Abby Donnelly: Business Succession Planning, Leadership Transitions, and Life After Exit

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The Business Owner's Journey Podcast host: Nick Berry
Production Company: FCG

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Episode transcript for: Abby Donnelly: Business Succession Planning, Leadership Transitions, and Life After Exit

Chapter Timestamps

03:50 The Business Exit Transition Process

06:14 Identifying Successors

08:48 The Financial Dynamics of Business Exit & Succession

12:00 Navigating Internal vs. External Successors

14:50 Leadership Transition & Successor Development

17:31 Creating a Portfolio Life Plan for Owners

20:20 Crafting Your Storyline for the Next Chapter

23:34 Recognizing Transferable Skills After Selling a Business

31:34 Key Factors for a Successful Business Exit

33:46 Starting with the End in Mind

37:46 The Challenge of Transitioning Out of Ownership

41:53 Ownership vs. Leadership in Succession Planning

45:09 The Holistic Approach to Business Succession and Exit

Abby Donnelly (00:00)

they always say they're going to travel a lot more. They're going to spend a lot more time with their family and they're going to play a lot more golf. those are the top three. And those are wonderful things to do. But unfortunately, that's not going to be enough for most people, A, to fill their time.

But this isn't about filling their time. This is about having something that's personally meaningful, engaging, motivating in that next chapter. And while those three things can have some parts of that inherent, of the owners that have invested their life in growing a business and have a lot of appropriate success and pride in it, moving into that chapter just isn't going to be enough.

the portfolio life planning process helps us or them look at what is it then that's going to make it be enough and make it compelling.

Nick Berry (01:05)

Abby Donnelly is an executive coach, a board member, bestselling author of an insider's guide to succession and exit. Most business owners are focusing so hard on building their companies that they barely look up until it's time to leave. When that moment finally arrives, it's rarely as simple or as satisfying as what they've imagined, which is cashing a check and riding off into the sunset. In this conversation, Abby shares how to actually prepare for this business transition.

what most owners wish they'd known before selling, whether selling to an insider or an outsider changes the game, her take on building a portfolio life after exit, the best and the worst ways to develop your successor, how to separate leadership from ownership, what most owners overlook until it's too late,

how to avoid the emotional landmines of an exit and why intentionality, not just the number, should be what's driving the plan. Enjoy this episode with Abby Donnelly.

Nick Berry (01:56)

we spend likely, the bulk of our adult life, but building this business, being very purposeful, driven around a vision or a goal and outcome.

And then we get to this place where it's time to reap the rewards. And from my experience, it seems like we're underprepared is probably the nice way to describe it. Why do we get that part wrong? this is the

probably as important, if not the most important step that I'm going to take, but we've taken it for granted and haven't prepared ourselves for it. Why are we doing that?

Abby Donnelly (02:27)

Well, it's a great question. And I think it makes perfect logical sense because as you said, owners are spending their 30, 40 years building their business. They have cultivated a very successful business and they got there by doing the business well. And now when you start thinking about succession planning or selling your company, the skill sets and the

process and plan that you need to use to do that is very different than when it took you to get to the place where you are in your business. So the demands are different, the expectations are different, there's just a different approach that needs to be done to get there. And frankly, it's uncomfortable. You know, I sometimes might use the word scary because there's a lot of uncertainty. It takes time. You've got to step away from the business that you've been.

active in in order to put time against this. And there are so many things that are different than what you would normally do in your business or on your business every day. And they're not things that you've ever done before. And so all of that is why people put it off or, you know, struggle with it.

Nick Berry (03:41)

What part of, other than I guess not starting early enough, not getting prepared?

Let's get into the specifics of How should we be preparing differently?

Abby Donnelly (03:50)

Yeah, so I think there are a number of things that are important in preparing for a transition like this. And I think one of them is that you've got to recognize going into it that this is going to be a little bit messy. And business owners, anyone that's been in business for any amount of time recognizes that it can be, know, business is messy at times. Things don't always go the way you want them to. There are external threats. There are internal challenges. There are

you weaknesses that you have in your business that you need to address. so business owners are very comfortable working through a lot of that stuff. But when it gets to the place where you're trying to figure out what's next and how are you going to transition this business to somebody else or to another entity that's going to buy it?

