In my last article, I pointed to the Federation of Small Businesses’ stark finding that 27% of SMEs expect to contract, close or sell in the next year, while only 25% expect growth.
That statistic has been gnawing at me, but then I was told a story that turned a number into something much more visceral.
A family business, decades old, profitable and respected, lost its patriarch suddenly. The family had a choice, keep the company going, potentially run it or sell it or close it down. Sadly, they chose closure, not because the business was failing, according to my source it was quite the reverse, but because there was no plan for what to do without the founder. The lack of a successor and roadmap for what to do means decades of value will be destroyed, all because nobody had the courage to plan.
The Most Dangerous Part of the Journey
Alan Crosbie, who chaired the Irish Examiner Group and spent years wrestling with the challenges of family business, has an interesting quote in his book “Don’t Leave it to the Children: Starting, Building and Sustaining a Family Business” which has always stuck with me:
“I think there is an interesting analogy between running a family company and flying a plane. There’s not much danger to anybody when the plane is in the third hour of a transatlantic journey, but at take-off and landing the craft is much more vulnerable to an accident. The point of succession is very much like landing and taking off again. It presents a radically greater threat of danger than is posed by any of the other periods in the history of the company.”
He’s 100% right, as most of the time a business cruises along, but the handover point where change occurs and new people either take, or are forced to take, control is where disaster usually strikes.
The real tragedy is that it is not inevitable, indeed, it is entirely preventable.
Why We Don’t Plan
Founders don’t like facing their own mortality and their families don’t want to discuss death of or face difficult discussions over who might take over. Further, management teams or employees don’t want the insecurity that comes with uncertainty and are often equally reluctant to discuss this sensitive topic.
So, the subject is quietly ignored, often for years until reality forces the issue and by that point the value is much harder to protect or extract. To bend Crosbie’s analogy it’s easier to keep cruising at 30,000 feet and pretend the landing isn’t coming when the simple fact is every plane has to land eventually.
The Price of Closing Down
Here’s the blunt truth, very few businesses are worth more dead than alive. The land and buildings might hold some value, but the real worth is in the intangibles such as customer loyalty, goodwill, brand reputation, as well as the knowledge of the people inside the business. Shut the doors and all of that evaporates.
That’s what’s happening in cases like the family business I was told about. Instead of protecting and monetising what was built, they are dismantling it. The family will lose money, the employees and the local economy will lose jobs and sadly, all of it could have been avoided with a plan.
The Excuse of Busyness and The Consequences of Silence
I know the line that always comes back: “We’re too busy running the business to think about succession.”
But, for me at least, that doesn’t wash as you don’t forget to pay for your insurance or skip paying tax because you’re busy. Some things are fundamental and succession planning belongs in that category.
When owners refuse to plan, everyone pays. Families inherit something worth a fraction of what it could have been, employees lose their livelihoods, communities lose vital businesses and the economy loses productive capacity it cannot afford to waste.
This isn’t market forces, it’s not competition, it’s not global shocks. It’s sheer waste and it’s avoidable.
The Options Nobody Talks About
The tragedy is that there are always options, if you plan succession doesn’t have to mean handing the business to your children for free. It could mean selling it to them properly, structuring a deal that gives the founder retirement income and the next generation skin in the game.
It could mean building a second-tier management team that can run the business going forward, or even taking it over by buying it themselves or via some of the more recent options such as an ownership trust (although I have some less positive views on some of these EoT structures).
It could even mean finding an external buyer well before the crisis hits. None of these options are easy, but they are all better than simply closing the doors.
Landing the Plane Safely
We love to talk about resilience in the SME sector, and whilst this includes how to get through recessions or energy crises, to me real resilience is whether a business can survive its founder.
That is the ultimate test and right now, too many SMEs are failing it. They’re cruising at altitude, pretending they’ll never have to land, then the inevitable happens and the crash wipes out a lot or all of what has been built.
Lack of succession planning is one of the biggest unspoken destroyers of SME wealth. Not the economy, not regulation, not foreign competition, just a collective refusal to plan. Founders aren’t immortal. Businesses shouldn’t have to die with them, but unless we stop cruising and start planning the landing, that’s exactly what will keep happening.
PS I work with founders, scale-ups and boards that value honest, experienced advice with real commercial impact. No fluff, no hype, just clarity and direction, as one friend said I call a spade a shovel (with a few expletives) and this is a description of which I was pretty proud….
