Most New Zealand businesses are SMEs that involve one or more members of the same family. Getting agreement on succession planning, or any changes to a business, can be like herding cats. Emotions can enter into what should be a rational, pragmatic process
Ask David Atkins what gets in the way of buying and selling a business and he’ll list them on three fingers:
- Buyer emotional issues;
- Seller emotional issues;
- The numbers not stacking up—often because of points one and two (ridiculous price expectations, time of selling, and so on).
Atkins should know. He’s been involved in four successful acquisitions by Image Centre, an Auckland-based printing and digital management company [Image Centre also prints and sponsors Idealog. –Ed]. And the company too, founded by three mates in the 1960s, was on the selling side when in 2000 it brought in an investment partner, Direct Capital, to help fund growth. That might be enough buying and selling for one lifetime but Atkins has himself gone through a succession story, acquiring a shareholding from his father Syd and the two other founding partners.
Atkins’ advice is to pay attention to the soft stuff. “On an intellectual level, people like the notion of succession planning and passing on the business. Yet when they become actively involved in selling their baby, skeletons appear out of nowhere and have to be dealt with.”
Acquiring a minority stake in the family business meant Atkins became embroiled in his father’s retirement planning. “He was averse to opening up and relinquishing control. He talked, in one breath, of wanting to ‘stop and smell the roses’ but in the next voiced his obligation to the team and the need to be first to arrive and last to leave to justify his wage. Letting go of the reins, to him, implied a loss of status as well as a way of life.”
Roles change and loyalties can be challenged. Atkins recounts a time when he thought he had agreed a selling price with one of the partners and the deal was done—but Syd Atkins killed it, saying the price was too cheap and his friend was being taken advantage of.
Another telltale sign of the emotional speed wobbles are the ‘what-ifs’, says Atkins. “These are all to do with status, lifestyle, ego and such—‘What if I don’t have enough money for a new car each year?’, or whatever.
“These multiply until it becomes an irrational game of hoop-jumping and fence-sitting where people stop looking forward and, instead, want out but also want to keep in. Sadly, particularly for sellers, this often happens at a stage when the savviest thing would be to relinquish some control to the visionaries. Instead they hang on, and tend to think only in terms of what is best for them.”
Simple in theory, but it’s an opportunity for plenty of generational angst.
“Before any thought of succession planning is mooted, people need to be emotionally prepared, open and honest. It is all about gaining trust quickly and then getting a sense of what might need to be tailored to fit the emotional variables.”