That can be really difficult because the kinds of things that you've done to get you there aren't the things that you're going to need to do to make the transition. What I recommend as a process for owners, and this is really all outlined in my book, but I think the most important process is owners starting with figuring out what matters most. And the typical things that people think matters most when you're talking to an owner, they'll often say, well,

The most important thing, because it's socially acceptable, the most important thing is to get as much money as I can out of the business. You know, I've built this, I've nurtured it over the years. What can I get as a payout on this? But when I talk to owners, the majority of owners that I work with, they do want to get a fair deal out of their business. They want to be paid a fair price. Nobody wants to feel like they've been taken advantage of. But what they really want

is to make sure that their business goes to somebody that they trust and is going to run it in a way that's consistent with their core values and the culture that they put in place.

what matters most to them is that they're looking for somebody who is going to run the business in a way that values the same things that they value and preserves the culture, takes good care of their employees, and they get a fair price and transition plan from it. And so,

Those kinds of things, getting clear on those, are a very important starting place once you recognize that it's going to be messy. So once an owner knows what matters most, then they can start to put the plans in place to arrange for that. And so from my perspective, it's about figuring out who is that successor that you want to bring on.

Nick Berry (06:14)

Mm-hmm.

Abby Donnelly (06:28)

who is going to be able to run the company in a way that's consistent with your core values, take good care of your employees and manage the culture that's important to you. And then developing those successors, figuring out what the ownership transition plan is going to be that serves them and serves you and how that payout is going to take place. Putting the infrastructure and systems in place to ensure that the things that you've built will maintain over time.

And then developing that leader to be able to take the business not just from where it is today, which is important, but develop a strategic plan with them that they can run that will take it into the next five to 10 years as you transition out or as you ramp down as an owner.

Nick Berry (07:17)

that's what kind of got my attention with some of your content and what I really liked about it is you're kind of listed out, here's all the things that you're to need to think about that probably matter to you in some way. And you can either be intentional about, getting your head around that, or you're going to find out that it was important to you when you don't have time to prepare for it, which what?

happens a lot of time. I went through some of that. I feel like pretty fortunate, there were a lot of those things that I got right. But I can't say that it was totally intentional. didn't have, know, an or is organized of a, of a strategy, as you just laid out. But I, having been around probably more than a dozen other

business owners who have gone through an exit. I've seen their perspective on a lot of things. for the most part, they tend to stick to that whole, it's about the number. I need to get my number and I'm gone. And I'm not worried about this other stuff. And I guess that kind of made me wonder like, why aren't you worried about this other stuff? And so I've put some attention to it, but

Not because I had somebody like you who knows that was saying like, Hey, you need to keep this in mind, figure out like what your values are here. And let's make sure that we've got them all accounted for. and I can imagine it gets pretty like the discomfort really gets ramped up for somebody who is, wasn't thinking about the emotions or their identity or any of those things. And then they get into the moment.

Abby Donnelly (08:48)

That's right. Well, and one of the things that I think is really hard for owners to recognize, and I have this conversation with a client a couple of years ago, and I still sort of chuckle at it, is that if a successor who's maybe a family member or key employee is going to buy you out of the business, well, most of the time, they don't have a large sum of cash that they can pull out of the bank to pay the owner off.

And in a lot of cases, the owner then has to finance the sale of the business to their successor. And so I had this conversation with a client and he said, so let me make sure I understand this, Abby. What you're saying is I'm going to use my money to fund my successor's purchase of the business, which if I didn't sell it to him would be my money anyway. But now I'm basically going to allow him to benefit from that.

for the purpose of buying me out with my own money. And I nodded and I said, yeah, that's pretty much it. I mean, in some cases they could go and get an SBA loan. In some cases they have family that will help them fund it. But typically the amount of money that they're gonna have to pull together to buy an owner out is much more than they're gonna have access to year one or year two. And so it is a little bit.

different if you're going to sell to a family owner or key employee. Whereas if you were to sell to a third party or a private equity or another firm that's going to do a merger or an acquisition, well, they're going to bring that cash and you would expect it. And so what it means if an owner is funding the sale of the business, that their risk level is going to be high for a lot longer than if they just get a cash payout.

