Improving efficiency, securing capital or liquidity, changing careers are reasons for selling a Micro, Small and Medium-sized Business (MSMB), but: Retirement is the number one selling point with business fatigue second and family issues third (succession issues).
Early awareness is the starting point for successful transfers. Practical support follows. Due to business transfer complexity, consulting Guidance must accelerate performance and unlock value before the transferring process. A well-organized exit strategy plan —including restructurings, organization-wide overhaul or a smart digital-attacker strategy, capitalization of the historical route, etc.— maximizes the business value and gives clear messages the potential investors. Strictly timely and rigorous planning of the business transfer is needed long before the entrepreneur's retirement and certainly long before its retirement.
The consequences of not focusing on succession despite its obvious importance can be profound; a leadership void and the resulting discord can significantly undermine the company's performance. Indeed, poorly planned transfers are among the most significant value-destroying events, primarily for family-owned businesses. Poorly designed successions can harm revenues, market capitalization, and margins.
MSMEs are the most vulnerable to transfer failure. They are linked to their charismatic founder, having a strong personality, formidable capabilities, and a long record of managing all aspects of the business, items that cannot be easily transferred. In such cases, succession can be a nearly taboo subject that is difficult to broach. Besides, the value of their tangible assets often makes it impossible to evaluate them because these companies' vital, valuable assets are the entrepreneurs themselves. In addition to its size, its legal form and age are two other factors that stand out as vulnerabilities.
Planning for a smooth succession starts with recognizing that it will be one of the most complicated transitions that a business owner will experience. Based on our experience advising entrepreneurs on series, we have identified ten principles that improve the chances of succeeding with succession: Start early. Set up expectations, philosophy, and values upfront. Understand individual and collective aspirations. Independently assess what's right for the business. Develop the successor's capabilities broadly. Define a transparent and objective selection process. Find creative ways to balance business needs and family aspirations. Build credibility through a phased transition. Ask departing leaders to leave but not disappear. Motivate the best employees and foster their support.