Do important things when and while you can. In business and life, this idea can be critically important. Unfortunately, many of us get caught up in the seemingly urgent aspects of our business and personal lives that keep us from focusing on the few really important things that need to be done at the present time to help insure a better future. Charles Hummell wrote an essay many years ago that is available today titled “Tyranny of the Urgent.”
Stephen Covey wrote about a similar concept in his best-selling The 7 Habits of Highly Effective People. In that book, he gave his interpretation of the tyranny of the urgent in his famous two-by-two grid ranking tasks by urgency and importance. Oh to live in the upper right hand quadrant doing only things that are important but not urgent.
My own take on this idea of the tyranny or the urgent, or focusing on things that are important and yet not urgent, is the following, and it relates both to business and to life:
Do important things when and while you can.
Because when you can’t, it is too late, and you can’t.
The first two examples below relate to things that were important to have been done but were not done by successful business people. The second is a composite hypothetical example of an important thing that needs to be done at many companies, but it hasn’t been done yet:
- Did not give stock to children timely. A number of years ago, I gave a speech to a group of business owners. One of the topics I addressed was the need to pass control of businesses at relatively early ages. I spoke of my “rule of 55,” which is that a business owner should have very good reasons for keeping control of a business beyond the age of 55. Two young men approached me after the talk. They said that they wished their father had heard this same speech a few years ago. On the positive side, the father had gifted 49% of the stock of his business to his two sons a few years before his untimely death at the age of 57. He just couldn’t let go of control and despite his promises to the contrary, did not and would not gift or sell any more stock to his sons.The equity enterprise value of the business was about $40 million, so his 51% was valued at a bit more than $20 million on a control basis. Unfortunately, his wife had predeceased him, so his estate was fully taxable. Had the estate’s held even a 49% interest, it could have been valued on a minority interest basis and might have been discounted 30% to 40% as a result. Assuming a 35% discount, the estate would have been valued at about $13 million, so estate taxes were paid on an additional $7 million of value. The estate (and the sons, effectively) paid a $3.5 million penalty because their father wouldn’t let go of control and take his share even to 49%. Do important things when and while you can.
- Would not sell the company until it was too late for an optimal sale. One successful owner built a very successful business that at its peak was worth about $100 million. He and his wife were proactive in transferring stock to their children over the years and had successfully transferred 80% of the stock, evenly, to their four children, none of whom worked in the business. As he grew older, his children encouraged their father to sell the business and to enjoy the fruits of his success – and provide liquidity for them. The father simply would not sell the company. Over time three things happened: the father’s health deteriorated, industry conditions worsened, and the company’s performance began to lag. When the company was ultimately sold, it brought only $60 million for the owners. Perhaps you don’t feel sorry for the children, who collectively received $48 million, but everyone would have been better off had the company been sold earlier, and their share would have been $80 million. The father’s reluctance to let go cost the children $32 million and his own estate about $8 million. Do important things when and while you can.
- Will not engage in a liquidity-producing transaction. Another successful entrepreneur built a highly successful business of enormous worth. He was successful in shifting substantial ownership to his children, two of whom work in the business and two of whom do not. But none of the children have any significant wealth outside their interests in the business. The family’s wealth is almost entirely based on the company.The company’s recent profitability has been sufficient to virtually eliminate all debt accumulated during the years of rapid growth and the return on equity has been declining in recent years as cash has been building. A leveraged dividend recapitalization using relatively modest leverage could secure the fortunes of the entire family, making them totally independent of the company and create the ability for diversification of their wealth without giving up any ownership in the business. In today’s environment, many companies could engage in transactions similar to that described here to create liquidity and diversification for their owners. But what about tomorrow? What will happen to the companies? To the economy? To available financing? Do important things when and while you can.
Doing important things when you can is certainly important in business. It is also important in life. Let me give one personal example. Fortunately, I have had a will for many years. It would be irresponsible not to have one. But time passed and circumstances in my life changed. I reviewed my will with my personal tax lawyer a few years ago and discovered that it would still work but should be revised.
I started to make the revisions and then didn’t follow through. Things do change over time. Recently, I remembered the message in Tom Deans‘ book, Willing Wisdom. Having that recollection, I was motivated to think about and to write down what I wanted my will to say. After some reflection, I sent an email to my tax lawyer. I knew if I got that step in motion, that it would be easy to follow through. He drafted a revised will for me within a few days. Upon review, I made a couple of modest changes. We met and I signed my will with appropriate witnesses present. I’m not planning on anything happening to me, but my beneficiaries now know what I want to happen and have learned this while I am alive. Do important things when and while you can.
One thing is certain about wills, yours or mine: if you don’t have one when it is needed, it is too late. If you don’t have the will you want when it is needed, it is too late. It may be cute, but where there’s a will, there’s a will.
Do important things when and while you can. In business and in life, this is a critical concept. When company performance is strong and financing is available, many potential transactions short of a full sale are possible for many companies. However, when things change, sometimes even small things, the transactions are simply not feasible or even possible. The same is true in our personal lives.
So this post ends with the end result. Avoid the tyranny of the urgent.
Do important things when and while you can, because when you can’t, it is too late and you can’t.
Please do call if you would like to talk about any business or valuation-related matters, or about matters of ownership and management transition. My phone numbers are 901-579-9700 (cell) and 901-685-2120 (office). Don’t wait until it is too late.
Until next time,