But many of them want to sell to a key employee or a family member because they want the business to continue through that transition and they want that next successor to run it. They've prepared for that, at least intellectually, if not yet emotionally and financially.

Nick Berry (10:59)

what percentage of the time does the successor come from internal versus external or do you have any statistics for how these scenarios break out?

Abby Donnelly (11:07)

I don't have any statistics. can give you kind of my experience. But what I have found most often is that if a business is going to go through a successor, the vast majority of the time, it is going to go to somebody that's already in the business, whether it's a family member or key employee. And I would say that probably 80 % of the time that I've been working with in my

client situations, it goes to a family member and 20 % to a key employee. But I would also say that if there are many business owners that anticipate that they are going to do a succession to a family member and key employee and they get into it and they recognize that either the family member or key employee can't get ready fast enough or they're not the right candidate or

the financial equation just won't work for the owner or the risk profile isn't something that they're willing to take on. And so they go part way down the path and then they make a different decision and sell to a third party.

Nick Berry (12:16)

So it is

as simple at that point as just pivoting to a different prospective buyer or are there other changes that have to be made in the strategy?

Abby Donnelly (12:26)

I think there might have to be other changes in the strategy. Certainly the work that I'm doing with owners to prepare them for succession will reapply to selling to a third party. But a third party sale is going to have a lot more, in some ways, lot more complexity. And they're going to want to dive a whole lot deeper into the financials and make sure that they know what they're getting. So I do think it's going to be a much more intense process for an owner. In some cases, I have

worked a parallel path with an owner who isn't really sure which direction they want to go. But it's very rare in my experience that an owner will decide to hire a third party CEO to come in to be the successor and buy them out over the next one to two years. There are a lot of young professionals out there in their 30s and 40s though who really want to do that. So, know, if anyone's listening and they're thinking, gosh,

I may not have anyone in my company that is a viable candidate for succession, but I would like to sell it to a person. There are a lot of folks that are looking to buy into a business and they're willing to learn from an owner for a couple of years with the intent that there is a transition at the end of that window of time and they own the company.

Nick Berry (13:51)

describe your role in the whole scenario for me.

Abby Donnelly (13:54)

Yeah, so I do a couple of different things. When I'm working with an owner, what I'm working on typically is I help them develop their leaders, sometimes help them select the right candidate for succession, but I help them develop their leaders, which may include more than just the CEO. It may include some of the other leaders on their leadership team and then the whole daisy chain behind that. And when I say daisy chain, what I mean is that, you know, as you move,

people up, the folks beneath them in the hierarchy need to be developed as well, because you need to continue to have a strong team and a strong organization as the ownership transitions. Of course, you need it all the time, but as the ownership transitions is particularly important. So I work with them to develop those leaders so that they're prepared to take over and run the company profitably and sustainably. It needs to be profitable, of course, for

natural business reasons, but the owner needs it profitable so that they get paid out. And then I also often will work with them to develop a strategic plan that not only meets the owner's needs, but also is something that the successor can successfully run and execute against. And then I get involved in all of the difficult decisions and tough conversations that owners need to have when they're planning a

transition of this magnitude. And then the last thing that I do often with clients is as an owner begins to ramp down, that's when the discomfort about their identity being in the business really ramps up. And so it's hard sometimes for owners to think about what are they going to do when they no longer have this business as such a significant part of their life.

And so I built a model and have been using the process for 25 years that helps owners figure out what's going to be meaningful and rewarding for them in their next chapter. I talk about it as a portfolio life plan because the idea is that they may still have a really important role in their business. I recommend that they carve out that role and define it.

so that their successor can continue to be successful running the company without perceived or real interference or confusion within the organization. But there are many other things that they might like to do. And I think it's important to figure that out six to 12 months before they exit so that they are moving to something instead of feeling like there's just a loss that they're leaving from.

