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Can We Please Spend a Bit More Time on the Exit?
Part of what I enjoy so much about sharing my musings with readers in this space is that I get to bring together ideas from lots of sources and try to combine them in interesting ways every week.
This time we’re going to start with an idea I got from a new colleague, bring in some previous posts, and then incorporate some other ideas that I happened upon on LinkedIn.
Along the way, we’ll bring in various metaphors, and hopefully give everyone some new ideas around how we think about transitions from one generation to the next in a family enterprise context.
Building a Business, and then Exiting It
Let’s start by explaining the numbers in the title of this post. During a recent peer group meeting, a new colleague who happens to be a financial planner, shared an expression that’s become common parlance in his field.
“We typically mention that a business owner usually spends 60,000 to 80,000 hours building their business. But then when it comes time to transfer it, they usually spend between 8 and 10 hours on that.”
Well let’s just say that I’d never heard anyone frame it this way, so I jotted it down and knew that I’d soon be expounding upon this idea here.
This particular peer group is for those who work with family enterprises and family wealth, and this new member of the group has long worked with non-family business people, so a straight sale to an outside party is what he was mostly referring to.
So let’s look at this from a family business viewpoint.
Ten Years or Fifteen Minutes?
One of my first thoughts when I heard the 60,000 to 10 ratio was a blog I wrote about three years ago, Contrasting Transition Timelines – 15 Minutes or 10 Years.
That line was from an acceptance speech for a Family Enterprise of the Year Award, where the recipient related the story about how, decades earlier, his father took only about 15 minutes to transfer the business to him, so he found it hard to believe when professional advisors would tell him that a good transition can take 10 years.
The moral of the story is that he now understands and agrees with the ten years, and that his father’s quick exit was pretty much a unicorn event.
The fifteen-minute version has the senior generation leader exit quickly, while the ten-year plan creates and allows for a period of shared leadership.
The Escalator Analogy
I also thought about an analogy I like and have written about, the one about the escalator.
See The Crowded Escalator Problem in Families
When someone is riding an escalator and they’re approaching the top (or bottom), they need to get off, and not step backwards.
In the case of the shared leadership period, it’s important for the parties to stay a safe distance apart, but you don’t need to wait for someone to disembark before getting on, because many people can ride together.
Congestion, Cohabitation, Turbulence
At the outset I mentioned some LinkedIn posts that I came upon as I was preparing to write this post.
A colleague had written something about a period of shared leadership as a “Période de Congestion” (this was in French) and I recognized that labeling it that way wouldn’t likely encourage families to work this way.
“Congestion” is often used here in referring to traffic jams and such, so I thought maybe “cohabitation” could work better.
As our comments went back and forth, she added that “turbulence” is also a term that gets used to describe this period. (Merci Martine!).
I suppose that just because it doesn’t sound lovely is not a reason to discount it, in fact I completely encourage it in almost every situation.
Learning to manage it well is the trick, of course.
Yes, It’s Messy. And It’s Necessary
For family enterprises, and for situations where there’s no operating business, but there is significant wealth and assets that are owned together with family, it’s important to make sure that what you are setting up is a transition, not a simple transfer.
See Don’t Transfer Family Wealth, Transition It
The time period where the leadership transitions will be messy at times, and that’s expected and completely normal.
And it is so necessary to make sure that the knowledge, skill, relationships, leadership and confidence are all moved down from one generation to the next.
We’re talking months and years, not minutes and hours.
