Today’s family business entrepreneurs face a demanding and stressful environment. Their concern over a slowing economy, perceived or real, feeds the fear that many entrepreneurs live by. Entrepreneurs fear that competition, cash flow, accounts receivables, bad debts, or the collapse of a marketplace will take them out of the game. These fears drive the entrepreneur to be highly focused on what is happening today in the business. Planning for the future can be seen as a feeble waste of time - you have to make today work or there will be no tomorrow! It is this drive and this focus that makes many entrepreneurs successful. It can also be the major reason why successful businesses can falter when it is time for transition to the next generation or to a new management team. In today’s business environment, it is easy to stay focused, working in the business rather than to take time to work on the business.

When a family business is in the throws of transition, either managerial or inter-generational, it is time to sit back and spend some time working on your business. We have found that three major fears surface when entrepreneurs are faced with a transition. These fears:

• The fear of conflict;
• The fear of loss of control;
• The fear of loss of wealth;

are easy to ignore in light of the other “real” demands and stresses of running a competitive and successful business. However, ignoring these fears grinds successful transition to a standstill. It is imperative that they are addressed.

CONFLICT

The fear of creating conflict within a family or organization can stop transition dead. Tough decisions need to be made. In most cases, there is inherent conflict in the transition itself. One party is looking to downsize responsibilities, retire, reduce workload or change the nature of their workload, while the incoming generation may be looking to expand, grow, or change the way they have always “done it”.

Conflict can be highest when the entrepreneur has to choose one child versus another, or one manager over another, to lead the business forward.

Inaction is easy and avoids conflict. This is not always the best for the business.

LOSS OF CONTROL

The ‘loss of control’ fear is experienced when the founding generation is considering retirement. Retirement has become a four-letter word to many family business founders. To the retiring generation, it may mean loss of power, respect, authority and control. They may believe their opinion is no longer valued, that they are no longer needed, and that the next generation wants to come in and put its own mark on the business. Retaining control can be seen by the founders as a way to protect themselves from the loss of status in the business or in the community. Not dealing with the transition of leadership can lead to even greater conflict.

A younger generation must come to realize that “he who has the gold still rules” and be aware of the fear which retirement creates. It is also important not to associate leadership with control.

LOSS OF WEALTH

Many entrepreneurs have worked their whole lives to build their business. As a result, they have their wealth heavily concentrated in the business. Handing over the reins to someone else can create real anxiety on the security of their life’s work and wealth. This fear and anxiety make it easier not to deal with the transition in order to protect their investment, so no action takes place.

Decisions, based on protecting ourselves from the fear of what might happen, are not unusual. They do however keep an entrepreneur from working on their business.

SUMMARY

It is important that family businesses find a method of discussing the issues of transition, either with a trusted advisor or objective facilitator. Developing a plan will help reduce the demands and stresses placed on the business and its people. Working on the business should be as much a priority as working in the business.

After all, doing nothing should be the greatest fear.

By Scott vanEngen, C.A., CFP