Nick Berry (16:40)

So I love your portfolio life plan. I've talked about this in a few bits and pieces in episodes, but after I sold and I had a transition period, but it basically goes into that, that season of, okay, well, what am going to do now? And I thought about it some before the event, but really it was as broad as, what am I going to do now? And.

the portfolio life plan kind of breaks out that into actual, discoverable elements that you can be intentional about figuring them out. I kind of stuck myself in a spot where, if I wanted to figure out what I was going to do now, that's kind of a like go set under a tree type question and just maybe wait, then something will hit me. And you gave

something that was more actionable can be intentional about like here that here's what you need to think about to help you define your answer.

Abby Donnelly (17:31)

Well, I'm so glad that you said that and you've used the word intentional a couple of times and that's really important to me is, you know, helping clients be very intentional about this process because there is so much emotion and there's so much at stake, you know, with their business, with their financial investment in the business and most owners are going to rely at some level on the payout from their company to fund their retirement.

For me, everything is about how do you do that in a way that serves your own highest good and your long-term goals and plan. And so I do a lot of speaking engagements. And when I'm speaking in front of an audience and I'm talking about this portfolio life plan, I'll often ask the audience, so what do you think the top three things that people think they're going to do when they retire or when they move into their next chapter?

And the audience gets it right every time. Sometimes they give me four things and three of them are right. But they always say they're going to travel a lot more. They're going to spend a lot more time with their family and they're going to play a lot more golf. And every once in a while I'll hear tennis, but for the most part, those are the top three. And those are wonderful things to do. But unfortunately, you know, that's not going to be enough for most people, A, to fill their time.

But this isn't about filling their time. This is about having something that's personally meaningful, engaging, motivating in that next chapter. And while those three things can have some parts of that inherent, of the owners that have invested their life in growing a business and have a lot of appropriate success and pride in it, moving into that chapter just isn't going to be enough.

So you're right, the portfolio life planning process helps us or them look at what is it then that's going to make it be enough and make it compelling.

Nick Berry (19:35)

I think there was a point in there. You mentioned like your is it your storyline? Is that what you call it? Where it's kind of like we were talking about with Daniel in the headshots. It's like how you view yourself and the effect that that has. Can you talk about that some?

Abby Donnelly (19:43)

Yes, yes.

Yeah, yeah. And it's a great analogy to Daniel as a photographer because we see ourselves in photographs. So the storyline is kind of the transition point between phase one and phase two of my process. And phase one is really all about really being introspective. And I look at three different areas that are important in next chapter of planning or that portfolio life. One is

What motivates you? And I've got great tools to help uncover that because most people, honestly, if you ask them, they really struggle with that. So what motivates you? What are your favorite strengths to use? And I say favorite strengths with intention because at this point in your life and career, you really don't want to do something that you're good at, but you hate. And so it's about your favorite strengths because your results are going to be better and you're to have more fun doing those things.

And then the third one is your lifestyle priority. So a lot of clients examples of that might be, I do want to travel a lot more. I want to be able to take a month off, you know, twice a year and things like that. I actually had a client who said, you know what, Abby, the only lifestyle priority that I want to set in my next chapter is I have set the alarm for five o'clock in the morning for the last 40 years.

And I would just like to set the alarm for 6.30 for a change. So, but anyway, getting to the storyline, the storyline is taking all of that information and putting it into a narrative, a storyline that describes who you are at this point in your life. And the purpose is really twofold. One is to consolidate everything that you now know after this discovery process, this introspective phase one of the process.

everything that you know into a concise, relatively concise statement that you can look at and go, yes, that's me. Like that represents who I am right now. The more important part of it though, is that the second phase of the process is to go out there and explore to find opportunities that match up.

