Begin with the End in Mind
As the retired CEO of a successful, multi-generational family business, I have become a champion of the free enterprise system – which I believe to be the foundation of our economic system, and the very freedoms my grandfather sought when he came to America in 1909.
Reflecting back on my 45-year career, I learned many valuable lessons; often they came from the mistakes I made or I gleaned them from the mistakes of others. The first of these insights is that planning the ending of your business relationship is as important as planning its beginning.
What do you look forward to in a good book? What captivates you about it? Why do you read page after page filled with suspense and intrigue? Isn’t it to get to the ending? To the novelist, the ending determines the book’s success and likewise the
uccess of the writer’s career. The ending is as important as the beginning and without a good one, the novel is a bust. This is also true of the business relationship – without a well-planned endgame, the business journey could also be a bust.
Unfortunately, I have seen too many successful family businesses, partnerships and joint ventures end in ruin – leaving behind a trail of bitter feelings, spoiled relationships, lost careers, and the loss of hard earned value in the enterprise. Most of this value ends up flowing to federal income taxes and litigating attorneys instead of the owners or partners of the business – all because they did not plan an agreed upon exit strategy in the beginning.
The reality is that nothing lasts forever. Endings are inevitable and usually arrive much too fast.
For me, it felt like I blinked twice and found myself attending my retirement party. Looking back, I realized I had spent every waking minute working to build our business and zero time planning how I would access the wealth I had helped create. This is probably the case with many successful entrepreneurs. But if you take the time to write out the ending you and your partners want, right now, you can then apply every ounce of your efforts on building your business, knowing that you will harvest the rewards of your effort at the end. This strategy produces an orderly and fair process; one that secures your future and the future of your family, partners and employees.
What? When? Where? How?
So how do you do it? The objective is to plan for the needs of each partner in a way that allows each to achieve their desires without destroying the business. This is best done in the beginning while all the players are on the same page and there is no stress in the process caused by an unexpected occurrence. Some of the issues to address include a buy-sell agreement. Will the business be sold at the end to fund retirement or will it be passed on to the next generation? Or, do you want to sell it to your employees?
There are a variety of scenarios to consider. There are also a variety of resources available to help you make these decisions. In my family business, we found great value in using a consulting group that works with other family businesses. Their collective knowledge and client experience afforded us the opportunity to make informed decisions about how to evolve as a company to accommodate the needs of each succeeding generation. In my own recent personal business endeavors, I have applied this lesson by having discussions with my partners – right up front – about our desired outcomes and exit strategy. The outcome is a plan we all agreed on at the start.
My partners and I might not know the date our relationship will end, but we do have a plan for the ending. I encourage you to take a look at how you might start planning your exit strategy with your partners. Seek counsel if you need it; embrace the process as a way to ensure everyone has the opportunity to live out their happy ever after.
Joseph Duda is the retired CEO of A. Duda and Sons and the retired president and CEO
of The Viera Company.