After almost two decades as a financial advisor, there is one lesson I have learned that I can reveal with completely certainty: people are “planning averse.” When it comes to individual planning such as financial or estate planning, most individuals have a hard time focusing on goals that extend beyond six months. The process of long-term planning can be complex and the decisions required can be numerous. The obstacles are even greater for a business- owner.
Just mention the term “succession planning” and you can see the pain on an owner’s face. These two words evoke a sense of helplessness, because even though, intellectually, we know we can’t keep working forever, we can’t seem to create a fermata long enough to take action. Most MI retailers, are workabees – they love what they do, and are great at. The habits that have been created over the decades of putting out fires, motivating the team, updating the inventory system, planning the next event, growing the business, or trying to keep it open for yet another year is all-consuming. There’s no protocol to allocate a few hours a week to work on the business, instead of always working in the business.
I was recently speaking to a successful music retailer and he said, “Jaimie, I have paperwork that continues to pile up on my desk for years. Yes, it’s important and, yes, I don’t want to touch it. I’d rather be hanging with our customers or my team.”
So, what do I do with this information? I take a deep breath, and stick to my narrative: Build your business from day one to sell it. By so doing, you will create a more valuable business, and more importantly, you will have a stronger work/life balance. Why? If you are creating a business which one day will be sold, that means you are delegating responsibilities. As a result, you will have more time to pick up a guitar, a golf club, or a grandchild.
When I speak at the NAMM Idea Center about this topic, there are plenty of head-nods, but my suspicion is that few will follow-up with their financial professional. However, the handful which have the courage to make changes experience rapid growth, and the “happiness meter” rapidly accelerates.
Here’s what happens.
Step 1: The 50-plus year-old MI retailer recognizes that he or she is not getting any younger.
Step 2: A call is made to their trusted advisor with questions, which generates a to-do list. In other words, changes have to be made in their work habits.
Step 3: Most, not all, people get stuck at step two. They stall, excuses are made: “I have plenty of time… I’ll get to this next month… I’m the only one who can run this company…My bookkeeper is too overwhelmed. I can’t bother her with any new work.”
The reality is that two-thirds of U.S. public and private companies admit that they have no formal CEO succession plan in place. It turns out the reason is not financial, or time, or lack of information. It is 100 percent psychological. People hate to change. People fear change. The status quo is safe. This is nothing new. The Greek philosopher Heraclitus observed over 2,500 years ago that life itself is change. Nothing remains static. From the molecular level to the celestial level, everything is changing. Not adapting to change doesn’t make the problem go away.
In spite of the fact that fewer than 20 percent of any population are prepared for action at any given time, psychologists have recognized that there is an underlying structure of change; a model, if you will, that is effective if the person understands where he/she is in the process. According to Dr. James O. Prochaska, there are six well –defined stages of change:
- Precontemplation (can’t see the problem)
- Contemplation (I want to stop feeling so stuck)
- Preparation (I will take action next month)
- Action (behavior is modified and action is taken)
- Maintenance (consolidate the gains you attained)
- Termination (your former bad habits are no longer a problem)
Matching your challenges to your stage of change is key to solving your problem.
However, Prochaska points out that the process is rarely linear. The successful self-changer recycles and meanders through the steps several times until goals are reached. For example, people who take action and fail are still twice as likely to succeed over the next six months than those who don’t take any action at all. Keep in mind the technical components to succession planning are not difficult to understand.
There are only three ways to sell a business:
- Transfer to a family member
- Sell to an insider – a key manager or a group of employees
- Sell to a strategic buyer
The other alternative is to liquidate your inventory. I don’t consider this selling a business. I consider this closing your business. What’s my big confession as a succession planner? My clients don’t care how much I know, until they know how much I care. It’s all about caring, listening, and asking the right question at the right time.
When you engage your financial professional about succession planning, your shields should be down, and you should “feel” that the relationship with your advisor will promote growth, which requires change.
Jaimie Blackman – a former music educator & retailer– is a financial advisor and succession planner. Blackman helps music retailers accelerate business value now through team building, coaching & mentoring. Blackman is a frequent speaker at NAMM’s Idea Center. Visit jaimieblackman.com to preview his value-creation tools and to subscribe to Unlocking the Wealth newsletter and webinars. If you have ideas for a future column, email Jaimie at jb@jaimieblackman.com
