Ownership Transitions

Business Owners Not Prepared for Ownership Transition

Published: 2012 11 15 | Views: 0

CIBC World Markets released a study on Tuesday revealing some staggering statistics about how “ill-prepared business owners are for the inevitable ownership transition that is quickly approaching”.  Here is an article that I recently wrote providing some lessons for business owners from one family that was successful in its transition.


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Ownership Transitions

KEEPING IT IN THE FAMILY: A TRANSITION SUCCESS STORY

Published: 2012 11 12 | Views: 23

Statistics tell us that successfully transitioning a family business from the founder to the founder’s children is a long-shot.  It only happens in 3 out of 10 cases. 

The question for family businesses in transition or looking to transition is what lessons can be learned from those who have managed to beat the odds. 

In my experience having seen the good, the bad and the ugly of family businesses over the years, the key often lies in the willingness of the founder to let go sooner rather than later and in the ability of the founder to foster an ownership mentality in the children. 

A newspaper article I read recently provides some interesting insights on how to do it right.  It was about a Canadian boutique hotel chain called Groupe Germain owned by a brother and sister team which had recently been cited by Conde Nast Traveller and Travel & Leisure as one of the top hotel chains in the world.  

The part of the story that caught my attention was that the brother and sister decided to start their business while working for their father who had built up a successful restaurant business.  The brother and sister were in New York looking for new ideas for the restaurant business and were so inspired by the boutique hotel they were staying in that they decided to launch their own hotel business based on their experience at that hotel.  

There are a number of lessons to be learned from this story.  The first is that the business dream of the father (restaurants) need not be the business dream of the children (hotels).  Let the children pursue their dreams and take the pressure off them to pursue yours.

The second lesson is to teach the children what it means to be an owner including the concepts of risk and reward.  The father was likely successful because he had to take some calculated risks along the way and probably had to suffer some failures before becoming successful.  My hunch is that the children had to do much the same. 

The third lesson is that for any partnership to be successful it must be created by the partners themselves, in this case the children.  That is not to say that the parents do not have an important role to play in providing the children with the all-important business and life skills to succeed, but at the end of the day the children will have to run with it their own way in order to succeed.  This means behaving like strangers who decide to go into business together and asking each other some basic questions like why do we want to go into this business together, what makes us unique in this business, what do we see as our success factors, etc., etc.  

The fourth lesson is for the founder to know when and how to let go.  The most successful transitions that I have seen are the ones where the parent steps aside long before the parent’s “best before date” and goes from being the boss to being the coach or mentor to the next boss(es).  Having that wisdom, foresight and emotional maturity are fundamentally important to any successful transition.    

As my father likes to say, “if it was easy, everyone would be rich”.  It’s not easy, but for many successful business owners it is the last big challenge in their business lives and should be taken on with the same gusto and enthusiasm that it took to make the business a success in the first place.   

Ron Prehogan is a Partner with the law firm of BrazeauSeller.LLP and President of Equitas Consultants Inc., a consulting business that provides business and wealth transition planning and implementation services for businesses and families using a unique combination of facilitation and transactions expertise. Ron can be reached at 613-569-7001 ext. 257 or at rprehogan@equitasconsultants.com


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