Ironically, growing the business often increases the likelihood and degree of exit-goal incompatibility among co-owners.
It is helpful to understand this from the get-go because co-owners and the people around them (close family members, employees, advisors, etc.) may see the signs of co-owners struggling with exit-goal incompatibility and interpret it to be a relationship problem, which is not always the case.
Goal incompatibility at exit has nothing to do with the quality or duration of the co-owners’ relationships. (It is true, however, that co-owners who already are not getting along well will often experience deeper discord once they realize that their exit goals are in conflict.) Rather, exit-goal incompatibility is a natural, almost predictable event, rooted in the practically unavoidable differences between two or more people. No two business co-owners are exactly the same.
Their biographical and situational differences plant the seeds which blossom into different goals at exit. The following table, taken from A Tale of Two Owners, written by NAVIX founder Patrick Ungashick, lists fifteen owner differences, each of which can lead to incompatible exit goals among co-owners.
| Owner Difference |
How It Causes Exit-Goal Incompatibility |
| 1. Ownership Percentage |
Disproportionate ownership often causes different financial challenges and opportunities at exit. |
| 2. Age |
Older co-owners often want to exit sooner and/or make a quicker exit transition. |
| 3. Job Position/Responsibilities |
Co-owners with more demanding and stressful positions may seek to exit sooner and/or make a quicker transition |
| 4. Income from the Business |
Co-owners receiving greater income from the business may be more financially dependent on the business, and therefore need more money at exit to reach financial freedom. |
| 5. Outside Income |
Co-owners with greater income from sources outside the business may need less money from the business at exit to reach personal financial freedom. |
| 6. Lifestyle Costs |
Co-owners with higher lifestyle costs may need more money at exit to reach financial freedom. |
| 7. Family Profile |
Co-owners with larger families, extended families, or blended families may have higher lifestyle costs, and therefore need more money at exit to reach financial freedom and/or prefer to exit later in life. |
8. Work/Life Balance Desires
|
Co-owners who desire greater personal freedom may seek to exit sooner and/or with a quicker transition. |
| 9. Other Family Members Involved in Business |
Co-owners who have one or more family members working in the business may seek to keep the business within family ownership rather than sell the business. |
| 10. Method of Becoming an Owner |
Co-owners who founded the business often have stronger legacy needs and goals compared to co-owners who came into ownership at a later date. |
11. Outside Interests and Activities
|
Co-owners who are eager to pursue interests and activities outside of the business may seek to exit sooner and/or with a quicker transition. |
| 12. Sense of Self-Identify |
Co-owners whose sense of self-identity is rooted in their role within the business may wish to exit later in life and/or maintain an ongoing role with the business even after exit. |
13. Risk Tolerance
|
Co-owners with less tolerance for risk may seek to exit sooner and/or diversify their net worth away from a large concentration inside the business. |
14. Health
|
Co-owners dealing with health challenges may seek to exit sooner to recuperate or pursue other life interests. Conversely, co-owners with known health issues may seek to maintain employment in the business to preserve medical insurance and other benefits. |
15. Business Ambitions
|
Co-owners who seek significant additional business growth and accomplishments may seek to exit later and/or make their exit conditional on achieving these outcomes. |
|
This list is not exhaustive—co-owners could experience a variety of personal, cultural, or psychological differences that can contribute to different goals at exit. Most business co-owners will have multiple differences between them, any one of which can lead to incompatible exit goals. As the number of co-owners increases, the number of differences usually increases exponentially. As a result, it should be easy to see why incompatible goals at exit occur so frequently and predictably.
Download The Story of the Paralyzed Partners Case Study (PDF)
This case study highlights the importance of co-owners in a business recognizing their exit objectives may not be aligned. Owners need to plan their exit years prior to the event and work with an experienced team of advisors, like our NAVIX Consultants.