Tom's life is strikingly similar to that of most small business owners. In his early sixties, he is the sole owner of a machine parts business that he has owned for two decades. Jane, his wife, manages their household and occasionally assists with the business's administrative functions. The couple has been married for thirty-five years. They have two adult sons, Max and Adam. Both work as managers in the company.

Throughout their history of business ownership, Tom and Jane's life together has been regimented and uneventful, especially as of late. They normally wake up together at about 6:00 a.m. Tom leaves at 7:00 a.m. to open the shop. They tend to have at least one phone call midday, and Tom tries to return home about 6:00 p.m. in time for dinner before doing some additional work at his home office. But today was different. Tom had just arrived home from work, and as they began to sit down for dinner, Jane asked, "Did you hear the news about Phil?"

For years, Phil had been a neighbor and a fellow business owner. A couple of years back, he sold his successful software company and moved his family to Florida.

"What happened?" Tom asked.

Jane stared somberly. "He died."

She then shared the full story, which she had learned earlier that day in a call with Phil's wife. After the business sale and relocation, Phil had been at a loss as to what to do with his time. He had devoted his life to the business. That was all he knew. Without it, he fell into a depression. That, in turn, precipitated illness and his premature demise.

"Jane, what?" Tom replied. "Are you sure? He seemed so happy. It doesn't make sense!" he added.

The news shocked Tom. He compared himself to Phil. He viewed their work and life situations as similar. Both were around the same age, parents and grandparents, owners closely engaged with their businesses. Tom knew that Phil had gotten a good offer, and the sale of the business had happened quickly. There hadn't been much time for planning. Still, Tom had envied Phil's retirement. Now he was gone. Tom couldn't help but think, This could easily happen to me. I have not done any planning either. I too could die without much of a plan to protect my family or the business. And, without a plan for how to spend the rest of my life, I could see myself falling into the same cycle of depression and demise that Phil suffered.

Throughout dinner and afterward, a rush of questions and thoughts raced through his mind.

What will happen to my family if I fall ill or die? While Phil died after selling the business, the thoughts of Tom's own mortality were front and center for him all evening. For the past two decades, he had devoted all his energy and time to making his business a success. Now almost all his wealth was tied up in it. It had certainly provided him and his family a good lifestyle, but was there enough value in the business to meet his future lifestyle objectives after a sale? Tom knew that he needed to focus on the future and funding his retirement years, but at the very least he needed to have a plan in place that protected his wife and family, something that would allow them to live well in case something unexpected happened to him. But knowing you need to do something and actually doing it are two separate things. Where would he begin? Tom was lost.

How can I make sure the business is passed on to the next generation and continues to thrive without me? After twenty years, Tom's business still does not have an exit plan or contingency plan. He would like for the business to stay in the family. But he doesn't know how to reconcile the rivalry between Max and Adam, his sons. Both have ambitions to run the business one day.

What can I do to have a fulfilling life while I am still running the company and the years afterward? For Tom, the biggest takeaway from Phil's fate was that he needed to work on his own goals, objectives, and legacy. His days, and many evenings, were consumed by the business. Now the company is financially stable. He needs to find a way to eventually cash out and monetize all of his hard work during the last twenty years. Beyond that, he has to have a plan for that next phase of his life, so his time is occupied with something fulfilling, something that keeps him from suffering the same fate as Phil. What he yearns for is more personal time, the opportunity to do some volunteer work, read, travel, and, most importantly, spend more time with his family. In this moment of honesty, he acknowledges that there's room for improvement in his marriage. He can also be a better parent to Max and Adam and a better grandfather to their children.

Would coping with a transition be easier or more complicated if I had a business partner? Tom had been approached several times by other business owners to form a partnership. After careful thought, he had opted against it. Now he wondered if dealing with issues such as legacy and transition would be easier or more complex if he had a partner to share the responsibilities of ownership.

