By Loren Feldman
One of the hardest things about planning a business transition is figuring out whose advice to trust. There are plenty of people who will tell you that an ESOP is the answer. Or private equity. Or selling to key employees. Or keeping the business in the family. That’s not what we’re going to do in the 21 Hats Succession Solutions Workshop.
Instead, I’m bringing in a series of special guests who have lived through these decisions or helped owners navigate them. They have also been guests on the 21 Hats Podcast, where they’ve been unusually candid about what happened—including the mistakes, surprises, and nuances they wish they’d understood before making a choice.
They have opinions, of course. But none of them is coming to promote a particular path. They’re coming to answer questions.
Josh Patrick will talk about something many owners spend surprisingly little time preparing for: what happens after the business is gone. Josh built and sold a successful vending-machine business and then spent years advising other owners through their own transitions. He has seen how disorienting life can become when the phone stops ringing, people stop needing you, and the business that supplied so much of your identity and purpose is no longer there. (Here’s Josh on the podcast talking about why owners tend to be ill-prepared for retirement.)
David C. Barnett will explain the realities of buying and selling a small business—especially the things owners tend to misunderstand before they enter the process. David spent years as a business broker before abandoning the traditional commission model, in part because he saw how many deals fall apart and how poorly the incentives can work. He’ll address why so many small businesses never sell, why owners often overestimate what their companies are worth to a buyer, and what makes a business genuinely transferable. He’ll also talk about valuation, financing, earnouts, seller notes, and the steps owners can take years in advance to make their businesses more attractive to buyers. (Here’s David on the podcast discussing why there really isn’t a true market for buying and selling small businesses.)
Laura Zander will describe how exhausting it can be to sell a business—even when you’ve spent years preparing for the day. Laura and her husband built Jimmy Beans Wool over more than two decades, and she had long tried to run the company as if it might someday be sold—keeping the books clean, building systems, reducing dependence on the founders, and cultivating relationships with potential buyers. When the right strategic buyer finally came along, she got the deal she wanted. But there were 155 due-diligence requests, months of legal negotiations, endless paperwork, and stretches when Laura and her husband Doug were so consumed by the transaction that the business itself suffered. She’ll talk about what surprised her, what she wishes she had done differently, and why getting a good deal is only part of what owners need to prepare for. (Here’s Laura on the podcast saying that selling her business nearly broke her.)
Kevin Donnelly will bring a very different perspective. After 20 years of building a telecommunications company, he received an unsolicited offer from a private-equity firm and, as he puts it, reacted like a deer in the headlights. He came out of the deal okay financially but continues to regret aspects of it, especially what he wishes he had done for the employees who helped build the company. Today, he helps owners consider a range of succession options, including sales to key employees. (Here’s Kevin on the podcast explaining why the mistakes he made selling his business compelled him to start another business.)
John Abrams will talk about worker cooperatives. John converted his own company, South Mountain Company, into a worker co-op decades ago. He’ll explain how the structure actually works, how a founder gets paid, what happens to control, how employees become owners—and what can go wrong. John believes strongly in the model, but he’s also quite willing to discuss its limitations and failures and how it compares to other forms of employee ownership. (Here’s John on the podcast clarifying that he did not manage his worker co-op as a democracy.)
Peter Koehler will explain Employee Ownership Trusts, one of the least familiar succession options available to American business owners. Peter helps owners compare trusts with ESOPs, worker co-ops, and more traditional employee-buyout structures before choosing a path. He’ll explain why trusts can be attractive to owners who care deeply about preserving a company’s independence and values—and why financing these transactions can still be a serious obstacle. (Here’s Peter on the podcast with the owner of a restaurant that he guided through the process of creating an employee ownership trust.)
Julia Beardwood will recount a succession process she created that began with a health scare and took years to resolve. She explored an ESOP. She considered a strategic sale. Ultimately, the answer turned out to be inside her own company. A compensation strategy she had put in place years earlier to motivate and retain key employees wound up creating the foundation for selling the business. (Here’s Julia on the podcast explaining how she sold her business to two key employees.)
Cathy Carroll will describe the uniquely difficult challenges of family succession. Cathy joined her father’s business, helped turn it around, and then found herself in a painful struggle over leadership, control, identity, and what it really means to pass a business from one generation to the next. She eventually left. Today she coaches family-business leaders, and she’s candid not only about what her father got wrong but about the mistakes she now recognizes in her own approach. (Here’s Cathy on the podcast explaining her own failed succession.)
Roland Burdett will share a perspective on ESOPs that few people can match. He helped turn Miklos Systems into an ESOP when the founder was ready to retire, then spent nearly 20 years running the employee-owned company. Along the way, he learned what it takes to make employee ownership more than just a retirement plan—including extensive employee education, financial transparency, and a constant effort to get people thinking like owners. But he also had to confront a harder question: Is an ESOP really supposed to last forever? When turmoil in the government-contracting market put not just the employees’ jobs at risk but also their health insurance and retirement savings, Roland and his team decided the responsible choice would be to sell the company and lock in the value employees had built. He’ll talk about why selling an ESOP can be complicated, and what he wishes more owners understood before choosing—or exiting—employee ownership. (Here’s Roland on the podcast explaining the risks for an ESOP confronting challenges.)
There’s no party line within this group. An ESOP can be a terrific solution—and still create dangerous debt. A sale to employees can preserve a company’s culture—but only if the right employees are capable of running it. A family transition can fulfill a founder’s dream—or do enormous damage to both the company and the family. A private-equity deal can create substantial wealth—and still leave an owner wondering whether it was the right decision. And sometimes the succession option an owner ultimately chooses isn’t the one he or she expected to choose at all.
That’s really the point of this workshop. The best time to learn about these choices is before you have to make one. Over eight small-group sessions, participating owners will have the opportunity to compare notes with each other and to question people who have lived through these transitions or helped other owners navigate them. (Here’s a more complete explanation of how the workshop will work.)
These aren’t people speaking only from theory. They’ve seen what happens when plans work, when they don’t, and when the answer turns out to be something entirely different from what an owner expected. And perhaps most valuable of all, they know the questions they wish they had asked sooner.
Succession Solutions: A 21 Hats Workshop begins Monday, January 11, and will meet every other Monday from 3 to 5 p.m. ET for eight sessions. Participation is limited to 10 owners. The $1,650 early-registration price is available through October 1; after that, the price rises to $1,950. And, as always, there’s a full money-back guarantee.
This is the right order. Don’t start with the answer. Start with what the owner wants to protect, what they want next and what they are willing to give up. Then choose the structure.