We live in a world flooded with information, but what has happened to knowledge? Think about it, the volume of accessible information increases exponentially every day, knowledge workers, Google, and data are infused in every area of life. You don’t know something, ask Alexa or Siri and get information… just don’t count on them for knowledge. Information and knowledge are two very different things. Information is readily available to anyone with an internet connection. Knowledge is the theoretical or practical synthesis and application of information and data. The power of information and data rests in the ability to develop and apply knowledge.
Knowledge is power. Too many owners are taking the simple truth for granted and eroding their competitive advantage as a result. (A product of the 70’s and 80’s it is hard to read that phrase without thinking of the theme from School House Rock – “it’s great to learn because knowledge is power”.) This truism was driven home during a recent engagement for five siblings, all equal owners in a second-generation business attempting to align expectations for their exits.
Despite years of diligent effort maintaining a family charter and buy-sell agreement, emotion fueled dialogue as family, business, leadership, and personal aspects were explored. Tension stemmed from a lack of clarity about competing needs and priorities at a values level regarding what each wanted for their MOM (Money, Ownership, and Management) and the timing each had in mind for their personal transition. While every business and every partnership is unique, the tensions these owners faced are common to all family businesses contemplating transition and wrestling with MOM issues.
Decreasing tension required increasing knowledge so that each owner had a common understanding and the playing field for exploratory dialogue was level. The underlying fear driving much of the emotion was a fear of the unknown. If my older siblings exit what will that mean for me? Will I have enough money to retire? How will those of us who are left operate the business? What will happen to the family relationships? Can we survive this?
Recognizing transition as a journey and not simply an event frees each owner to engage in exploration and co-create the map for their collective and individual futures. Fear of the unknown is eased as each piece of the journey is explored.
In this case, as with many multi-owner groups, each owner was in a different stage of readiness leading to personal, family, and organizational tensions.
Therapists know that the three things couples fight most about are money, sex, and kids. For family business owners the top three tensions are money, power, and priorities. For this family the key issue was money. There was a fundamental lack of understanding about their long-term financial needs and whether the business could support each of them reaching those goals. Leveling the money playing field started with increasing knowledge by asking essential questions about future income goals and needs.
Many owners we work with count on the sale of the business to fund their retirement, but in low-to-mid market businesses – particularly those with multiple owners – this may not be realistic and using time strategically is crucial. Understanding the financial goals each owner holds personally and for the business in light of individual timeframes (in a range of years) grounds transition dialogue and sets the available degrees of flexibility. These data points allow more robust and informed exploration of preferred transition scenarios (succession, full or partial sale, ESOP, liquidation, or some combination of those options) and the timing required to satisfy their MOM goals.
Through skillfully facilitated exploration owners are able to align their expectations and move to decision-making that is grounded in more than emotion or rhetoric. That is not to say emotion is bad or should be ignored, rather to acknowledge the danger of unexplored emotion is that it can insidiously impact decisions and outcomes. Explored emotional tension balanced with increased knowledge and understanding fosters effective co-creation of an owner’s transition journey map. In this case, the transition was exit, but the process is the same for scaling or leadership succession. Knowledge is power – it frees people from the fear of the unknown.
Ready to power up? Here are 3 easy steps:
- Know your numbers (start with a few simple ratios like the ones found here. An additional resource for business valuation is BizEquity)
- Know what it takes for a successful transition (scale/sale/succession). Read our M3 Framework whitepaper.
- Know yourself. Take the complimentary version of our transition readiness assessment.