None of these questions was new to Tom. One or another of them had been on his mind for years. But the demands of the business did not allow time to focus on them, let alone make decisions. Instead, he kept putting off dealing with them until some undefined time in the future. After all, he thought, there was always tomorrow to work on it. The news about Phil forced him to see things from a different perspective. He now had to consider something he had never thought about: What if there is no tomorrow?

The story of Tom, Jane, and Phil is a parable. But the questions and points it raises are real. All of Tom's issues (contingency planning, ensuring the business provides enough value to fund his future lifestyle objectives, whether or how to transition or exit, how to create a legacy, fulfilling responsibilities to family and other special people) are things every business owner should address at some stage. Tom's thoughts about a partnership are real too. Business owners with one or multiple partners have similar questions to Tom's, multiplied by several times as the need of each owner differs. As a result, many sole business owners debate the pros and cons of partnership particularly when they reach a crossroads.

Tom's approach to the dilemmas he posed also rings true. Like him, many owners avoid contingency planning, life planning, and strategic planning, particularly if they involve emotional subjects. They hope the issues will resolve themselves. Instead, they focus on the day-to-day demands of their businesses. The reasons are understandable. In Tom's business, like most, there seems to be a fire every day. And fires, as every business owner knows, have to be dealt with right away. Issues like legacy planning seem far away, things that can be done some other time down the road. It's a line of thinking based on the misguided mindset that there will always be a tomorrow.

It is our belief that owners should organize the planning and running of their businesses to incorporate the demands of their business lives and personal lives at the same time and gradually build the business so that it works for them rather than them working for it.

The Fear of Tackling Tough Issues

As business exit and value growth specialists who have worked with hundreds of clients, we have found that fear is the major barrier keeping many business owners from dealing with topics like their life objectives, business planning, or ultimately transitioning out of the business. Owners' fears are wide ranging. For some, the biggest fear is of the unknown. For a business owner who has been in control, not knowing what comes next is very frightening. For others, it's a fear of risking the investment and ongoing cash flow they have devoted much of their lives to building up. And when it comes to exiting out of the company one day, some fear the possible loss of identity after no longer being part of something they were associated closely with for years or, in many cases, decades. "I like being known as the car guy," as one owner put it. "What will I be known as now? The retired guy?"

To many business owners, these fears are rooted in a feeling that any transition means leaving something behind. And it's not just anything they think they're leaving. The business in most cases is a comfort zone, something they have invested in heavily. In essence, it's their baby. But that thought process is also the main barrier preventing many owners from reaching the graduate level of business ownership. Rather than dwelling on the potential of leaving something behind, we encourage business owners to view any business initiative, including transitioning their responsibilities or selling the business one day, as a move to the next phase of their lives that includes something positive to walk toward.

Particularly for those who have devoted a big part of their lives to the demands of business ownership, we encourage the process of discovery or the uncovering of personal passions and values that bring them their greatest enjoyment and discerning what things would be nice to have versus the things that they are truly committed to going after. The focus should be on creating goals and activities that bring personal meaning to their life. Often that active search for meaning motivates business owners to think enthusiastically about what they want to accomplish in their lives while still running the business but especially in the postbusiness ownership phase of their lives.

No matter how challenging a decision, similar to an owner's personal savings and investment planning, the longer business owners have to implement and execute their plan, the better the results will be and the better chance they have of meeting their goals successfully. That's not to say that the decisions will be easy. Whether they are about creating a contingency plan, engaging family in the business, or something else, the considerations are often complex. That alone causes many business owners to put off planning. But they shouldn't. An experienced advisor with the right expertise can break down the complexities into manageable components.

Key Factors in Planning and Executing Are Often Ignored

Even for owners in the initial phase of exploring their eventual exit or transition, never mind those with a fifteen to twenty years' time horizon, operating the business at the graduate level makes all the difference in the world of being able to achieve business success and personal happiness. As stated above, for us it often starts by helping owners discover those things most important to them and assisting them in identifying goals and objectives that will best bring them the greatest fulfillment and joy: a life plan per se. For example: Do they have things they always wanted to do but never got a chance to do? Are there personal financial objectives they hope to achieve? Do they have a major scaling mindset that will take years to fulfill? Do they want to maintain ownership for a few more years and then start transitioning to the next phase of their lives? Or is the plan to keep the business in the family and pass ownership to other family members at some point? Do they want to maintain a role in the company after a transition?