And what I found when I'm working with clients who are in high profile, visible leadership roles as owners of their company or as CEOs, you know, they may not be looking at succession in quite the same way, but they they are in demand. People want them to come volunteer for their nonprofit or to, you know, take this opportunity to teach or something like that. And if they just take.

meetings to talk about those opportunities without having done the work to get them to the storyline, they may end up getting pulled into things that they just aren't happy with. And it's a lot harder to extricate out than it is to go in on the front end and say, I'd like to be intentional and design what my next chapter looks like. And so if they have a favorite nonprofit that they might want to invest in,

going to that nonprofit and saying, here's who I am, here's my storyline, here's my narrative at this point in my life. Let's figure out together how I can serve your organization in a way that works for both of us. Or if they get an invitation, I had a client that got an invitation to teach at a university, which was wonderful for them, but it didn't really match what their spouse wanted them to do in that next chapter.

Nick Berry (23:19)

Mm-hmm.

Abby Donnelly (23:34)

And so they ended up getting hooked into this semester system and they realized immediately that that kind of rigor and that kind of work, if you will, was not really rewarding for them. And then it was, they had to go through the semester in order to get out of it. So those are some examples of why it's so important to do it.

because you're in control and being intentional about the process.

Nick Berry (24:06)

And those are things that are avoidable, right? So you spent your career running this business or whatever amount of time you spent running this business. And there are a lot of things that land in front of you that you couldn't avoid maybe, but you're in this chapter, you can have a little bit more control over what lands in your lap with a little bit of preparation. Why do you think that they are in demand? What is it that people are looking for? Organizations are looking for that.

that puts these business owners who have recently exited in demand.

Abby Donnelly (24:35)

owners.

Yeah, so I think a couple of things. One, they've obviously been successful in business and there's a skill set that comes with that and experience base that I think is very valuable to the outside world. What is interesting is that most owners don't see themselves through that lens, but I do. I know that those skills and experience they have are very transferable and can be applied to a lot of other organizations. The second thing that I think puts them in demand is that they have

on their hands now. They have stepped away from what might have been a 40, 50, 60 or more hour a week leadership role. And now they have time and they're at a stage in their life where they're not being probably driven by how much money they can make or how much they have to save to put their kids through college or to pay for weddings and things like that. And so they have a little bit more flexibility in many different aspects of their life.

to be able to make choices that are very attractive to other people.

Nick Berry (25:44)

Isn't it interesting that they don't necessarily see it the same way as somebody else does?

Abby Donnelly (25:51)

Yeah, I had a great example. I worked with a client who had spent his career in in health care. And when we were working together, he said, you know, the only people that are going to be interested in anything that I can do for them will be in health care, because that's all I know. And what was fascinating was, first of all, I told him that I disagreed right away. But as soon as word got out that he was going to be retiring.

He started getting offers outside of healthcare. His alma mater for his MBA came to him and said, we'd like for you to consider being a professor emeritus on campus. And we don't really know what that looks like, but we would love to have you here. And that wasn't in the healthcare industry. And then he got an opportunity to...

work with some business owners that were starting, you know, sort of their own mini private equity firm. And he said, well, what can I bring? You're buying businesses. And they said, well, first of all, we think that, you know, some funding, you know, investment would be great, but we mostly believe that you have a lot to offer. You see the world through a different lens and we know how applicable that's going to be to some of the businesses that we consider. And as soon as he got into it, he started recognizing that, know what?

It's true. I do have a lot more transferable skills and experience. So that was kind of fun for me to see just how much that blossomed.

Nick Berry (27:23)

Yeah. And you know, the stories that we can tell ourselves, right?

you know, I'm working with the businesses, the owners to get them to this place primarily. I've been kind of more on the growth side. And some of the most effective advice that I've given over time, what I've found really landed with people well is we're going to

build, even if you don't know what your plan is down the road, we're going to build it in preparation of exiting. And if nothing else, like it gives them a starting point, something to focus on and some guidance. But how similar is the business that we're building with the business that we're selling? are they the same thing or are they pretty distinct?

phases, ideally.

Abby Donnelly (28:10)

Well, actually, I would love to hear your answer to that.

