Meeting the Challenges of Change in Family Business

A Forecast for a Wave of Disruption

Meeting the Challenges of Change in Family BusinessThe research is done and the data’s been collected.  Industry Canada projects that by the end of 2020, close to 350,000 small and medium-sized business owners will be over the age of 55.  It’s expected that one third of family business owners will transfer control of their companies within the next five years.

The study reflects what we already know about population demographics in Canada. Baby boomers create a wave of change.  They filled hospitals at birth, schools while growing up and flooded the workplace as employees. As well, they dominated the business market as company owners. Now, approaching retirement, their businesses will be sold, acquired or passed on to family members.  Billions of dollars worth of business and companies are up for grabs. The question is, are the owners willing to let it go?

A change in ownership creates challenges for everyone within a company and especially for those of the boomer generation. They are the most resistant to change preferring instead, consistency and predictability. After all, if their company is successful and profitable, why alter anything? To business owners, adjustments within the company can often be interpreted that their family, employees or a merger and acquisition (M & A) specialist is forcefully encouraging their departure.

And while it is common for many people or groups to avoid disruption because it is easier and safer to maintain the status quo, younger generations and management types prefer to embrace change and the opportunity to explore new directions that may lead to further success. These two opposing sides to the challenges of change can result in a warzone.

The following are commonly-held beliefs about change within family businesses:

Business Owners:

They see the business as their baby and may not trust the successor, family or a stranger to maintain the integrity, values and principles of the company.  Change and disruption are not welcome.

Family Members:

They see the need for change and the best place to start is at the top.  A change in ownership and leadership will allow for new insights, innovation and different processes which will be more efficient and effective for business success.

Management Team:

Rapidly changing environments are welcome because they foster new ideas and more efficiency.  They feel a shake-up in ownership is sometimes needed to excel in leadership and adapt the business to present-time needs and technologies.

When these three different perspectives on change and disruption are housed in the same company, one can expect communication problems, power struggles and conflict.

At Pam Paquet & Associates, we believe that managing the resistance and ensuring cohesion in rapidly changing environments should be the focus so people and relationships can be managed, maintained and fostered through difficult times.

In our work with family businesses that are being sold, acquired or bought out, we focus on how different people adapt to change and rapidly changing environments.  We locate the commonality between the interpersonal needs and management requirements.  There is a fine line that balances expectations.  When that fine line is defined and insights into people, family and management are deciphered then a plan can be made to manage the feeling of constant disruption in a business sale or transaction.

What most M & A professionals miss or intentionally avoid is the personal and emotional side of the sale.  Understandably, their focus tends to be whether the business is saleable, if the valuation is accurate and the scope of the potential market. But, it is the behind-the-scenes issues, feelings and family dynamics (or dysfunction) can easily get in the way of simple transactions and straight forward buy-outs.

To ensure the success of a business sale, M & A professionals need to understand the seller’s rationale, emotional readiness and psychological preparedness for the sale.  If questions are not asked to discover what really lies behind the owner’s thoughts on the sale, one can expect silence, resistance and opposition to interfere with the transaction. Having an awareness of the typical mindset of boomers and career business owners—those most resistant to change—is an important factor in preventing a quashed deal.

If you don’t want to go down the emotional road with a business seller, you don’t have to. Leave it to us. We specialize in difficult and challenging conversations to discover the personal side of the sale and identify potential roadblocks.  Our work with clients means seamless transitions and transactions are possible.  Contact us at pam@strategytoexit.com or 604-349-8660 to discuss how we can help your business clients move forward. We also have an Exit Success Program that gets them on the right track.

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