Potential problems include:
- The business can suffer a loss of direction, particularly if the founder was a dominant leader.
- The business can underperform if not enough thought has been put into finding and grooming a suitable successor.
- Management can become confused and disillusioned if the retired founder continues to interfere.
- Key employees can resign or become disillusioned if they don't like a new strategy or feel they have been unfairly treated.
- Key customer and supplier relationships can suffer if these were personal relationships of the founder.
- Contracts may include clauses which allow them to be terminated if there is a change of control.
- The business can become financially vulnerable if the founder takes too much capital out.
All of these risks can be reduced by planning in advance and taking suitable advice. As with any other major change, involving key personnel from the outset can help to reduce problems.
