by Donald J. Jonovic, Ph.D.
Owners of closely held companies, by experience, inclination, necessity, and, often, personality, tend to focus on the short term. Most available waking hours are absorbed by immediate problems, sudden opportunities, annual profits and cash flows. Fortunately, a successful business can, in fact, be built this way. It happens every day.
Unfortunately, this focus on immediate challenges and rewards is definitely not the way to build the shareholder value of that successful business for the long-term.
Consider how this outlook affects transition. Few would doubt that a smooth ownership and management transition in a family firm can enhance the value of that firm to shareholders and potential buyers. Even so, in companies with a short-term focus, transition (when it’s thought about at all) is seen as an “event” in some distant future: “We’ll get to it when the problem arises.” This is wrong. Companies don’t suddenly decide to have a transition any more than a woman suddenly decides to give birth. Transition is a process. It is a way of going about things. More…