Nick Berry (28:13)

Well, I'm still telling myself that they're the same thing. But admittedly, the more I've talked to you and the more, and after reading your materials, there's a lot about that phase that I've took for granted

And so, you know, I'm open to the possibility that I may have just like kind of stumbled through and dodged the raindrops. But yeah, like, and for me, you know, honestly, the reason that I landed kind of with that whole, we're going to build this one way and it's going to serve both purposes is because it's simpler and that works better for my mind.

Abby Donnelly (28:38)

I so.

Well, and

Nick, think you're right on track. mean, I think the business, the fact that you are built, you are helping business owners build a business with intention again, with intention for growth. That's exactly what it takes to grow a business for sale, you know, for transition. And so, you know, I believe that if you just build a business kind of like, well, I hope it's successful. Then I would answer, no, it's not the same.

But everything that you're doing is building it for growth. And so I think that's exactly what any business owner should be doing. And when you have a business that was designed for growth, it's going to be more valuable. And a more valuable business is going to be more saleable, whether you're looking to a third party sale or you're looking to transition internally to a successor or key employee.

Nick Berry (29:26)

Mm-hmm.

Abby Donnelly (29:49)

I agree with you. think that's exactly right. And in fact, it's a great continuum to look at is, you they start with you and you help them grow it in the right way so that it is valuable as it grows. And then when it's ready for succession, they've got great systems in place and they've got great strategies and they're ready to figure out how they can make that transition.

Nick Berry (29:49)

Mm-hmm.

Abby Donnelly (30:18)

generationally occur.

Nick Berry (30:21)

Yeah, I mean, really, think the idea behind it is that the things that are going to make it more valuable to you are the same things that someone else is going to find the most value in. so it's just aligning those things.

Abby Donnelly (30:37)

Yeah, I agree. So you said that you had built and sold four businesses?

Nick Berry (30:47)

Yes. I've had, I've founded, co-founded, acquired several dozen. I've had four of what I would call successful exits. And then I've had a couple that were like total duds. And then the rest were kind of in that, they were, we made money.

⁓ but not the way that I would like qualify them as a successful exit. So, you know, it's kind of marginal on the whole, ⁓ was it worth the, do we get the ROI that we're looking for out of it? So yes, I have a lot of experience, ⁓ getting in and then ultimately out.

Abby Donnelly (31:34)

So can you speak to some of the kind of key factors that made those exits that were successful so successful?

Nick Berry (31:44)

One of the things that was done really well, was the successor and preparing them and defining what are the milestones.

that we need to reach or how are we going to know when it's time and when things are ready to do this? So a lot of the businesses that I've been a part of there were people who had a skill set or knowledge or a product or something that they like wanted to get to market.

They were experts in this thing but they weren't sure like how to take the business where they were trying to get it. Right. So even if they had a business going, it's they're doing you know, a quarter of a million dollars a year and they're like, this thing needs to be doing 2 million, something like that. So we would partner and from the beginning we would kind of outline this is what we're trying to, these are the goals that we're trying to reach. This is why we're doing this. So when we get to this place,

Like this is what's going to happen. in three of the successful exits, the partner who like part of the plan was they had to be ready.

Abby Donnelly (32:48)

You know, as I listen to you talk, I think the idea of starting a business with the end in mind makes a whole lot of sense. I believe that most of the business owners out there, know, myself included, don't really start with the end in mind. We start with an idea and a passion, and we start with, you know, a entrepreneurial mindset and a desire to make a difference in the world. And then, right, and then we just keep going and growing. And if we're fortunate and

you know, capable, we end up with a really nice business at the end and it supported our family and it supported many other families and it's made an impact in the community and we've got a culture that we're proud of, all that kind of stuff. So, you know, when business owners get to a place that they haven't started, where the really clear end in mind and some criteria about when is the right time to go, then the, they are faced with is, you know, they're

the reality that they've got to figure that out now. And so, you know, going back to what we talked about earlier, figuring out what matters most, you know, I know as you know, at my age, that what mattered most to me in my 30s is very different than what mattered most at 45. And at, you know, now I'm 62. And so, you know, the criteria there are different. And we've got to meet

owners where they are. And so looking at what matters as a 60, 70, sometimes 80 year old looks different. And then as you as as I work with them to develop their successors, the picture that they have of what they want their successors to do also has to be defined. In my book, I talk about the importance of what do they need to know? What do they need to show? What do they need to do? And what do they need to deliver?

