or sell the business. Your spouse may be forced to work with your partner. That goes two ways. How would you like to be in the position of working with your partner's wife? Sobering thought isn't it.
2. Company value will drop dramatically because you are not there to run it. In many cases you are the business. Want to find out if that's true?
3. Your employees may end up out of work.
4. Customers are not quite as loyal as you think.
5. Competitors will be circling your customer list within minutes.
6. In case your big plan is to die with your boots on. Good luck. You will likely be leaving a legacy and a mess. They'll definitely be talking about you. Maybe just not in the way you hoped.
If you don't want this to happen you have 2 choices:
1. Sell now, knowing it will be significantly harder than you thought, and you will realize far less payment for the business. The terms of the sale may not be exactly what you were hoping for, or even close. You'll have little choice and be forced to be content with the deal however it turns out.
2. Start getting your business ready for a successful sale or transition and have the future you always thought you could have. Become a company desired by Buyers. Sell for the amount you wanted or possibly far more. Sell on your terms.
You can't properly do #1 or #2 without a plan and a team to implement it. It's really not much more complicated than that.
In many cases what today is a thriving multi-million dollar business started out as just a seed of an idea from the Owner. Carefully and skillfully tended it grew and thrived. Business Owners in transition often seek a Buyer who will tend their garden with the same care. A2E
Business Owners need to ask themselves this one question. The answers will come to them lightning fast. What stupid things am I doing to screw up a potentially successful sale or transition of my business?
February 2, 2018
After speaking with several of my readers and clients about their holiday break, I learned that the common theme was using the time to think.
With a nod to Jeff Foxworthy the comic, here is my list.
If you're thinking about running out of time, you might be ready to start transitioning.
If you're thinking about who could carry on your legacy, you might be ready to start transitioning.
If you're thinking about staying or going, you might be ready to start transitioning.
If you're thinking about growing your business way bigger, you might be ready to start transitioning.
If you're thinking about what your life will be like after, you might be ready to start transitioning.
If you're thinking about spending more time with family, you might be ready to start transitioning.
If you're thinking about what's going to happen to your staff, vendors and customers, you might be ready to start transitioning.
If you're thinking about how much you don't know about transitioning, you might be ready to start transitioning.
If you're thinking about what a great ride it's been, you might be ready to start transitioning.
If you're thinking about not wanting to stop, you might be ready to start transitioning.
If you're thinking about how to download your decades of experience, expertise and contacts to a successor, you might be ready to start transitioning.
If you're thinking about not knowing where to start, you might be ready to call me. Eric 416-270-2466 or email email@example.com.
Not quite ready?
The world of selling a business is not black or white like some owners think. There are many shades of gray. You owe it to yourself and those close to you, to find out what your options are right now. Listen to my latest podcast now.
Download this free PDF copy of MOVING FORWARD. Please enjoy the benefits of 'Getting The Triple Effect'.
Cheers, Eric Gilboord
My spread featured in OfficeToday Magazine page 20 & 21. Starting with the Winter 2017 issue I will be a regular columnist for this great magazine.
I would like to have a definable positive impact on 1 million people in 2018. Tracking my results will help make this a definable task. If I have helped you via my speaking, writing, consulting or just in passing please leave a comment below. Eric Gilboord
Family Business Owners have some surprises ahead, if they don't start the transition process.
Hope you enjoyed the first in a series of videos. Comments are always welcome.
Cheers, Eric Gilboord
Recently I was asked what I thought was the most pressing issue facing Family Business Owners today.
The answer is not singular but covers many aspects of their business and personal lives. So I responded that the multitude of questions they are facing are so overwhelming many Owners are simply putting off the inevitable. That is dealing with transition. At best it's a temporary fix.
As Owners age and realize time is running out they are going into a panic mode. There are plenty of questions, but not a lot of answers. The information is out there however many Owners don't know who to ask. Questions without answers soon become problems.
This past year has been a tumultuous time to say the least. If you're looking for answers and ideally the relief that comes from knowledge that is pertinent to your current situation, let's talk. How about going into the new year with a plan or at the very least some answers.
It would be my honour to assist you with this task.
Wishing you the best of the holiday season and thank you for being loyal readers.
Cheers, Eric Gilboord
We Have Much To Be Thankful For
I'm thankful for:
As a family business owner, you should be thankful for:
Food For Thought
Perhaps it's time to consider moving along. Make room for someone else to experience the extraordinary challenges, rewards, ups, downs, good experiences and bad that come with running a business.
After all, there is nothing more humbling, enriching or thrilling than sitting at the head of the table leading a successful business.
This year please give some serious thought to your transition.
Thank you, Eric Gilboord
Ask any employee of an established small or medium sized family business what they would do if the owner closed down and then decide on your next step very carefully.
