Do not let your psychology get used against you. There is another way!
Trauma with a capital “T” is happening and opportunistic buyers are starting to circle whispering siren songs of relief from the stress, conflict, and strain. Don’t let them take advantage of your lowered resilience, fatigue, uncertainty, fear or anxiety. Even if things are tough, if the business has the capacity to persist please do not rush to sell. This plea comes from a deep desire to prevent other family business owners from having avoidable regrets. There is more to this plea but, I’ll cut to the chase for those of you who are determined to sell in the current market environment.
If you are going to sell the family business, you can reduce the risk of family conflict and regrets by:
1. Ensuring the family is: a) aligned around goals for the sale; b) has shared expectations for the process and the outcome(s); and c) united and fully committed to the decision.
2. Having a clear answer to the question, “what makes now the right time to sell for each member of the family?” (Note: family members will likely have different responses.)
3. Identifying the deal breakers and limits you will not compromise when the pressure of the transaction is on and the processes attempts to force fast decisions.
4. Providing a supportive forum for family members to express their hopes and dreams for the future along with concerns and frustrations with the current reality BEFORE making the decision to sell (or at the very least before you sign a letter of intent; LOI).
5. Recognizing the choice is not binary (sell or don’t sell) there are a range of solutions that might help you achieve the goals you are seeking.
6. Investing the time and effort to ensure the process maximizes desired outcomes for as many family members as possible.
7. Being clear about the impact of the decision for long time employees who have helped you build the business.
8. Being realistic about what you can and cannot control during and after the transaction if you choose to sell (including the impact to your legacy).
9. Recognizing that selling will increase workload demands, emotional labor, and complexity for a minimum of several months and in some cases a year or more.
10. Creating a post exit plan for family life and engagement. What new rituals and rhythms will keep the family together once the business is gone? (Key assumption: family cohesiveness is important to you.)
Consider joining us for a Lemonade Lab where owners work together to explore their current reality and chart a course through these challenging waters. This lab is by invitation only. Please email: admin@ockiwi.com for more details.
For those who are interested, here is the rest of the plea…
There is little denying the pandemic is a Black Swan event (an outlier; a sudden onset event that takes the world by surprise and has profound, often life changing impact). Modern history provides few insights that include the level of trauma and depth of impact being experienced as a result of the COVID-19 pandemic. Trauma associated with the pandemic is a trifecta with characteristics of sudden, slow-moving, and ongoing trauma happening simultaneously. This roller coaster that nobody wanted to buy a ticket to does not seem to have end in sight. In short, the pandemic is eroding resilience and resources.
According to an April 2020 study published by the National Bureau of Economic research in partnership with Harvard University, University of Chicago, and University of Illinois as many as 100,000 small businesses had already shut permanently. As of July 2020 another 40,000+ businesses have been added to the list. Even with government sponsored relief efforts, businesses large and small are succumbing to economic pressures with bankruptcies at an all time high. In these cases, regrets may be unavoidable. Psychological research suggests that reducing regrets during the emotional aftermath of your loss depends on your ability to reduce or eliminate counter-factual thinking errors.
Navy Vice Admiral and aviator, James Stockdale, is the subject of what Jim Collins termed “The Stockdale Pardox.” Collins uses the story of how Stockdale survived more than 7 years of torture in a North Vietnamese prison camp never knowing when he would get out to highlight the difference between those who survive and those who do not. From a psychological perspective The Stockdale Paradox is referring to the nature of resilience and its relationship with ruthless honesty, meaning, and belief. The paradox is that both optimists and pessimists have lower resilience in crisis than realists.
Optimists engaged in overly positive counter-factual thinking and realists in overly negative counter-factual thinking. Neither were able to persevere through trials, albeit for different reasons. On the other hand, the realists who looked at the gravity of their situation, accepted the reality, had a compelling purpose for surviving the trauma, and held onto the belief that they would persevere in the end were the ones that survived.
Family business owners find themselves in the worst market environment the modern world has ever experienced, and it won’t be over quickly. Yet, family businesses are the foundation of our economy and the hope for our recovery. Multi-generational family businesses survived the crash of 2008 and who knows how many downturns going back generations. We are not surprised by the fatigue but, an unexpected phenomenon is emerging. Families are pulling the plug on generational succession and shifting to sell rather than as one owner of a successful manufacturing business recently proclaimed, “putting the kids through the same hell we’ve been going through over and over.”
Very capable adult children in their 30s and 40s who have given their lives to help build these businesses are suddenly seeing the lack of resilience in the “now” generation (the generation in control of the business today). As one “next gen” (the successor generation) family member tearfully proclaimed, “I have given my life for this business. It means everything to see our family legacy survive this pandemic. Our business is more than viable and I believe we can survive even if it will be tough. I want my chance… and it is being stolen.”
These words have haunted me for several weeks. As the pandemic continues to unfold, more and more families who were working toward succession are shifting course. If the competing priorities cannot be resolved, the life’s work of multiple generations may be lost. There will be money in the bank and financial freedom but, this chapter of the family business story will close with the transaction. For some family members no amount of money can replace the regret and potential resentment of a future taken away and I find myself saying, “it doesn’t have to be this way.”
My final plea: no matter the choice, engage in a process that leads to as few regrets as possible. Create space for each adult family member to have as much voice and choice as possible in these decisions. Refuse to let fear or fatigue drive your decision-making. Whether the ultimate decision is to sell, engage in generational succession, or take an option in the middle, my hope is that you will look back on this time and say, “we fought the battle together and we survived”.
As always, we are here to help navigate the journey, feel free to reach out if a conversation is helpful (admin@ockiwi.com). In the meantime, be safe for and kind to each other.