And as owners are developing their leaders for succession, no show, do and deliver are some really simple trigger questions to ask to figure out, have you built a development plan for them? And are you gearing them through experiences and learning opportunities so that they learn what they need to know? And oftentimes I would look at that as some technical knowledge or business knowledge, finance, things like that.

Do you have clear what you need them to show? And then can you map out what you want them to be able to do? And then what results are you looking for that will tell you they're ready to take on more responsibility or they're ready to take it all on and the owner then can start to transition out. And so for me, wherever they are right now is

where they need to build from. And I think that that's a pretty critical part of the process.

Nick Berry (35:48)

What do you think they tend to struggle with? What's harder for them? Actually articulating what needs to, like the know show, do, deliver, or actually accepting that it's occurring, like letting go of.

Abby Donnelly (36:00)

⁓ I think we both know the answer. It's definitely the accepting although I will say it is it is very difficult to even get clear on the no show do and deliver because you know as owners, they tend to be very immersed in their business and so it's second nature to them. So they have to step back and say what is it that I really want somebody else to know and the other thing that's interesting about the no show do and deliver.

It's not just what do they need to know to backfill the owner today, but in any business, they need to be looking ahead to what are the skill sets and what does the no show do and deliver for three years from now, five years from now, because building that in now is going to ensure that the business is sustainable long after the owner is gone. And we see the pace of change right now. mean, three years ago, AI was two initials.

Whereas today, it's becoming a pretty active part of people's lives, and it can do so much. So if an owner were planning three years ago on what their successor needed to be able to no show, do, and deliver, it might not have really incorporated in how to leverage AI. But today, it's going to need to do that. And that's just one small example. So figuring out what that is can be difficult.

You know, I think we would both agree that actually putting that in place is often the hardest part. There's a lot of difficult decisions. There's hard conversations. There's a lot of emotion wrapped up in it. And, you know, it's not as straightforward as I think, you know, we would like it to be when we're ready to transition out.

Nick Berry (37:46)

Yeah. well, I know for sure that would be the case with me, but part of that was because I still wasn't as prepared as what I wanted to be. So, you know, I wanted it over with. It was time to be done.

Abby Donnelly (37:59)

Exactly. When I think that, you know, that's an

interesting piece to find out, you know, your comfort in and sort of admitting that at some point we get to the place where it's like, I just want this to be done. And I've certainly worked through transitions with owners that that get to a place where one day they're saying, I just want this to be done. And then, you know, a couple of days later, it's like, can hang with this a little bit longer.

I use a phrase in my book and when I'm doing speaking engagements called the rolling 10 and it's not my phrase. got it from Patrick Ungashick He's the author of Dance in the End Zone and I heard him speak at a Vistage meeting probably eight, 10, 12 years ago maybe even. It was probably 2011 or 12. It's a long time ago and he talked about this rolling 10 and it's the idea that when you talk to an owner and you say, are you planning on exiting your business? They'll usually say,

five to 10 years. And then you talk to them again a few years later and you say, when are you planning on exiting your business? And they'll say, to 10 years. And then you see them a few years later and you ask them, when are you planning on exiting your business? And of course they say five to 10 years. And so it's always something that's out there, which it's understandable why, but it never gets you then to the place where you have to make those decisions. And then sometimes what I find is in that next round of five to 10 years,

they might hit a wall and say, know what, I think I want to sell this or succession plan this in the next six, you know, five to 10 months. And that makes it a whole lot harder because that runway is so much shorter.

