Business Transition: Eureka, no one blames the Advisors!

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Eureka, a word attributed to Archimedes, is an exclamation indicating sudden discovery. A Eureka moment is the sudden understanding of a problem. I have spent the past four years summarizing my business transition views and experiences. First in the book 50 Hurdles: Business Transition Simplified, and latterly in this Newsletter. In the past two weeks I had a Eureka moment.

Statistics on business owner engagement in business transition planning and execution are legion – see heading Business transition planning statistics in this commentary. Without exception those statistics lead to an overview conclusion that comparatively few business owners address business transition in a timely manner or as diligently as they should.

Here I explore whether many of those advising business owners on their transition and exit strategies should be flagged as being partially responsible for the failure of many business owners to rigorously plan for business transition. I say they should be. As either a business owner or an advisor you may differ – but I believe you should at least think about this question.

Business transition: what prompted this question?

I recently read an article generated by Denver based Business Enterprise Institute Inc.Inc. titled Why Owners Delay Exit Planning. The article begins with this statement: “Advisors ask us for an easy, reliable way to convert reluctant owners into eager planning clients”. I read the article to say that business owners are more likely to plan and take action if advisors are able to convince them they need to:

  1. quantify the gap between the financial assets they currently have and the financial assets they will need to exit their businesses on their terms.
  2. estimate the time and effort it will take them to accomplish that.
  3. grow the value of their business in order to benefit irrespective of which exit plan they ultimately elect to follow.

Those are three good things for advisors to communicate to business owners. That said, my two reactions were:

  1. wow, aside from perennial issues such as concern over identity loss, family dynamics … , that is but scratching the surface in our economic and business normal.
  2. advisors who advise or want to advise on business transition and have to ask others how to convince business owners of the importance of transition planning must be ill-equipped to do that.


And that led to what for me was a Eureka moment that resulted in me reaching two conclusions.

  1. First, and importantly, any advisor who fails to convince business owners of the urgent need to strategize their business and focus on transition planning now needs to reflect on their advisory capability and resolve. This as contrasted with simply focusing on apparent owner business transition recalcitrance as reflected in surveys.
  2. Second, advisors evidently need to deliver a much more authoritative, compelling and convincing transition message to business owners than as a generalization it appears they have been doing to date. This where advisors need to accept that if a business owner doesn’t get it, the advisor needs to assume a great deal of the responsibility for his/her poor messaging, presentation, and communication with that business owner.

The chess board picture that heads this commentary

That brings me to the picture of the chess board that heads this commentary. Chess is a complex game that requires years of practice to play well. Business and business transition likewise are complex games, made more complex by an ever-changing:

  1. size and shape of playing board.
  2. number and value of individual board pieces.

Business transition advisors: two important questions

? #2 - 123RF

This business strategizing and transition planning complexity leads to two important questions, being: How many advisors are:

  1. up for helping business owners play the business transition game soundly, successfully and on a timely basis?
  2. capable of delivering a comprehensive, authoritative, and compelling strategic planning and transition message to business owners in a manner that will cause them to understand why they need to better focus and act on those things now rather than later?

Owners need to hear an authoritative, compelling business transition message

There is broad agreement among those who advise on business transition that business owners should prioritize ongoing transition strategizing and execution where that almost certainly will enable maximization of future choices.

For me this means transition advisors need to accept great responsibility – and presumably far more responsibility than many of them have accepted to date – for convincing business owners of that.

Simply put, transition advisors need to communicate to business owners their assessments of the strengths, weaknesses, opportunities and perhaps in particular the threats that ought to drive their clients to realize they need to strategize and execute their business transition plan far sooner than later – and preferably immediately. This where:

  1. fear is a strong motivator.
  2. successful business transition takes time, energy and funding – expended typically over a period of years. This where in the current business environment business risk for any given business can change dramatically over a short period of time or – heaven forbid – a relevant black swan event occurs.

Advisors need to effectively communicate that focusing on transition strategy and execution now is a ‘no lose’ proposition when measured against postponing those things or simply doing nothing.

So how do business transition advisors make the move from observer to pro-active compelling convincers?

For those who advise on transition I believe the:

  1. first thing advisors need to do – if they are not already doing it – is clearly separate family business advisory and business family advisory.
  2. second thing advisors need to do in our current and prospective economic and business environment is prioritize the family business over the interest of individual business family members.
  3. third thing advisors need to do is accept – and then convince their clients – that we are living in a ‘business risk on’ world where among other things:
  • globalization continues to advance in the face of government concerns, notably in the case of the U.S. increased focus on ‘America first’ banter.
  • central banks, most notably those in the world’s largest economies, arguably are running out of quantitative easing and other remedial options.
  • government debt is continuing to increase in all major economies, where at some point those ‘debt chickens will have to come home to roost’.
  • technological advances are exponentially escalating where this is virtually certain to impact – either positively or perhaps for many negatively – the free cash flow of many businesses. This where technological advances may in the comparatively near term negatively impact unemployment rates.
  • business combinations are rampant and continuing in most industries. This where in a competitive context technological advances and business size seem likely to increasingly matter to smaller businesses going forward.

All of those five high-level things are external to individual businesses and hence beyond the control of business owners. Any one or more of them in combination may prove to be game-changers for many businesses.

