How often do you hear a potential financial planning client say, “I just need to sell my business/sort out my will/get some things sorted, then I’ll sign up as a client”.
Similarly, a very common comment I hear from owners of IFA businesses when asked about their progress towards succession planning is this:
“I just need to sort out X before I can start thinking about succession planning.”
The ‘X’ might be getting the right leadership team, or perhaps a successor, maybe refining the service proposition or a new adviser. The suggestion is that working on long term strategy cannot start until the short-term problem has been dealt with.
In practice, long term change is just the summation of a series of short-term changes. Therefore, when working towards a significant change, such as the sale of the business, it is important for the business to multi-task.
There are four particular dangers of focusing on one major issue at a time.
Do you recognise any of these?
The Bump In The Lino Effect
Sorting out a problem in one area can often give rise to another. Like the proverbial bump in the lino – when you push it down, another bump appears across the room – it can be better to deal with several issues at once.
As an example, take a company with some structural issues than need addressing. Perhaps there are loans in place, or a minority shareholder. Perhaps there are separate share classes. It is a good idea to simplify such matters in advance of getting the business ready for a potential sale.
In solving this problem, however, another problem may be created. For example, a leadership team who, aware of the structural changes taking place, might begin to develop expectations of ownership. These could have been dealt with when the restructure was being looked at but might become too entrenched in their views if left until later.
The Time Taken
So many business owners get to the point that they want to sell their business, only to realise they have not made the necessary preparations to give them options.
Many of the steps needed take time to bed in, especially when looking at the business continuing, such as via an Employee Ownership Trust (EOT). Ideally, the cultural changes to engender employee engagement should need at least 18 months to fully bed in.
If the other changes to the business also take 18 months to sort out, and one does not start until the other is finished, then this means it will be three years until the business might be ready to be sold.
To quote the Chinese proverb, when is the best time to plant a cherry tree? Ten years ago. When is the second-best time? Now.
Employees are smart. They have a sense of when something is up. They talk to each other, often in an uninformed way, and can therefore reach inaccurate judgements.
Suppose, for example, an owner who wants to sell to an EOT. Perhaps they do a lot of work on employee engagement but do not take time to consider their own purpose and future.
When the day of the sale comes, and the owner continues to act as managing director, employees who feel they were told that they would be in control now may feel that nothing has really changed.
Struggling To Let Go
The preparation needed for a business to be sold to an EOT often focuses on employee engagement. A common phrase is that employees should “step up”.
Of equal if not greater importance, however, is that of the owner letting go. Employees will not step up unless there is somewhere to step up onto.
Letting go and taking control are two sides of the same coin and need to be worked on in tandem. For example, by clarifying the purpose of the business (what I call ‘The Flag’ in the ground), in order that everyone understands why the business exists.
Conclusion – The Eternal Pyramid
The Eternal Business Programme provides a pathway for businesses who wish to sell their business to get a fair value and to leave it as a legacy.
There are four parts to the business model, which we call the Eternal Pyramid. Crucially, the programme provides a pathway that enables owners to work on the four parts to this permit at the same time.
By following our programme, owners and leadership teams can be guided through a process that ensures they multi-task and don’t get bogged down by focusing on only one issue at a time.
The programme takes around 12-18 months to complete. We are launching an intense version, which will get your business to the stage of announcement in 6 months. To find out more, email me at email@example.com