Chapter 7Let's Make a Deal

Life consists not in holding good cards, but in playing those you hold well.

—Josh Billings

We spent much of Chapter 6 trying to define the major building blocks of transition strategy by working through the personal financial impacts for both founders and successors. Current owners have four financial options: (1) retain a predominant ownership stake in the company, risking an eventual drop in equity value (hoping meanwhile to get enough cash out of it); (2) complete an internal succession by selling shares at a discount; (3) bring in outside capital to assist in an internal transition; or (4) sell or merge the business. For a successor, the guiding principle in any of these scenarios is that, while the founder needs to be treated fairly, the transition strategy can't be so favorable to the founder that the successor retains too little upside.

Let's assume for the rest of this chapter that option 1, milking the business, is off the table. As we've emphasized, “doing nothing”—for now—is a legitimate strategy. But it can't be a permanent one. At some point, the strategic focus must move toward one of the other options, if it's not too late. Strategic delay can become a form of perennial denial, permitting the founder to cultivate the delusion that there will, someday, be some attractive rescue. No one lives forever. Not overcoming denial will not have a happy ending. When is that optimal time to choose a more affirmative strategy? There is no general ...

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