There are many questions to explore, and these are just a small sample of the kinds of questions we pose to engage owners. What you will notice immediately is that this type of planning is not solely focused on the business's growth, unit sales cost, or other operating metrics. It begins first and foremost with the owner and his or her significant other's goals, objectives, and value drivers. Only after identifying their personal life objectives, do we begin working with them using the business as the catalyst to achieve them.

At the heart of this, is the realization by business owners that from the first day they start their enterprise, someday they will leave the business. The only question is whether the owner will be walking out the door on their own two feet or going out feet first. It will all come down to whether a business owner takes the time to plan and prepare in order to fulfill life goals and have minimal regrets when it's all said and done.

With various factors coming into play, both business and transition plans are all unique to each person and circumstance. But underneath it all, the process of creating and executing a successful holistic plan, and the secrets of most successful business owners, are all based on these four constant factors.

First, establishing, maintaining, and building on the financial success of the business within a specific timetable is key. Establishing goals helps drive decisions about how to build the business's value, reduce the dependency on the owner, and determine the personal planning action steps that may be integral to the overall plan. Higher profitability and a higher overall business value will help the owner or owners meet their current and future lifestyle objectives. It will also help ensure that the business is on an upward growth and profitability track at the time of the exit, something a sophisticated buyer will be seeking.

Second, recognizing and addressing the right-brain or emotional issues is paramount. Because our recommendation for these business plans is to link them back to personal objectives, during this process, we try to identify any emotional restraints that may hold the owner back. We do so because many plans go off track or are halted altogether because of unidentified emotional issues that surface during the plans' execution. Those issues, we have found, are often rooted in the owner's personal dilemmas. Owners need to keep in mind that business and life planning are not all about the money and left-brain analytics. Therefore, successful business owners learn how to address these issues head on and not ignore them. They can be the difference between a successful and joyful life journey, or one filled with regrets.

Third, allowing enough time to successfully execute a plan that meets an owner's goals and objectives is also key. Unfortunately, many business owners operate under the impressions that implementing change can be accomplished within a short time period, and exiting their business is a quick, one-time event. When they are ready to execute, for example in the case of selling their business, they often think they will simply put the business up for sale and then move on, hoping that the sale yields enough. They don't bother to calculate how long the sale proceeds will last given their lifestyle spending needs or consider what they will do next, what activity will fill their time and be fulfilling. A successful plan is a process; the more time a business owner spends planning that process and putting it into action, the better.

Fourth, be warned that strategic business plans typically fail. Study after study shows that lack of execution is the main reason. So, for value growth planning, life planning, and an eventual exit to succeed, business owners must commit to its diligent execution over the long haul. Business owners have plenty of stories of ideas and strategies that didn't work for one reason or another. The successful outcome occurs more times than not for owners who are persistent and don't give up when things don't go exactly right or expected outcomes take longer than originally expected. Instead, they learn over time that there is no silver bullet for immediate success. While the business concepts are easy to understand, it's the execution that's the hard part. It takes tenacity to see things through to a successful outcome.

John, a sole owner of a chain of car dealerships, is a good example of how these factors come into play in discussions about planning an eventual business transition. John owned his business for eighteen years. He'd been divorced for five years. Since the divorce, he had begun withdrawing more money from the business and devoting more time to his personal life. He also had a goal of selling his business in ten years.

Having an objective and a time frame for reaching it were positive steps. But John had no plan for how he would get there, and he had not identified the value gap between the current value of his business and his goal. The business was not creating sufficient profit to sustain either his current or future lifestyle.