As I see things any advisor able to get an audience with thoughtful owners of pretty much any business and who reviews those five things in a meaningful way ought to have little problem convincing business owners that they need to focus on business transition strategy and execution now, not later. And that is before changing issues internal and important to the ongoing success and value growth of the business are discussed – all of which exacerbate the need for business transition focus.

Business transition advisors – my observations

As an active business valuation and transition consultant I didn’t spend much time attending professional conferences and socializing with other valuation and transition consultants. So when I wrote the book 50 Hurdles: Business Transition Simplified I sought out transition consultants to talk with and find out about their backgrounds and transition practices.

What I found surprised me. Of the ‘transition consultants’ I spoke with many:

  1. were what I call ‘soft-side consultants’. In broad terms their principle messaging seemed to be that the better a family communicates the more likely it would be to succeed in generational business transition. That has to be conceptually correct. However, statistics aside, the assumption – one I consider seriously flawed – always seemed to be that most if not all family business owners had a good chance of successful generational business transition.
  2. were income tax lawyers or accountants who thought an estate freeze viewed in isolation was a generational business transition. It doesn’t, although an estate freeze may be one tool that contributes to a successful (or unsuccessful) generational business transition.
  3. seemed to think transition consulting is comprised of asking the controlling owner(s) what he/she/they wanted to accomplish and then working with them to attempt to accomplish that. That approach can hardly be described as independent and objective counseling.

Moreover, with few exceptions and based on what they told me, those transition consultants seemed:

  1. unable or unwilling to ‘speak truth to power’ when addressing and educating business owners with respect to their inevitable transitions. This where ‘speaking truth to power’ means against all risks holding hard to, and fighting hard for, what one believes. I attribute this to possible client retention risks and what I perceived to be lack of both business and transition knowledge, among other things.
  2. to have comparatively little business operating experience, where participating in the management of a professional service firm doesn’t count.
  3. not to stay up to date with globalization, central bank policies, government intervention and regulation as those things did or might impact their client’s businesses to the point where they are comfortable taking positions with their clients on those things.
  4. not to focus on how technological advances might impact their clients prospective cash flows and business viability.
  5. not to consider long-term business viability analysis as a first or early tenet in their transition thinking. In my opinion in the current business environment discussion of this issue alone should cause business owners to focus on strategizing for business transition now and not later.
  6. not to focus on the importance of ongoing business growth to business transition success.
  7. not to focus on what our current low interest rate environment means to both current business value and their client financial markets returns.

Business transition planning statistics and fertile ground

Over past decades there have been many reported studies of the dismal manner in which private company business owners plan for the transition of their businesses. This ought to mean there is serious ‘fertile ground’ for transition consultants who deliver an authoritative, compelling transition message to private company business owners on the importance of not deferring business transition strategizing and execution. Two of those studies are discussed here.

The 2008 White Horse Advisors survey

On July 10, 2008, two months before the Lehman Bros. demise that heralded the so-called Great Recession Atlanta based White Horse Advisors said, based on a (U.S. centric?) private company business owner survey:

  1. 87% of those surveyed had no current, written exit plan. This where over 50% of them indicated they would leave their businesses in the ensuing 10 years and nearly all said it was important to have an exit plan.
  2. those 60+ in age had more aggressive exit-planning deadlines (hardly a surprise) but 66% of them did not have an exit plan.
  3. business owners said focus on growing their businesses precluded them spending more time on exit planning.
  4. 66% or more said their top three exit planning objectives were:
  • achieving personal financial security.
  • maintaining family harmony.
  • achieving maximum business value.

The 2016 Business Enterprise Institute Inc. survey

Denver based Business Enterprise Institute Inc. (BEI) claims to be “the leading innovator in the Exit Planning industry”. In 2017 BEI published a Business Owner Survey it completed in 2016.

80% of those surveyed were business owners between 40 – 69 years of age. BEI claims the survey results to be statistically valid. Results are said to include business services, construction services, manufacturing, and professional services businesses – among others – located in multiple geographies.

Among other things, the BEI survey found:

  1. 79% of business owners plan to exit their businesses by 2026.
  2. 75% would exit today if their financial security was assured.

The survey reported on the percentage of owners who have talked with the following types of advisors about their exits. Charted, here are the results – note the comparatively low percentage of transition consultants/coaches business owners talked with.

Advisors - BEI Survey

Data source: BEI 2016 survey

Respondents were asked what actions they had taken ‘toward their exits’.

  1. 45% said they had identified all steps necessary to successfully exit their businesses – up from 36% in 2014.
  2. 38% said they had not taken any steps yet – up from 12% in 2014
  3. 27% said they had calculated how much money they need from sale/transfer – up from 11% in 2014.
  4. 17% said they had created a written exit plan – up from 8% in 2014.

The BEI 2016 Survey is interesting for many reasons – and I think deserving of separate commentary. It is certainly worth the review of business owners and their advisors.

Recommended reading

  1. Why Owners Delay Exit Planning. Business Enterprise Institute Inc.
  2. White Horse Advisors Announces Results of Its 2008 Survey of Closely-Held Business Owners. Business Wire, July 2008.
  3. BEI 2016 Business Owner Survey Report. Business Enterprise Institute Inc., 2017.

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50 Hurdles: Business Transition Simplified

50 Hurdles Cover

The book 50 Hurdles: Business Transition Simplified, is available here at a price of Cdn$37 (including sales tax where applicable and free shipping). Read book testimonials here.

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, or by telephone at 905 274 0610.