How much? Tough questions about generational handover

How much does it cost to accompany the generational handover in a company? Basically: ‘give me a quote for business succession consulting’. This is the question I often hear from potential clients.

The honest answer

The honest answer to the pure and simple question ‘how much does it cost to accompany the generational handover’ does not exist. Or rather, the honest answer would be ‘I don’t know’. And it would also be the only honest answer.

Unfortunately, in most cases, if the serious advisor gives this true, honest, very professional answer, the assignment is given to an unprincipled  one who gives one of those that serve to catch clients. What are they? All those answers that start from an assessment (rational, intuitive, empirical…. doesn’t matter) of the amount of money that the potential client seems willing to spend to get it off his chest.

Imagine the scenario

At first glance it may seem to you that the honest answer is actually an attempt to avoid the effort of giving an accurate one. I understand.

But I ask you to make the effort to follow me in some brainstorming. Try to imagine, for example, that you are called into a company that has been in existence since the late 19th century, with rather prolific generations, and that has built up over time a remarkable series of production sites scattered across the territory. Imagine that some family members of the last generation work in the company and others do not. Then imagine that for some family members the production units also represent their family home, often enjoyed with extensive fringe benefits (e.g. the discharge of many expenses from the family).

Imagine also that, in the century and a half of the company’s existence, the generations have largely shifted, so that in some branches there are newborn heirs, with parents to protect them who are peers of the previous generation in another branch. Then imagine a corporate situation of liquidity crisis and great wealth of assets; assets that, however, cannot be sold for cash because they coincide with the production units.

Then imagine that the entrepreneur calls you, gives you an appointment, and asks you to make him an offer for your assistance in the succession.

And perhaps also for the redistribution of assets necessary to allow a livable situation in family relations after the reorganisation. So, when he asks you how much it costs to accompany the generational transition, what do you say?

Imagine again

Now imagine two seemingly identical but profoundly different scenarios.

In the first, you have a typical medium-sized family business, with the entrepreneur’s family, husband, wife and two children, male and female. The parents are well matched; he developed the business from nothing, his wife supported him first with the income from a freelance profession, then by joining the company and managing its administration, following the children and the social activities that allowed the entrepreneur to devote himself 100% to the business. The sons are both serene people, they studied business subjects and their father brought them into the company a few years ago to make their bones. They cooperate serenely with each other in roles that reflect their peculiarities. Now the father has decided to enjoy the second half of life with his beloved wife and wants to pass the ball fairly quickly. He asks for help in assessing the consequences of his departure and facilitating a totally painless transition for the company as well, so that there is no governance void in the transition.

In the second, you have the same type of business and the same composition of the entrepreneurial family. However, the father is a somewhat old-fashioned ‘boss’ who considers women unsuitable for business. However, his daughter, who has studied subjects useful to the business, has already been working there for ten years and is practically the general manager. She would be perfectly capable of being the managing director, but her father does not ‘see’ her. The son, on the other hand, has artistic leanings and would have no desire to take over the family business. However, his father wanted him inside and entrusted him with tasks that he never manages to perform properly. However, encouraged by his father, this son would claim total ownership of the enterprise for himself. Relations between the brothers are strained, and the father’s evident preference for the son also generates tension in the family at large.

Now make the offer

Having done the imaginative exercise on a simple family, now imagine that the two entrepreneurs ask you the fateful question: how much does it cost to accompany the generational transition?

If you are serious, and you know something about how conflicts within such situations can be, the only answer you can give is the one I indicated earlier: I don’t know. In case you haven’t read my book outlining my CASE® Method for Conflict Transformation, know that by ‘conflict’ I mean a divergence of interests, priorities, goals… things like that; not necessarily fisticuffs or court.

After that, of course, something has to be answered to the potential client, if they haven’t already run away from someone who gives them the easy answer: 10,000, 20,000 50,000 100,000… depending on how deep the client seems to want to reach into their own pockets.

Here the type of answer you give clearly shows how much you know about your trade, because your answer should start with a question.

What to ask?

Your answer should start with a question, I said. Or rather, from a series of questions that have a very specific purpose.

The objective of the questions to ask is to get out of the potential client what he really expects from you.

As well as what he will allow you to do when he has chosen you as a consultant, I would say more precisely as advisor, to accompany the generational transition. Yes, because often the biggest obstacle to overcome is the deep-seated convictions of the person who is to hand over, and of course also that of these convictions that have been passed down through the generations.

Finally, you should get the opportunity to ask questions and get to know all the people involved in the process, present and future, including their expectations and positions in the current situation.

This is to define a STARTING POINT. Because one of the most difficult things to do in accompanying a generational transition, as well as any transition, is to establish where one starts from. This means thoroughly understanding the psychology of the people involved, their desires, their priorities, but also their mental, emotional, cultural abilities… In short, you have to know what material you will be working with.

Often the potential client already jumps to ask about legal aspects, such as patrimonial redistribution,, or a company governance reform, tax issues etc. But, right now, the honest answer should always be ‘I don’t know’.

A matter of trust

In essence, this type of counselling is a service based entirely on trust. The process of generational handover is complex, it usually lasts several months if not a few years, it involves people, which is as complex and multidimensional as it gets.

That is why I used the term ‘counsellor’ first, which I prefer to ‘advisor or “consultant”’. The real challenge to be overcome by those who set out to assist entrepreneurs and families is to win the trust of the potential client – a person who normally does not know you – so that they come to trust you with an open mind. And willingness to spend over time an amount that cannot be determined a priori. In summary, the potential client must choose to make you a trusted advisor, on issues that are often intimate and certainly confidential. Not easy…

It would seem the Eldorado for the dishonest and profiteers. But it is not. Let us say that the difficulty of determining the cost of such assistance, and the real risk of not knowing where one is going, means that few entrepreneurs turn with confidence to advisors who are truly capable of accompanying transition processes. Often bits and pieces of what is needed are entrusted to different advisors, or relationships are started that end badly because the entrepreneur or businesswoman refuses that their own convictions may be wrong and useless, if not harmful, to the generational transition process.

Relying trustfully on a counsellor, as the word itself says, requires a great deal of trust, and the ability to accept points of view even radically different from our own, in order to broaden our horizons and see solutions that we did not know. Ah: sometimes it is also about better and simpler solutions, mind!

A free call to see where you stand

Well, this is the second instalment of my reflections on the generational transition, which is a complex topic, but at least the basics I want to try to convey.

Maybe this will make it easier to get started with the next prospect you happen to meet….

If you are thinking of taking advantage of my help, the first fundamental step is to get to know each other and frame the specific topic that arises in your concrete reality.

Therefore, if you found this article interesting, I offer you a free 30′ first call to understand how I can help you. Email me at: info@federicofioretto.biz