Don’t Transition Your Small Business Until you Know Your Emotional IQ

With more than 60 percent of privately-held businesses owned by those in their sixties and older, transition is a reality. It requires proper planning and action from owners who are rarely prepared for the emotional impact that transition brings.

Understanding the emotional requirements of transition is where the process begins. If the owner’s emotional IQ is not up to the task, the process is derailed at the outset. It requires that owners undergo an operational, organizational and financial assessment. Here some classic scenarios:

Owner A: “I really want to retire and either transition the business to a senior manager or sell it. But I would expect to continue to earn my current compensation in either case.”
Owner B: “Well, I’m 68 years old, my most senior manager is retiring in six months and I wake up every night stressed out by the business. I am the only one who understands the technology…but I really don’t think I want to sell. “
Owner C: “I’d like to sell, but I don’t want the name changed. I also want the top five managers to have guarantees of jobs and I want assurances that I can have a continued role in making business decisions.”

Embrace the Realities of Ownership Transition

Let’s first understand what ownership transition and the planning process means and entails.

Ownership transition can mean legacy, management members, mergers and acquisitions. It can involve developing a buyout agreement, working with an attorney to transition to family members or seeking business advisory support to work through acquisition processes with investment bankers, private equity firms, merger and acquisition firms, synergistic buyers, etc. It means knowing and understanding your options and how to best work through these options. It means surrounding yourself with the proper team to be able to work through the issues.

Most business owners have spent years building their businesses. They have invested tremendous emotional, intellectual and physical energy. And now, it is time to think about and plan for transition because of scenarios that include a) the company will benefit from new leadership; b) the business is flatlining and needs capital infused to survive; c) the business is growing, profitable and it’s a perfect time to pursue personal objectives; or d) the market dynamics are changing creating competitive pressures – requiring capital infusion.

Assess Your Emotional Intelligence Before Selling Your Business

Most business advisors, merger and acquisition professionals, attorneys, brokers and financial planners are united in saying that owners ‘lack of emotional readiness’ is the first and most important hurdle that must be overcome in order to properly plan for transition and/or plan for the future.

It all starts with the owner’s emotional views and perspectives:

1. Do you want to sell your business? (If no, stop here. You aren’t ready or don’t want to sell).
2. You built the business, you run the business but do you believe you should handle all aspects of selling the business?
3. Do you expect to keep working for the business after ownership transition? For how long?
4. Can the business sustain and succeed if you are not involved?
5. Are you prepared for the reality that the “new” owners may not want your involvement?
6. If yes to “4”, what kind of severance will you need/want?
7. Do you believe your involvement will be required for the business to succeed?
8. Which members of your “team” do you believe are essential to the ability of the business to continue until new ownership?
9. Are you prepared for the reality that once the closing documents are signed you may have no role in this company you built? The employees and managers you groomed may no longer call you…are you prepared for this?
10. If you sell your business, your valuation may not be the buyer’s valuation: do you have a financial plan for your future, factoring in the ways your future can be affected with different purchase prices?
11. Have you considered asset protection to ensure that your taxes will not erode your exit plan and have your taken into consideration what happens if you become disabled while this plan is being worked out?

Take the test. If you score 6 points or more, you are on the way to being emotionally prepared for the decision to sell your business. In this case then move forward with solid business advice.

About FLA/GA: Sarah and Michael specialize in providing transition advisory services as they work with owners and, with respect to asset protection, their families to prepare for ownership transition prior to, during and following transition. Collectively, they have more than 75 years of experience in working with business owners as well as experience building, enhancing and selling their own companies. They can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it. and This email address is being protected from spambots. You need JavaScript enabled to view it..

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