Do you love your business more than your family?

Business Legacy, Business Planning

Do you love your business more than your family?

Eric DunavantDecember 2, 2019

I still remember the turmoil of my Senior year like it was yesterday.  I had lived in my childhood home since I started kindergarten.  Three months before my high school graduation my father was filing bankruptcy and we lost our house, our family’s farmland and my father’s veterinary business. It wasn’t supposed to be like this, but as I’ve learned over the years, my situation is not unique.

Four years prior to this event, my family buried my mother after a sudden illness.  Her medical bills and the unexpected life of being a single father, were overwhelming enough. My dad had to spend days choosing between being Mary Poppins and Mr. Entrepreneur.  Prior to my mother’s death, he was so busy running his business, he never took the time to create a contingency plan.  The bankruptcy was the culmination of his lack of planning and the unexpected events of life.

Entrepreneurs are comfortable taking risks, which often leads to acting as if they’re invincible.  We move forward without any plans for what to do if our life goes sideways.  When the unexpected happens, we often make choices out of emotion rather than logic and end up operating from a position of weakness rather than strength.

If you are an owner who has not made a succession plan, is it because you love your business more than you love your family?  You may not like the question, but it doesn’t change it’s validity.  If something were to happen to you or your family, who would pay the greatest price for your unwillingness to take a step back and create plan for the ongoing success of your business if you need to exit temporarily or permanently?

In my experience, most owners don’t want to create a mess for their family, but they haven’t faced the reality of the situation either.  There are three factors every business owner should consider when thinking about succession planning for their business.

First, most business owners haven’t done any strategic succession planning.  In a poll of entrepreneurs, only one quarter of all businesses have put any work into documenting a strategic succession plan.[1]

I certainly understand how this happens. The saying that, “The cobbler’s children have no shoes,” exists for a reason. Business owners are busy running their businesses and trying to deal with the day to day. The last thing they want to think about is the exit.

This statistic keeps me up at night. So many people have failed to create any kind of plan. Do entrepreneurs, as a group, have an unexpressed dislike for their family? I know we are not that callous, but we have to think about what our family needs from us should the unexpected happen.

Second, just as my father experienced, half of all exits from business are not voluntary.[2] When I mention this to owners they are often surprised at this statistic.

The culprit of this data point can be narrowed down to the five Ds ‑‑ death, disability, distress, disagreement, and divorce. In every single case, when these events happen, they catch the owners by surprise and if a plan has not already been developed, they are sent scrambling for a solution.

We all acknowledge that exit planning for the owner’s death is important, but what if these events happen to a spouse, key colleague, partner or vendor? A lack of preparation leads to making decisions from an emotional state rather than acting rationally based on a strategic plan that anticipated this possibility.

Third, even if we live a full life without experiencing an unexpected interruption, we are all finite.  In a best‑case scenario, you might work from age 20 to 70, which is 50 years of productive time. If we break that out, it’s just over 600 months.

If you’re 45 to 50 years old, your time of being in business is likely more than halfway done. For those of you who are sports fans, we know that every great team enters with a game plan from start to finish.  A business should be no different.  It’s been my personal experience that those owners who prepare their succession early on, operate at a higher level of success. Never underestimate the confidence that results from a well-executed plan.

The best time to begin planning our succession is the day we open the doors. We certainly won’t know everything. Yet, knowing that you have the end in mind is powerful.

Creating a succession plan is simple, but it’s not easy. It’s also one of the most important things we can do to show our families how important they are to us. So much of our time is spent at the office on a day‑to‑day basis, trying to keep the business running and to grow the vision we’ve been given.

It’s time to make a plan that shows your family how much they mean to you. That is the most important piece to your legacy. When all is said and done, wouldn’t you rather be remembered for what you did right as opposed to what you failed to do?

At Paradiem, we have discovered that abundance is creating legacies that fail. Most professionals do a great job helping business owners create great tax plans that are ultimately horrible family plans. Our experience is that beginning with a different perspective, creates outcomes beyond anything your current professionals have helped you develop.  I encourage you to get a copy of our whitepaper, “Are there unintended consequences hidden inside your current estate or business plans?”  If you would like a copy, email info@paradiem.org with the subject “Unintended Consequences” or give us a call at (985) 727-0770.

 

[1] “The need for Exit Planning”, Peter Christman, CEPA Certified Exit Planning Advisor Training and Certification Program, University of San Francisco School of Management, August 1-4, 2016

[2] “The need for Exit Planning”, Peter Christman, CEPA Certified Exit Planning Advisor Training and Certification Program, University of San Francisco School of Management, August 1-4, 2016

 

About the Author

Eric DunavantEric is the president of Paradiem, a man devoted to God and the advancement of His Kingdom.

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