For many small-business owners or company leaders, succession planning is almost like planning the funeral of a healthy family member – it just never seems to be the right time for it.
Discussions about succession planning mainly cover issues like the timing, who is a good fit to take over, the engagement with employees and the financial details of the handover.
Yet, very little is said about the emotional transition the business owner or company leader is undergoing when having to hand over a dream that has been built and nurtured over many years.
Timothy King, life coach at Lead Life Coaching, says those affected usually go through one of two processes.
Some people are prepared to move on and are even excited about opening a new chapter in their lives. Others may be fearful and unsure about what the future holds.
Age can also have an impact – many older people may struggle with the notion of transitioning from a role of respected leader to putting the reins into someone else’s hands and possibly embarking on a new venture.
The majority of people who reach this point in their lives question whether they have the strength, capability or creativity to compete in a new market, says King.
Stephen Sheinbaum, founder of funding company Bizfi, remarks in an article published by Entrepreneur magazine that more than 50% of all small-business owners in the US are over the age of 50.
One difficult choice that the business owner must contend with is who will take over from them. Will it be a family member or should an employee within the business step into their shoes?
Very little advice is offered on how the business owner should handle his own transition. King says this change causes anxiety and even depression in a lot of people.
This also plays a role when deciding whether to hand over the business, sell it or hold on for a little longer...
“Many people simply freeze. They have become so used to a particular environment, they are unable to deal with a new one.” He says some are simply incapable of letting go.
Their affirmation and their sense of identity are completely tied up in the business or in their leadership role.
People in this position will most probably need some kind of “event” to let go – either a health issue, like a heart attack, or a partner threatening to leave because of the business leader’s inability to move on.
“Short of that, the person will almost have to reinvent his identity.” This is a difficult thing to do at 60. However, the frustration, irritation and uncertainty about moving to the next phase persist.
“Making the transition will require the support of family and friends, especially for someone who seems trapped in his business or career and has not led a balanced life with external interests,” King advises.
Loss of status
In a study by the Center for Family Business at the University of St Gallen, Switzerland, and which was published by Credit Suisse, entrepreneurs were asked about their emotional responses to the issue of succession.
Entrepreneurs who saw the time of transition drawing nearer, generally experienced a rising tide of contradictory feelings about letting go, and in extreme cases they even sabotaged the process.
The reason for wanting to sabotage the process is the potential loss of status. As employers and active members of society, entrepreneurs enjoy a good deal of respect from others in the community.
“They fear losing that respect. Status considerations are more prominent in rural areas, than perhaps in urban regions,” the study found.
A second important aspect is the incumbent owner’s fear that giving up entrepreneurial activity will mean “losing what matters most in life”.
This fear arises because most entrepreneurs invest enormous amounts of time and emotional energy into their businesses, often to the exclusion of most or all other activities.
“Even their private concerns generally take a back seat to serving the company,” according to the study.
One way of making the transition smoother is for the business leader to take on a smaller role in the company’s day-to-day activities a few years before moving on. The person’s ability to let go of the control over decision-making will be critical.
“It will require that he has confidence, faith and trust in the people who will be taking over his dream,” says King.
According to the University of St Gallen study, if the owner deliberately takes a step back from the running of the business and delegates responsibility, the skills, abilities, structures and processes can be developed early before his departure.
Ideally, an entrepreneur should set their sights on being able to say with pride at the end of their professional careers that they have left their business in good hands, the study advises.
Find your purpose
People often confuse their role with their purpose. King says once they leave the role (as business owner or CEO) they fall apart because they have assigned all their self-worth and esteem to that role as opposed to their purpose.
“They feel they cannot fulfil their purpose in any other role. If they understand their true purpose they can fulfil it in any other role they choose in life.”
Understanding their purpose will make it easier to let go and to take on any new challenge, he adds.
This article originally appeared in the 7 September edition of finweek. Buy and download the magazine here.