Tereza Murray: I'd like to introduce Rob Dorey a director of Business Success Partners. Rob specialises in working with business owners to take the business through to sale and succession.
Rob, So what's the first step that business owners should know in preparing their business for sale or succession?
Rob Dorey: In New Zealand we've got a massive number of SME businesses where the owners are in that late fifties or early sixties and the key thing people realise and they probably see amongst their friends is that some of these businesses work and some of them don't. So our game and the offer that we have at BSP is if you plan and go through the succession process and understand what's going on with the psychology of retirement and the psychology of succession planning and how it fits in the business, you can increase the probability of being successful.
Our initial thing is basically a business assessment. We come in and look at the business so there's two dimensions to the succession projects.
- Is the business ready?
- Are the people ready?
The people being the employees the people in the business but more importantly the owners and the owners family, are they ready and that's where the whole thing starts.
Tereza: Where usually is the biggest gap between where the businesses are at the moment when you first start working with them and getting it to that place of readiness.
Rob: I'll probably put it in two to two buckets, one bucket is the business was ready it's a very good business and we use that as a foundation, the other is that the business isn't ready and the good news about what we do is when we're doing succession planning it's not a six-week plan or a four-week plan, it's a two or three year plan, so if there's a bunch of work to do on the business that's where we start and we use the business success program to do that the second one.
A very good business doesn't mean "let's just create succession in the very good business"; we look first at what is the opportunity and the opportunity quite often can be to grow that business and use the program to grow that business with the people that are going to succeed the leadership of that business, so that they own the business and it's a quite frankly it's a way to pay for sometimes the incremental cost of adding that dimension of leadership into the business.
Tereza: So if somebody is considering selling or looking at succession planning for their business what should they do?
Rob: Basically it's an introductory discussion because again and that's where the whole process comes in, are you personally ready, are you ready and if you're coming back to sale and succession, is the business ready and quite often we see there's a lot of opportunity to improve the business. In the case of sale if you improve the business as the owner, you're going to get paid more for the business and the problem, the irony of it is the probability of the new purchaser being successful is actually higher because the business is ready.
In the case of succession the idea there, it's the same thing, you know that the degree of success will be how ready the business is so it's having that discussion and making that determination and developing a plan forward.
Tereza: So tell me a little bit about the psychology of succession planning.
Rob: What I said originally was we're looking at two things; business readiness and personal readiness.
It's fascinating what's going on around the world in the personal space, there's a guy out of North America called Dr. Riley Moynes and he's developed a model which is the "four phases of retirement" and a lot of this will resonate with you when you look at people that you've seen retire.
The first phase he calls sort of the vacation phase or the holiday so somebody says okay I'm retired and this is fantastic it's time to do the bucket list and go travel around the world and do all these things and wake up in the morning and have nothing to do and all that sort of stuff. His observation is that this lasts for two to three years max and it's all over.
Feeling Lost phase:
The second one becomes where it's a sort of this doesn't feel very good moment because you've lost the centre of your life you've lived in your 30 plus year career and your career has been a big part of your life and so people go into this and they basically lose their centre and it's not a good place to be. This is where people you know that retire and then within two years they're dead, you know they basically die or have signs of depression and all sorts of things and the trick is to understand that as a possibility and work through it.
Trial and Error Phase:
The third phase of retirement is experimentation, people that have experimented all take up photography or they do this or they do a bit of volunteer work and they do all these things to fill that gap. Some of those work and some of them don't and what he says where you're headed and the more you understand about the process and the sooner you can get there the better.
It's basically self actualisation and it's replacing that centre that your business played in your life with something else and it's usually and give it and then also you have something meaningful where you can contribute and you know you're getting things done and that's where you're headed.
Breakthrough Phase: The challenge in retirement is years ago it used to be retire at 65, have a party, get a watch do whatever and you're dead within three years. Today retirement can be one-third of your life, you know you can live for thirty years after you retire and so bringing that back to SME businesses it doesn't have to be a lottery.
We can now to do a lot of work to increase the probability of that retirement being more on the vacation side, more what you think it should be and that's what we do.
Tereza: So do you have an example or a case study of succession that you've been involved in personally?
Rob: I've got a couple and none of them are completed because as I said prior when we do our projects our projects can be two three four year projects in order to deliver what we're talking about. I've got one that I'm probably 18 months through and it's a great story because the foundation was a great business with owners 61 years old proactively looking forward saying okay where are we going what are we doing and they're asking that question now before they need to.
In that particular case we started out and we did the full business Success Program, created a management succession plan strategy around the business and in that particular case what we're doing is we're taking a roughly one and a half million dollar business and the three year business plan is to double the size of that business.
We've set about doing that but the succession piece was as you can imagine in a one and a half million dollar succession business the current owner is a key part of the success and what we're talking about is replacing that, so what we did was we recruited basically a professional general manager to come into that business and manage this transition so that manager in this case has now been in the business for about eight months actively managing and managing that transition and the cool thing about the project is the business is growing and the business is continuing to increase its profitability even though we've added the cost of professional management.
The general manager has the ability to replace he critical things that the owner does and in this particular case we've got to be able to sell the services in the business and that's what we're working on so we're changing the process and we're doing that and you know we're well down the track, this will be this would be a great story in a year or so.
Tereza: Fantastic I can't wait to to check back in when it's finalised!