Quite a few years ago when I was doing a stint of independent consulting for some small businesses, I had a client whose company didn’t survive them.
What happened? Well, he assumed his son would be able to take over the business when he retired. The owner was only in his 40s, widowed, and thought he had years left to get his son ready to take on the business.
He assumed wrong. The owner had a massive stroke in his late 40s that seemed to come out of nowhere. He was a person who ate well, went to the gym, stayed active, and had no family history of stroke. He was incapacitated, and died a few months later. His son was not able to keep the business running, and ran it into the ground, leaving only the equipment and assets to be sold off.
Skills Gaps aren’t cured by family ties
So what happened? Well, first of all, the owner never had the son work in the business or in the industry as a high school or college student. The son went to college, got a business degree, went on to get an MBA, but never once worked in the area of his father’s business. He actually never worked at all through school, so his work experience was almost nil. He was a smart young person in his mid-twenties with no work experience that would prepare him for a role he had dropped on him.
The owner had assumed his son would learn what he needed to run the business in school and that he would have years to train him in the company after he graduated. That assumption led to the son finding himself in charge of a company he had never worked for with no practical experience. The other leadership in the company weren’t consulted on his appointment and they resented it. They started leaving and he had little to no experienced leaders or supervisors left to lean on.
Lack of Succession and Transition Planning
The owner had never invested in planning how the company would transfer to the son. The org chart was outdated and useless. There was no real documentation around roles other than some old job descriptions from when people had been hired years before. There were few SOPs except for the ones in the IT department, who were good at their documentation. There was no strategic plan for the future and no clear delineation of who and how decisions would be made in a crisis.
Outdated documentation, lack of clear operating processes, unclear authority for decision-making, and an unqualified successor was a perfect storm that sunk the company in months and forced the sale of the assets.
The Costs
I had advised the owner to implement SOPs, document, and do the things needed to get his company ready for a transition. He balked at having his people take time away from their jobs to do it internally and wouldn’t hire consultants to do it for them. He didn’t believe it was worth the investment. He didn’t update his will because he said it was too expensive to hire a lawyer since his son was his only heir anyway. He had every excuse in the book for not spending money to create a succession plan or transition plan because he thought he had the time to train the son. He did not.
He also had never updated his life insurance policy or purchased long term care insurance. The costs of those final months in an inpatient care facility depleted much of the owner’s savings.
When everything was said and done and the company assets were finally sold, the legal fees and the discounted price the company sold for worked out to more than three times what hiring someone to properly create a plan would have cost. Instead of protecting a legacy for his son and insuring his business would continue, the owner created a mess that could have been avoided.
Don’t Assume You Have Time
None of us know what amount of time we have left. Good health is not guaranteed. No matter how small your company is now, take the time and do the work to make sure it will survive if something happens to you. If you need help with that, reach out to us at Beatitudo Consulting. We have seen messy transitions and know how to get your company documentation ready for changes that might just be out of your control.