In my experience, owners of smaller businesses typically with $1- $3 million in annual sales generally have 10-20 employees. Theses smaller companies, many of which have been running successfully for 30 years or more, are seriously considering shutting down and each one will be putting 10-20 families at risk.
All you will accomplish with the proposed tax plan is to give them no choice and a convenient excuse to do so.
What we should be doing as a responsible community, is to find ways to keep their doors open. We need them to grow their companies, hire more people and successfully transition the business to new younger owners.
You are running down a dead end road and nobody will benefit.
Finally, you have forgotten that you work for us. This is not a dictatorship. The boomer aged owners of established businesses built this country over the past 5 decades. My guess is they will not let you destroy all their hard work.
Your pledge during the election was to tax the 1%. Success in small businesses comes from saying what you do and doing what you say.
Advocate for family businesses, Eric Gilboord
Please share this article.
I will consider all serious requests for writing, interviews or speaking engagements to discuss this subject in more detail.
NOTE: My subject matter expertise is NOT financial matters. I will speak or write on the impact of this proposed legislation on business owners and employees.
Thank you, Eric Gilboord
It's not necessarily a bad thing if you're doing what you love. Work the hours you want and make the money that affords you the life you desire.
This is commonly considered a lifestyle business. The Owner grows the company only as far as he/she is comfortable managing. Typically, but not aways, lifestyle companies do under $3 million in annual sales. That doesn't mean they couldn't do significantly more, just that the Owner(s) have chosen not to.
What Owners Think
When it comes to selling, they have an idea of how much more cash can be taken out of the business and what they think it could sell for. Owners think they'll stay around for a little while and that should be all the new Owner needs to transition the company.
What Buyers Think
To a Buyer this is considered a lifestyle business and a risky investment. The big question they will be asking is this. Can the business survive or thrive without the Owner? The Buyers are thinking, what if the Owner gets hit by a bus or gets sick or just quits?
Need To Do
What Owners must do is make sure the business runs without them.
More To Do
What else can an Owner do to evolve beyond the lifestyle stigma? Execute on the ideas placed on the back burner. Look into buying one or more of their competitors. Provide incentives for staff to help with the growth plan.
Mostly because none of us really know how much is needed to live out our life in real comfort. When you think beyond your immediate requirements, the needs of parents (senior care and medical bills etc.) children and grandchildren enter into the mix. Who knows what our government will do to make things even more difficult. How much is needed to retire? I don't believe anybody really knows and erring on the side of more is not a bad idea.
Sell for More
For Owners of companies, with annual sales, in the $3 million and under range; which is the bulk of small business, this is what what you might want to consider. As you run things now, you will likely be able to sell for 3-4 x ebitda. While that can be a considerable amount of money to supplement your retirement fund it isn't the whole enchilada.
What Both Want
Buyers are typically looking for companies with at least $10 million in annual sales. If you can grow your business to over $10 million in annual sales organically or via acquisition and increase the value by improving each of the departments you may be able to sell for possibly 6-7 x an even bigger ebitda.
I don't know about you, but that's life changing money to me and my friends.
So what are you going to do? Sell at the size and operating style you are currently or put some energy into the company and go out on an amazing high.
Out of Steam
I get calls regularly from Owners who know what needs to be done to go big. They just don't have any steam left or are simply using their steam with caution. At WarrenBDC we can help shape and execute the vision you have while supplementing the team you require to reach your goal.
What you thought were your only choices for selling are actually much more exciting than you had ever imagined. How about a partial sale? Where you can be part of the future, but only doing the things you love to do.
If you're up for the challenge, email me at firstname.lastname@example.org to schedule a call and let's talk about going out big.
Make every day count, take action now, Eric
As Mike Tyson so eloquently observed "everybody has a plan until they get punched in the face".
You've been putting off transitioning the company for so long that it's now the accepted status. Or you promised your spouse, the team, your advisers and most importantly yourself, five more years and you're out.
But suddenly circumstances change and you're faced with an unsettling feeling in the pit of your stomach. You want out, but you're trapped, for at least a period of time. And it's always longer than you want it to be.
Could be changes in the business environment, new competition, higher interest rates, cross border restrictions or you fill in the blank _________________________.
Personal reasons rank equally high as business or higher. Grandchildren are at that age where you can't afford to miss a minute of the fun.
It's a family business and the patriarch or matriarch passes on. Now everyone in the family wants their share. Active in the business and non active family members all want what's theirs and to make their own decisions. And rightly so.
This is when the 'now what do I do' kicks in. You haven't really planned ahead and certainly not for a much shorter time frame. Reality steps in and punches you in the face. Making decisions when you're dazed, confused, and pressured typically never ends well.
Regardless of the reason for a change of heart, when it's time to sell, the clock starts ticking. You can't stop it or change it back, time continues moving forward and eventually you will run out.
The point is, start getting ready today. Because even if you know the punch is coming, likely you won't see it until it's too late.
