1+1 = 44? The Exponential Complexity of Multi-Owner Business Transition

Successful entrepreneurial owners are: dynamic, resilient, driven, focused, goal-oriented and the businesses they build tend to reflect this nature. At points of significant transition (scale, sale, succession) family, personal, and business dynamics interact to create a complicated and complex environment.

The M3 Framework describes 3 dimensions (My Business + My Money + My Self) that (when properly evaluated) increase the likelihood of achieving a successful transition.

For privately held businesses with multiple owners the complexity increases as owners must first individually evaluate the variables and then reconcile and align their transition variables with other owners to create common goals for money and business domains. 1 owner = 22 variables; 2 owners = 44 variables; 3 owners = 66 variables… the combinations of these variables leads to exponential complexity. At the end of the process unrelated owners have the freedom to leave the business without fear of familial disruption allowing greater freedom and independence in decision-making.

In the case of family businesses the complexity is magnified further as the entire family system impacts the process and the variables between people become more interdependent. Family cohesiveness, loyalty, history, and rules are not represented in the model at the individual level because they operate in a system that supersedes the individual self and the business. Organizationally, family businesses are at a minimum a mirror (a direct reflection of the dynamics) or more commonly a magnifying glass (intensified version of the dynamics) for the family system.

Points of significant organizational transition (scaling, selling, succession) will introduce tensions that ripple through the family, the business, and the family-business system making the impact of the existing dynamics even more pronounced. When considering a significant business transition, our advice to family business owners is to identify and understand the unique strengths and weaknesses inherent in their family system and how they impact variables in all 3 domains.

Admittedly, this is not an easy process and many would prefer to focus exclusively on the business. This is a mistake. We have seen the destruction first hand. The issues families want to avoid dealing with are the very catalysts for transition failure. Why? Because a significant transition requires significant change to roles, rules, and norms in the business and in the family – this is an inherently emotional process.

BUT… it does not have to be a traumatic experience! The key is the approach. Here’s our advice:

Do Not:Do:
Focus on the problems of the pastFocus on the vision and hope for the future
Major in the minors or engage in emotional battlesMake the process a fun and enriching family experience
Build the transition plan alone as the business leader(s)Involve all family members that are active in the business and consider including those who want to become active in the business
Rush to discussion (conversations where decision-making and action are the focus)Ensure adequate time for dialogue (the exchange of ideas, insights, opinions, and information for the purpose of exploration) before discussion
Believe fair is equal and equal is fairSet expectations for how, when, and by whom decisions will be made
Assume that the family business leaders should facilitate this processConsider accessing external skills that can facilitate an exploratory process avoiding unnecessary trauma and creating an enriching experience

Finally, keep in mind that successful transitions go through four distinct phases (Exploratory, Strategic, Execution, and Adjustment). Research indicates the level of transition success can be predicted based on the robustness of the Exploratory work.  Our goal is to increase the number of successful transitions (scale/sale/succession) and happy owners! That’s why we created the M3 Framework for Successful Business Owner Transitions.  To learn more, get your complimentary download.

Additional resources:

  1. Finish Big: How Great Entrepreneurs Exit Their Companies on Top by Bo Burlingham (2013)
  2. Beating Transition Odds by Allie Taylor, PhD (2018)
  3. Family Business on the Couch: A Psychological Perspective by Kets de Vries, Carlock & Florent-Treacy (2007)