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Testing does not guarantee success in any activity, but it does strongly indicate the possibility of failure. Testing, in conjunction with competent analysis, aids in determining whether a person has the skill set, motivation, desires and personal psychological habits necessary to be successful.
Many parents hope that their children will be as capable as themselves. When parents are intelligent and motivated, it is generally believed that their children will also possess these qualities. However, often overlooked is the fact that when confronted with a difficult situation, a parent has the ability to draw on decades of experience and select the best course of action. In comparison, a child has little to no experience in the business. Parents expect their children to step into the business when they are 25 to 30 years old and assume responsibility for the business. We have seen time and time again that this approach leads to disappointment.
Some years back I worked on an intergenerational transfer between a father and his son. The family was extremely proud to be passing the business on to the next generation. His son was 29 and had been working in the business since the age of 17. Upon completion of the transfer, both parents departed for Florida. Upon their return, the father discovered that his son had lost almost $80,000 during a period when the company would normally have made $60,000 to $70,000. The father's impulse was to sell immediately.
After reviewing the situation, it was revealed that the son had little understanding of financial management or accounting principles. He had no involvement in the purchasing of product and the only advice provided to him on the issue was that "you can't sell from empty shelves".
Subsequently, the son was fully assessed by an industrial psychologist identifying the son's strengths and weaknesses. It was uncovered that the son was not only insufficiently trained on other business functions, but he also suffered from a mathematical learning disability. This revelation enabled us to establish a corporate structure that met the needs of the business and the son. An outside controller was recruited who conducted all of the financial management and facilitated some of the purchasing decisions. The son has now been operating the business for the past few years.
A secondary purpose for psychological assessment is to determine the compatibility of potential partners. This can include siblings, but more specifically partnerships. For example, if two tests are completed by two individuals, the tests can determine whether the individuals will work well together, what they need to do to work effectively together, and, if they have difficulties working collectively, the steps they can take to minimize the frustration and anguish caused by their proximity to each other. We encourage all developing partnerships to participate in psychological assessments and to meet with an industrial psychologist to determine whether the partners have the ability to work together in a long-term project.
The test is relatively simple. Website-based, the psychological test known as TAIS is composed of 144 multiple choice questions and takes approximately 30 minutes to complete. Upon completion, a computer analyzes all the results and prints a report for the psychologist, who will then arrange to meet to make further assessments and make the appropriate recommendations.
Exploring the strengths and weaknesses, motivations and desires, and skill set and personal habits before transferring your business to your children will greatly aid them in the opportunity to be successful. And a successful partnership can be created by understanding how each of you can best serve your business, as well as outlining how you will best work together.
"More Than A Business Broker"
Gary McAuley
Financing * Acquisitions * Mergers
Exit Strategies * Evaluations
www.sun-west.biz
gary@sun-west.biz