Make every day count.
Take action now, Eric
Browse through over 125 of my past emails click here.
It's the middle of Summer and the time for reading couldn't be better. Read for help with making better decisions. Read to learn how to establish a solid footing as you go down the road you've chosen and read to find comfort while making important decisions. Read now to take action in the Fall.
In conversations with my readers I've learned that many of you save these weekly emails electronically in a file. Others tend to go more old school and print them out to save in a binder.
It seems the ideas, suggestions and tips I write about have a value and for that I appreciate your acknowledgment.
In the spirit of sharing something of value with others, I'd like to direct you to a link where you can read or reread many of my past emails.
Please visit My LinkedIn Article Section. There are over 125 emails all in one place.
Thank you to all of my readers who responded to the last email and took action by reaching out to speak with me. I believe those I spoke with would agree they received answers to their questions and solid direction regarding selling or transitioning out of their company.
The offer still stands, call or email. A five minute telephone conversation could make a huge difference in the success of your next steps.
Make every day count.
Take action now, 'Coach Eric'
Contact me at email@example.com or 416-270-2466
If you're a business owner today it's not easy. The world is changing crazy fast. Decisions need to be made quicker, the implications can be more impactful and it seems like every day there's another new challenge you know little or not enough about.
So what's an Owner to do? Start by admitting you don't know and follow immediately with identifying someone who can help. If it was your golf swing or getting in shape you'd know where to go. If you wanted travel advice, it's pretty simple.
But when it comes to your business, your baby, the passion of your adult life. (Ok one of the passions of your life.) At least some of the decisions coming up are key and will affect you and others long term. So who you consult with is as important as the decisions you make.
Most Owners will do the knee jerk move and call their Accountant or Lawyer. But is this an appropriate time for their services? Are these questions outside their areas of expertise?
A business coach is a great choice. A coach or coaches could be helpful by providing insights, specific expertise, connections, objectivity, emotional support, cheerleading and a laundry list of other things.
But what kind of expertise do you require? Depending on where you are in the life cycle of your company will impact who should help you. Is it a start up coach, grow and improve coach or a start down and get ready for transition coach that would better satisfy your needs? As you drill down the choice will become easier.
Make a decision and try it out. If the choice is correct, next time a challenge pops up and it will, you can say to yourself - I don't know, but I know who can help me.
As a starting point, I am available for a no charge call or meeting to discuss your current situation. We could end up working together or not. At this point what you need is to drill down, talk to someone who is a good listener, impartial and able to bring fresh eyes to the conversation. I'm sure some new insights would also be welcome.
Often accused of being inside my readers' heads, I tend to understand quicker and more easily than others what you might be going through.
Offering to help you is my way of saying thanks for being a loyal reader and for graciously maintaining our relationship.
So feel free to give me a call or send an email and let's talk about you.
Make every day count.
Take action now, 'Coach Eric'
A great question and we get to answer it more often than we think. It's typically our choice and we live with the consequences. We also sometimes bring others into the result and are therefore responsible for the impact of the answer on their lives.
So regardless of whether you're making a poor choice in clothing and embarrassing your spouse or a business decision that affects the entire company you need to decide.
Would you rather be the one who says I wish I had or the one who says glad I did?
Take action now, Eric
If you want to 'Get The Triple Effect' - Sell your business for 3 times more and 3 times faster.
Purchase my book from Amazon.ca or Amazon.com
Ask yourself right now. Who would you rather be?
We all have wants and needs but are we really ready to do what it takes? In this information age there is no shortage of experts, coaches, mentors and a myriad of ways to get the answer to how do I achieve X.
So if the answers are so easily and readily available why don't we just go out and get what we want? As a species we have learned to count on others for far too much. It can come free and typically with no effort. Excuses for not taking action are quickly adopted. Acceptance of not having or not having more is the norm and we slowly spiral down or remain in a state of no change on cruise control.
Many people set goals, work hard, change and adjust to their new circumstances and experience success. Of course these are the 'LUCKY' ones. We know that's not true. They just wanted it badly enough to work for it.
So if others can do it and the help is there for the asking why are you not moving forward? Maybe it's because you don't want to. You need to ask yourself, what is holding me back from having what I want?
Is it simply not knowing what you want? There are many resources to help you figure out what you want. So that's not it. What is keeping you where you are?
When you can answer that single question you may find the path to where you want to be is right in front of you and it's time to take the first step.
As Lewis Carroll said:
'If you don't know where you are going, any road will take you there.'
As The Rolling Stones sang:
'You can't always get what you want, but if you try sometimes, well you just might find, you get what you need.'
Take action now, Eric
If you want to 'Get The Triple Effect' - Sell your business for 3 times more and 3 times faster. Let's talk.
Ask yourself right now, how much do you want it?
Call me directly 416-270-2466 or email for an appointment firstname.lastname@example.org.