As reported in the Chicago Tribune recently… Alexia Elejalde-Ruiz ‘The Boss Is Retiring, The Kids Don’t Want To Take Over, A Succession Crisis’, describes challenges confronting ‘boomer’ (family) owned (privately held) businesses throughout the U.S.
For further perspective on this issue…please see this blog’s post titled ‘Exit Planning: $15 Trillion In Privately-Owned ‘Baby Boomer’ Business Wealth’.
The Tribune article presented several illustrative examples of businesses…which are experiencing, for various reasons, such challenges. One, in particular, is a third-generation owner of a machine tool sales and service company. The grandfather of the current owner and CEO founded the company 88 years ago and, his preference is to keep the company in the family. However, his children have exhibited no interest in taking over the reins.
This example is merely one among multiple millions of privately held family SME’s (small, medium sized enterprises) and businesses…in the U.S., often started by a ‘baby boom’ generation, a not insignificant percentage of whom, are now exhibiting – expressing concern and, perhaps frustration regarding…
- the absence of a familial-based succession plan, and
- what will happen to their company-business should the only viable option, at least the one that is recognized, is to seek an outside buyer or other party interested in exploring merger – acquisition possibilities.
As an intangible asset strategist and risk specialist business consultant…it is not a preference to become involved in any familial dynamics which, experience suggests, underlie and may variously be in play, in small-medium sized enterprises (SME) business succession – sell – merge planning. When this occurs, a ‘reality TV show’ is often on the horizon absent a rational and calming hand for guidance.
The reason I bring this to readers attention is…any business-company operating for decades has developed, accumulated, and holds valuable and competitive intangible assets which have contributed to their
success. In most instances, those intangibles are products of intellectual, structural, and relationship capital.
It is necessary – essential, then…for business owners to recognize the economic fact, that today and for the foreseeable future…
- 80+% of most company’s value, sources of revenue, and competitive advantages lie in – emerge directly from the intangible (non-physical) assets they have accumulated, integrated, and applied.
My focus, and the benefits I endeavor to deliver to business clients…as an intangible asset strategist and risk specialist, lie largely with ‘bringing to surface’ the intangible asset side of a business, i.e., respectfully elevating the current (business) owners’ operational familiarity with…
- the contributory role, value, competitive advantages, and sustainability which their businesses existing collaborative ensemble of intangible assets have contributed, over time, in the form of sources of revenue, business value, reputation, and operating principles, and for
- a high percentage of those intangibles, the family-owned business has likely developed internally, acquired externally, enhanced, and sustained over the lifetime of the business.
‘State of (business) Owner Readiness’….was the title of an important 2017 survey conducted by The Exit Planning Institute (EPI) and its (Phoenix) Arizona chapter. The objectives of this exit planning survey were straightforward, i.e.,
- identify the states – stages of ‘exit planning’ readiness of business owners, and
- encourage surfacing more of the wealth the businesses have accumulated. https://kpstrat.com/wp-admin/post.php?post=266
A conservative estimate is that $15+ trillion of largely privately-owned wealth will be in transition… ala ‘baby boomer’ business owners which should translate to exit planning par excellence which absolutely must include the array of intangible assets each business has accrued.
Intangible assets, i.e., the intellectual, structural, relationship capital (reputation, image, goodwill, etc.)…underlying most company’s (financial) success and successive generation sustainability absolutely must and should be factored. When – if business leadership are receptive to recognizing how to value and leverage their intangibles in sell, merger, acquisition circumstances.
Michael D. Moberly January 21, 2019 St. Louis firstname.lastname@example.org, the ‘Business Intangible Asset Blog’ since May 2006, 650+ published posts at https://kpstrat.com/blog‘ ‘where businesses intangible assets, challenges, and solutions converge’!
Readers are invited to explore other relevant blog posts, books, position papers, and video I have produced also at https://kpstrat.com/blog