As part of our standard planning process, which we will detail later in the book, we explored John's plan and engaged him in a discussion of emotional issues he was facing. In his case, a major issue was that he had come to use the business as a piggy bank for years and could not see it any other way. He drew directly from the business's operating profits to support his lavish lifestyle, sometimes taking out tens of thousands of dollars on a regular basis. The emotional aspect of this habit centered on his tendency to act independently and commingle personal money and business money. This strategy might have been smart if John had invested the money and by doing so diversified his holdings from his business to several other investments, in essence, taking some chips off the table. But he was using the funds to pay for expensive vacations, luxury cars, and other personal items. With the majority of their wealth tied up in the business, there is often a tradeoff that is needed between the amount owners need to support a comfortable lifestyle and what they need to put away to fund retirement savings.

John was eventually able to come to terms with the reasons behind his habit. At its core, John not only thought that he deserved the lavish lifestyle as a reward for his hard work, but his circle of friends almost forced this lifestyle on him as a way to simply keep up with them. Once John understood these drivers and was able to reflect on the long-term ramifications of his behavior, he was better able to separate business money from personal money.

That, in turn, helped him create his transition plan. John's willingness to consider the four factors we outlined above were crucial in his ability to move ahead: he made a commitment to work on a plan, and he was honest about the emotional issues involved. He also gave himself a good amount of time to meet all of his financial and nonfinancial objectives, and he took advantage of building on the business's success with a specific time frame for action.

Leaving the Business One Day Is Inevitable

Not many business owners take the initial steps that John did, to consider transition or contingency planning early enough. More often, they may call in an advisor only after some sudden life-changing event occurs. For many owners, like Tom, the character in the opening scene of this chapter, it takes being hit with a sudden death, illness, or other crisis for them to understand how important it is to have a plan in place. When a dramatic event such as a death or serious illness happens, the options for working out a solution are far more limited.

Donald is a good case in point. He was an eighty-three-year-old owner of a software company with around eighty employees. He had kept tight control of his business, made all decisions, and didn't build a strong management team that could step in and take over.

Although the company had been successful, the revenues had begun to fall. Then Donald had an auto accident, caused by a health complication. Lacking any contingency plan, he was persuaded that he needed to seek help creating a transition plan. Through a referral, he came to us for help.

In our talks with Donald and other employees, several issues facing the company emerged. After the accident, many of the senior employees were worried and fearful about their job security. Some had already left for the competition, and others were poised to depart. Neither of Donald's sons was prepared to take over the business, for different reasons.

This was a case where it was crucial for the owner to face his/her own health problems and their consequences for the business. The full range of emotional issues that many business owners must face came into full play: how to deal with mortality; how to secure what you have worked for after you are gone; how your family will be cared for.

Time was not on our side. Donald's age and health issues gave an urgency to structuring a viable transition plan. And the imminent retirement of a couple of senior managers only added to the urgency. Even in cases without those added constraints, the more time allowed to come up with a plan, the better. If Donald had taken the time to plan before he was forced to, he could have exercised control and put things in place to maintain the community commitment and work environment that were important to him. He could also have protected the long-time employees by allowing them to continue to work after he sold, giving them a place to go in an effort to give them purpose.

In the end, we held a series of meetings with trusted managers and other employees and arrived at a transition plan. Fortunately, Don had a nephew that previously worked in the business who also owned his own business. So he had an understanding of the business, knew some of the senior employees, and had experience running a successful company. They all knew the nephew and felt better for the long-term sustainability of the company having him on board. While not ideal, it was a plan that Donald and the senior managers could accept without the luxury of time to seek alternative options.

The Search for Life's Meaning

When business owners, like most people, begin to consider what is most important in their lives, their thoughts turn to life's meaning and purpose, and oftentimes their attention is directed to forging closer family bonds. In many cases, over the years, business owners have sacrificed time with their families to meet the demands of the business. The process of recouping lost family time or shoring up relations with a spouse, children, or grandchildren is usually wrought with emotions. Business owners tend to be aware of the challenge but unsure how to address it.

That search for meaning is never easy. It requires business owners to tap into emotional areas that many are not used to exploring or are comfortable with. When owners are earnest and diligent in this pursuit, it leads to surprising discoveries. When they are rushed or not fully engaged, the process can easily fall short of the goal.

