Management
When your number is called, who succeeds you?
Caterina Valentino
Succession planning is an entrepreneurial pitfall. Let's take a look at some
strategies for successfully exiting your business.
Ask an entrepreneur how much time he or she devotes to suc-
cession planning and once the look of incredulity passes you’ll
get one of these responses: “I’m too busy trying to make a go
of the business to think about succession.” Or, “I’m only 35 years
old. I’m healthy. I’ve got another ten years left in me before
contemplating succession planning.”
family and assume that someone else is going to run it while you
take it easy.”
Doug Robbins, founder of Robbinex Consulting Intermediaries,
an international firm that specializes in helping owners of mid-
sized companies with business transitions, describes this as the
five-year syndrome: “Call me in five years. You call in five years
and they ask you to call back in another five years.” Friesen admits that he could not have made the same succession
decision his father and uncles made. D.W. Friesen & Sons Ltd.
was a family business until the early 80s. When the reality struck
that not all Friesens were passionate about the print business,
the brothers turned the company into a trust and sold shares.
Now others are running Friesens as employee-owners and hiring
professional managers. David Friesen was the last family mem-
ber in the business. His two sons didn’t follow him into the print
business.
According to Robbins, who is based in Hamilton, Ont., from a
legal perspective there are about 20 disciplines of law that need
to be accessed when considering succession. And, it’s unlikely
that one lawyer has enough expertise in all these areas. David Friesen makes it crystal clear that Friesens’ succession
plan is unique. “They didn’t try to open up manufacturing oper-
ations in different provinces or different countries. They just
made this model work in Altona.”
Add to the legal questions hundreds of other inquiries that need
to be addressed for transitioning out of a business and it’s over-
whelming. Do you sell? Leave a legacy? Give back to the
community? Turn it over to the employees, merge it with a com-
petitor or just close it down because the assets are worth more
than the business is worth? There is no one size fits all solution
Avoiding succession planning is an entrepreneurial sand trap.
Robbins makes it clear that when entrepreneurs make a business
plan to open a business they need to make an exit plan, too.
Here’s the storyline.
The entrepreneur mortgages the family home and has his
spouse sign the bank guarantee. Three months later a bus hits
the entrepreneur. The bus keeps going. The entrepreneur
doesn’t get up. The bottom line is that illness and unfortunate
circumstances are unexpected.
It is hard to let go
Heidy Lawrance, owner of WeMakeBooks.ca, a division of Heidy
Lawrance Associates, a Toronto-based, independent production
house for self-published authors such as David Chilton (The
Wealthy Barber) laments, “I was absolutely ignorant and naïve.
I should have thought of succession planning but I was going to
get a job any day. Freelancing was only temporary.” Twenty-eight
years later and Lawrance isn’t sure who will succeed her and
manage her business. As for selling your business Lawrance
states, “It’s hard to relinquish a business that carries your name.”
David Friesen, past CEO and Chair of Friesens, in Altona, Mani-
toba, says, “It never crosses your mind that a time will come
when you realize that you can’t or you don’t want to do this
forever. And, of course the easiest option is to leave it in the
20 | February 2018 | GRAPHIC ARTS MAGAZINE
Many owners believe in leaving a legacy and hope that their
children will take over the company. Robbins points out that
intergenerational business transfers are high stake. Sharing a
bloodline doesn’t necessarily mean that sons and daughters are
the best leaders for the company.
When it comes to handing the business over to a son or daughter,
Friesen cautions that the more successful a company is the more
difficult it can be for the children. Watching one’s parents grow
a successful business doesn’t prepare the next generation for
the difficulties of running a business in tough economic times
when margins are slim and the competition is fierce.
Selling to employees – a management buyout – can be fraught
with problems. Lending institutions may see employees as high
risk, and offer only unattractive rates and unbearable loan terms.
Moreover, line workers may not have the leadership expertise
to run the business efficiently and effectively. And if a manage-
ment buyout falls apart, disgruntled employees may leave the
firm, reducing the attractiveness of the business to other buyers.
Lawrance says that many employees have no appetite for the
marketing, managing and bookkeeping aspects of running a
successful business.
Selling the business outright may be the best option. But, before
an owner can contemplate selling, she needs to determine what
the company is worth. An objective market assessment and
valuation of the business should determine if this is the optimal
time to divest. Is the company legally ready or is this the time to
hunker down, consolidate and enhance the business in order
to reap a higher price at a later time? A market valuation assesses
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