The Three Ds of Business Transition: Death, Disability and Divorce

Closely held and family businesses don't always transition on a schedule. Often, something happens that changes the owner's plans. I tend to think about those events in three broad categories. I call them the Three Ds: death, disability and divorce. And I use each one more broadly than the word usually means.

Death.

It can be an actual passing, and that's the one every owner thinks about and puts off. But in the broader way I use the term, "death" can also mean the owner has simply lost the desire to keep going: burnout, fatigue, retirement, a quiet realization that the next chapter looks better than this one. The business doesn't die. The owner's connection to it does.

Disability.

It can be a real health issue that takes an owner out of the day-to-day. But it can also mean circumstances changed and the owner no longer has the time, energy, capacity, or desire to operate the business at the same level: a health issue, a family obligation, or simply a change in the owner's capacity to remain involved at the same level. The business is fine. The ability to run it isn't what it was.

Divorce.

It includes marital divorce, and that one gets messy fast when a business is shared. But I also use the term to include "business divorce": partners who disagree, a partner who wants out, family members who want different things, an ownership relationship that simply no longer works. Nobody died, nobody got sick, and the business still ends up on the table.

Here's the point.

Many closely held businesses eventually face a transition influenced by one of these three circumstances. And when the event forces the timing, the owner is reacting. They're selling from a position they didn't choose, often in a hurry, often without having built transferable value or a plan.

The alternative is to think about transferable value, succession and exit planning before one of the Three Ds makes the decision for you. That doesn't mean every owner should sell, or sell soon. It means the owners who control their outcome are the ones who asked the questions early: What is this business actually worth beyond me? What happens if I can't run it? What do I want the next chapter to look like?

Those conversations are confidential, and they don't commit you to anything. They just make sure that when transition comes, you're the one choosing the timing.

The best time to prepare a business for transition is before the transition chooses the timing for you.