Nick Berry (39:40)

It's like what you see people do with their health. And it's like, you know, Vince, I'm going to have to do something about that. I'm have to get in shape. I'm to have to take better care of until something happens and you're forced, like you hadn't started the process and like now you got to get it done.

Abby Donnelly (39:55)

Yeah, it's a great analogy.

Nick Berry (39:56)

Have you, did you ever speak to Vistage it's groups in Louisville?

Abby Donnelly (40:00)

No, not in Louisville.

Are you still in?

Nick Berry (40:03)

Not since we moved to Florida, But will, I've had such a good experience in Vistage.

Abby Donnelly (40:07)

Yeah, peer groups are great. I think it's nice to be able to sit in a room with people that understand. You know, it's lonely to be a CEO. And so being able to sit in a room with people that understand and glean wisdom from them. either they learn from your mistakes or you learn from their mistakes and you don't have to repeat those can make a huge difference. started last May, I started a successor peer group.

which has been wonderful. It's a group of folks who are candidates for succession. They may or may not be in a family business. They may or may not be family members, but they have been identified as somebody that could be a successor. And so we meet like any peer group, we meet once a month and we work issues and engage in some of the common challenges that they have.

And it's been so fun and so rewarding. This group is so talented and they have a lot to bring in. They're eager to learn. And so I really enjoyed that.

Nick Berry (41:11)

I love that. think that's, I mean, I say all the time how big of a believer I am in peer groups for the reasons that you said.

I was just talking to someone else who had put together a group for operators. And so it's really, it's not just the CEO that needs to be in those rooms. Everybody can use that kind of support.

Abby Donnelly (41:30)

There's just one other area that I thought might be worth And that is clearly defining the difference between ownership and leadership. And in a lot of cases in succession, those two things get lumped together. I'm going to sell it to the same person or group of people that are leading the company.

And if that's the case, it's a non-issue because ownership and leadership are overlapping or are the same. But in a lot of cases, I think the hats that people wear when they're doing one of each are different. And so the owner of the company has a risk involved with it. And they also have a fiduciary responsibility to the business to take good care of it.

course, the leader wants to take good care of it as well, but there is a distinction between the two. And I've got a client I'm working with right now where they have some owners who are not at the top level of leadership and they have some leaders who are not owners. And so that difference can get a little bit confusing. So being clear on that when you're leading a company is important.

But the reason I wanted to bring it up today is because as owners are thinking about the structure for their ownership transition, I want to encourage them not to be beholden to only the people that they see as leaders on either side. You you can sell to someone that's not a leader. You'd have to think long and hard about whether that's really the right decision. And you can not sell

not have an ownership stake to someone that is a leader. And again, there's not a right or wrong there, but there are circumstances where you could have some of each and they may not overlap.

Nick Berry (43:32)

Can you give me an example of where that might be a good idea?

Abby Donnelly (43:37)

Yeah, so in a situation where you've got a successor who's not quite ready to take over the company yet, but they can be ready in a couple of years, but the owner is ready to ramp down. And so the owner may say, I'm going to sell my shares of the business to my successor, whether it's a family member or key employee. But for now, I'm going to hire a CEO.

who is going to come in and for the next couple of years, they have two jobs. One job is that they are going to run the company. The other is that they're going to help me develop my successor. And in that case, the CEO is the leader of the company, but may not have any ownership stake in it. At least in that model, they would not. And I've had a client that did that. And the CEO came in, did a great job on both counts.

and then went on to his next assignment. So that would be one example.

Nick Berry (44:37)

Yeah,

The thing is to not get boxed in with your thinking and possibly overlook potential scenarios that might be favorable.

Yeah. Well, Abby, this is fantastic. This is great. I appreciate you sharing. I really liked your book. all of your content, but your messages about a lot of the things that get left out of the conversation. I think you said something to me about the conventional wisdom or the socially acceptable conversation is going to be about the money part of it. And that needs to be a part of it.

but it doesn't need to be exclusive to the money,

It's like a more holistic view

Abby Donnelly (45:14)

Yes, indeed. Well, thank you so much I really appreciate it.