We first met John in the building where his father, a brilliant engineer, had started their manufacturing business over 40 years ago. It felt like we were walking into a museum. Everything in the office as well as on the manufacturing floor looked like a snapshot out of the 1970s. Nothing had been upgraded, painted or modernized. The employees were all well into their 60s.
John pointed to a chair and an empty desk and said, “That’s where my father died just a few years ago at the age of 97. He controlled this company until the day he died. It sure would have been helpful if he let me make a decision before I turned 65!” John finally inherited the ownership and control of the family business upon his father’s death, but he didn’t know how to run it. He wanted to sell the business, but it was too late. The sales were declining and so were the profits. The employees with all of the technical knowledge were about to retire and John was thinking about life beyond the company. The problem was that he had saved very little toward his retirement.
So what were the outcomes and what might they have done differently?
- The business was not salable. John’s father, in his quest to keep everything the same until he died, unknowingly determined the company’s fate and his own legacy. The company never made new hires, upgraded the technology or put marketing initiatives in place.
- John’s father’s legacy would not be around much longer. The company was failing.
- The business had no value and could not be sold. The competitors had developed new and improved products that were much more attractive to customers.
- John was going to need to scale back his lifestyle and find another job in his late 60s, since he could not get enough money from the business to fund his retirement.
The What Ifs:
- What If John’s father had groomed his son to take over many years earlier?
The company may still be alive today.
- What if John’s father had found outside activities to occupy his time?
He could have handed the reins over to John, leaving intact his legacy of brilliant engineering and entrepreneurship as the founder of the company.
- What if John had been allowed to make decisions early in his career?
He might have developed the confidence to run and re-invent the business, as needed, to avoid becoming obsolete.
- What if John had saved money outside the business?
He would not have been so dependent on the business for his retirement.
What happened to John’s family’s manufacturing business is terrible and we can learn a crucial lesson from it: Preparation is vital when it comes to exit planning.