Running a business is often much more than a full-time job. You’ve likely dedicated a big part of your life to your role, committing vast amounts of time and energy. So, it’s perhaps understandable that when the time finally comes to walk away, it’s often easier said than done.
It can be especially challenging if you’re a founder or family business leader, as you will have a unique relationship with your business that runs much deeper than day-to-day management. It can also cause complications when it comes to leaving it behind and managing the succession process.
“Imagine that you raise a child, you give it your all, then someone else steps in to take over. You’re left on the outside without influence, with no one listening to what you have to say,” says Dr Ronit Lami, a US- and UK-based psychologist to UHNW families and individuals. “Not many people are familiar with how to be in that space and handle it well.”
Departing business owners are often caught out by the sheer magnitude of the adjustment, especially when there hasn’t been enough preparation for it, notes Kirsty Moore, Managing Director, Regional Head London, HSBC Global Private Banking.
“They can be so busy that they simply don’t get time to think about it, which can make managing the next steps much harder,” she says.
Separation and succession
Business owners frequently intend to sell their business at some point in future. Yet the eventual exit – whether through a sale or other means – isn’t necessarily the end. There are numerous stories of former founders and chief executives returning to the business to offer advice, whether invited or otherwise.
The commitment required to run a business has the potential to create a narrow focus that leaves little space for outside interests. While so many business owners envisage a future career for themselves post-exit, that leaves a sizable proportion who don’t have such plans. The result is that when it comes to walking away, you may have nothing meaningful with which to replace their former role.
“I’m always intrigued when business owners can’t immediately see what value they have to offer in different ways,” Moore says. “They almost need coaches to ensure they realise all the skills they have and what they can offer away from their business.”
The compulsion to remain involved in the business and continue offering guidance might aid the transition process. It may also be seen as interfering, and it can make life difficult for those now in charge.
This tendency to remain in touch with former colleagues, clients and (in more high-profile instances) the public can undermine a successor’s authority, according to Professor Kevin Au, co-founder and current director of the Centre for Entrepreneurship at the Chinese University of Hong Kong.
“Some former owners also challenge the innovative efforts of their successors. As a result, opportunities are wasted and the company is being run continuously in the old style.”
This can be a particular problem for family businesses.
“When it comes to family members taking over, there’s usually an insistence on continuing to have meetings with the children and wanting to have an input,” says Dr Lami. “It’s especially difficult when it’s a parent-child relationship and the business has evolved to the point that what was right 10 years ago doesn’t necessarily work now.”
That reluctance to let go may reflect doubts around the ability, commitment and leadership of incoming generations. It’s a common mistake, notes Au, and often a consequence of miscommunication and sometimes due to conflicting generational values.
Keeping open minded
Letting go is difficult. But there are steps that businesses can take to make the transition easier for all parties and ensure a smooth succession process.
Part of the responsibility lies with those preparing to step down, according to Au, especially in family businesses: “You need to groom the next generation earlier and be open-minded enough to seek professional assistance or advice from those who have already gone through the process.”
More importantly, you need to understand potential generational differences and allow your successor space to “test their wings with small bets”, helping them build confidence, learn how to do things independently and establish their leadership.
Taking care not to completely cut off the person leaving the business can ease the transition too. Dr Lami advises that you should find a way to work together with the new owner, so that you feel heard – without your successor necessarily needing to take your input on board. “Also make sure the disconnect is done gradually,” he adds.
The most effective transitions are invariably those that have been planned for, particularly in family businesses.
“Some have a very structured process, with clear rules for the children about their right to be in the company, and how the parent can keep their side of the trade and start pulling out of the business when the time comes,” reports Moore.
“It’s about it being an evolution and not a cliff-edge – how will it all evolve to the next exciting phase. You can't afford to think it will just sort itself out.”
So in summary consider these 5 take-aways for passing on your business:
- Prepare early
- Consider what you want to do after leaving the business – well before you actually leave
- Be prepared for an adjustment phase when you do leave
- Agree the nature of your on-going involvement with your successor
- Give your successor space