Procrastination results when a person elects to postpone doing something that ultimately must be done. Typically things that are postponed are seen by the procrastinator as difficult, threatening, lower value, more likely to result in failure than success, or not immediately gratifying or pleasurable. Hence the procrastinator choses to prioritize one or more other things they find easier, less threatening or in the near term more enjoyable.
Stated simply procrastination can be said to be a substitution that generates short-term gain that for the procrastinator may result in greater potential long-term pain that he/she would experience if they dealt with an unavoidable issue upfront and center.
Motivation and procrastination are inversely linked. The more motivated one is to accomplish something the less likely they are to procrastinate and postpone addressing and dealing with it.
Key to dealing with procrastination is to:
- identify the reasons it is important to prioritize and not procrastinate over things logic dictates are important.
- understand the consequences of procrastinating over something as contrasted with addressing it forthwith.
As a generality many – if not a majority of – business owners have been notorious for procrastinating over strategizing and executing a transition plan for their businesses. This article:
- discusses reasons business owners frequently embrace procrastination in the context of transition.
- makes important transition related recommendations.
Why do business owners procrastinate over transition?
Reasons business owners either postpone business transition planning and execution or do not focus on it to the degree they should include the following.
- Bowing to emotional intelligence over intellectual intelligence.
- Failure to recognize – or acknowledge – one’s aging process and mortality.
- Being paralyzed by uncertainty over business, retirement options and “end of life” issues.
- Fear of loss of control.
- Fear of loss of wealth.
- Fear of possible family member, board, management and employee conflict.
- A perception of potential loss of personal identity as a consequence of an arm’s length sale of the business, or a partial loss of personal identity as a consequence of a generational transition of the business.
- A feeling of a sense of failure, particularly if the business is sold to an arm’s length purchaser.
- An unwillingness to spend the time and out-of-pocket expense to properly strategize and execute a systematic business transition plan.
- Business owner perception that the annual return on net after-tax proceeds if their business is sold will be less than the annual income and capital growth potential their business generates.
- Unwillingness to consider selling the business and hence thwart the possibility of creating a family business legacy centered on the existing family business.
- Believing he/she better understand the risks that attach to their business than they understand the risks that attach to financial and other investment markets.
- Lack of confidence to act, and hence procrastinate over transition in circumstances where it is recognized and acknowledged that in the end business transition is inevitable.
- Failure to acknowledge the importance of putting the business ahead of individual family member emotional and financial needs.
- Concerns over family and family member disruption that might arise out of business transition strategizing and execution.
- Bowing to family pressure against systematic business transition planning and execution.
Reasons related to insufficient transition knowledge
- A lack of understanding transition metrics and the transition process.
- Mistaking business transition as a point in time event rather than a process whose relative success generally is coincident with the depth and quality of planning and execution over time.
- Failure to understand the importance of business transition planning and execution as a component of strategic business planning in the context of the long-term viability of their respective businesses.
- Failure to understand that concurrent planning for arm’s length sale and potential generational transition are complimentary activities.
- Failure to seek out and engage objective business transition advice, but rather rely on professional advisors with conflicted or vested interest positions in supporting owner perceptions and beliefs.
- Poor advice. For example an estate freeze may be represented as being a business transition plan. This where while an estate freeze may be incorporated into a comprehensive business transition plan it is only one component of such a plan.
- Current and near-term business issues take business owner time-commitment precedence over business transition strategizing and execution.
- Importantly, failure to focus sufficiently on ongoing internal and external changes that continuously impact business viability. These include ongoing globalization, central bank policies, government intervention and regulation, and technological advances. Hence in many cases holding to an unrealistic view of long-term business viability.
- An unrealistic view of current and prospective business value, and in the case of family businesses failure to focus on the important relationship between the number of family member participants and the size of the business measured by annual free cash flow and business value.
- Failure to recognize – or acknowledge – risk to their business of key employee dependencies that attach to individuals and are either not transferable or difficult to transfer to others.
- Failure to recognize – or acknowledge – risk to their business of possible key employee health issues that might alter management strength.
Failure to consider potential dispute related issues
- Failure to recognize – or acknowledge – the potential of shareholder disputes over business ownership, business management, business income distributions, liquidity of ownership interests, and business value.
- Failure to recognize – or acknowledge – the possibility of shareholder oppression claims in jurisdictions where such remedies exist.
- Failure to recognize – or acknowledge – the potential of how matrimonial disputes may influence the behaviour and opportunity of business owners in the contexts of ongoing business viability, business ownership interests, compensation if employed in the business, and attitudes toward business income distributions and shareholders liquidity. This where one or more of these things may directly impact the business owner who is party to a matrimonial dispute, and may indirectly impact his/her co-owners.
Conclusions: things to think about
I suggest business owners and their advisors consider the following.
- On an continuing basis determine whether ongoing change and economic and business uncertainty lead you to conclude transition planning should be a top priority for you and your co-owners. Or if you advise business owners, for your clients.
- Understand that generational transition typically results in compromise from arm’s length principles.
- Successful business transition is a fluid process, not a point in time event. Understand that from 20,000 feet successful business transition typically is rooted in continuous:
- implementation and improvement in corporate governance principles and execution.
- growth in annual free cash flow and business value.
- adaptation to changing circumstances.
None of these things are “snap of the finger” events. They require belief in their importance and commitment to them, and typically are achieved only over comparatively long periods of time.
- Define transition goals knowing they need to be specific and protected.
- Do not set impractical goals.
- Avoid false hope when setting systematic transition goals.
- Break transition down into “bite-sized” components that can be systematically addressed – preferably utilizing a documented and continually adjusted critical path schedule.
- Become and stay invested in your transition plan.
- Consider working with an independent third party delegated to ensure transition planning and execution continuity.
- Why Wait? The Psychological Origins of Procrastination. Psychology Today, October 2015.
- The Secret Life of Procrastinators and the Stigma of Delay. Psychology Today, August 2017.
- Procrastination: 3 Sources, 3 Solutions. Psychology Today, April 2017.
- How Type A People Procrastinate. Psychology Today, July 2017.
- Short Answers: Getting Unstuck. Psychology Today, July 2017.
- 11 Ways to Overcome Procrastination. Psychology Today, March 2017.
- How to Stop Procrastinating Now. Psychology Today, June 2017.
- Beat Procrastination in 3 Steps. Psychology Today, November 2016.
- 7 Tips for Setting Achievable Goals. Psychology Today, April 2017.
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50 Hurdles: Business Transition Simplified
If you are an owner of a family business you might consider purchasing a copy for every member of your business family. If you are an advisor to business owners you might consider purchasing a copy for one or more of your clients. Discounts are available for multiple book purchases.
Ian R. Campbell FCPA FCBV
Ian R. Campbell is a Canadian business valuation and transition expert. He is the author of several Business Valuation texts and of 50 Hurdles: Business Transition Simplified. The Canadian Institute of Chartered Business Valuators recognizes his contribution to the Canadian Business Valuation Profession through the annual The Ian R. Campbell Research Initiative.
He writes The Business Transition and Valuation Review newsletter for business owners and their advisors.
You can reach him by email at email@example.com, or by telephone at 905 274 0610.