One case that comes to mind involved Bryan, a business owner in his late seventies; his wife, Lillian; and their middle-aged son, Junior. Bryan started his business career from scratch and went on a mission to amass as much wealth as possible. It was a goal he met. He eventually owned multiple businesses, all of them successful. By all accounts he was a brilliant business owner. And he and his son were a great team.

But the success came because he was always on and all business. To Bryan, the tendency for hands-on tight control was ingrained and as natural as breathing. He did not know how to let go. Unfortunately for his family, he was the same at home as at work.

Bryan reached out to us to discuss transition planning. How could he forge a deal with his son to take over the business? But he had another, more personal objective. When questioned about what he ultimately wanted, he said, "All I want is for Junior to say he loves me." For him, that simple emotional expression from his offspring would be the greatest possible return on investment he could get from the years of work he had put into business ownership. That moment hit us like a ton of bricks. How very sad. Here was a very successful businessman who took no time to develop a life plan, who now in the latter part of his life was searching for purpose and found himself living a life of regret.

We had several key meetings with Bryan, his wife, and their son. Bryan's overbearing character, coupled with unresolved issues in the family, created an atmosphere of tension in the meetings. Bryan's failing health put us on a short time frame. His son was very competent and ran large parts of the operations already. But to meet Bryan's wishes, he would have to shift more of the business's final decision-making responsibilities to his son. That was a very hard thing for him to do. The fear of lack of control and the loss of wealth held him back. He would also have to take time away from the business and slowly get involved in the personal lives of his three children, including Junior, and his grandchildren. That too was very difficult for him and would require him to change his priorities in order to take part in their personal lives. He would need to learn empathetic supportive personal communication skills, all of which would take tremendous effort over a long period of time. What this owner wanted as the end goal of his transition and exit plan was fraught with challenges. If a successful resolution was possible, it could only be achieved by a sustained, long-term commitment: something, regrettably, the owner no longer had. Although Bryan and Lillian thought they were making some progress after each meeting, there were too many challenges and not enough time to resolve them. We parted ways as a result.

Keeping the family abreast or even engaging them in the business is also something that can never start too early. We've seen too many cases where a family is left with a business they have very little knowledge about. No one better illustrates this scenario than Sam, a longtime owner of a menswear business. Like most owners he had not considered transition planning previously. But he came to us one day with a potential buyer, someone he knew and trusted. In that meeting he told us the price range they had talked about. Our initial assignment was to pull together definitive numbers such as historic financials and normalized earnings and help Sam work out a fair deal. He did not need top dollar. He just didn't want to be taken advantage of.

Unfortunately, we never got to that stage. In the next few weeks, Sam was diagnosed with brain cancer. Within months, he was dead. Sam's wife was left with little knowledge of the business and no transition or contingency plan in place. The potential buyer, we later heard, offered her less than half the figure that he and Sam had been discussing.

Sam's story underscores the main point of this chapter: because you never know when the unexpected can hit, business owners should take the time today to plan for it before it's too late. Business owners should consider their loved ones and have a plan at the ready, even if the potential planned transition is fifteen, twenty, or more years away. Having a solid plan with a focus on the end game and life goals is preferable to waiting until a crisis forces the issue. It means dealing with emotional issues sooner rather than later. And so, we have put a particular emphasis on this point. It's a theme that runs throughout this book. We focus on it because, in our experience, business owners are most successful when they grapple with and resolve such emotional topics as succession, transition, contingency, and legacy early in the life of the business.

There are strategies business owners can use to make the planning process easier. The next few chapters will cover those strategies in greater detail. The alignment of personal life objectives with the demands of the business is crucial. This sounds easier than it often is, but the process of aligning the plans builds the business, so it works for the owners rather than them working for the business. This also helps make transitions, whenever and however they occur, smoother.

Furthermore, we'll discuss how business owners should develop a comfort level in identifying and dealing with the right-brain emotional issues that are part of owning any business. We spend the next few chapters discussing in detail these and other ways owners can build their businesses for greater profitability and value and eventually plan for an exit.