The journey from founder-led to employee-owned is as much a personal transformation as it is a business transaction. Financials, legal structures, and advice can take a founder only so far. To cross the finish line, founders must want to let go – and be emotionally ready for it.
This resource explains how financial coaching can provide the bridge between a founder’s head and heart in this journey.
What’s covered in this resource
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The limits of traditional advice in succession planning
Legal and business advice excels at the technical side of succession: succession of ownership; potentially minimising tax; ensuring that the employee buyout is legally sound. These are necessary components, but traditional advisers often assume the client will make rational decisions once presented with a solid plan.
In reality, a founder can have a picture-perfect succession plan on paper and still sabotage it due to unresolved emotions.
Consider a scenario: An adviser crafts a succession deal transferring ownership to employees, complete with financing and governance structure. The numbers add up; the legal work is done. Yet the founder keeps delaying the closing date, or micromanages the new leadership’s decisions.
The technical plan did not account for the founder’s anxiety about “what will I do after I’m no longer CEO?”, or their reflex to intervene whenever they see something they would handle differently. This is where purely basic financial advice hits a wall and financial coaching excels.
Why even savvy founders resist: Understanding ‘behavioural bias’
Human biases affect founders just as they do any investor or client – sometimes even more so, given the high stakes of one’s life’s work. Understanding these biases is key: a founder might intellectually agree that transitioning to EO is the best move, yet still emotionally drag their feet.
Key biases and psychological factors include:
- Endowment effect/loss aversion: Founders notoriously view their business as invaluable, often far above its market value. In practice, a founder might turn down fair offers or delay exiting because no price feels ‘worth’ what they built.
- Status quo bias: Humans prefer things to stay the same, and for a founder, the status quo is being at the helm. Even a well-planned transition to employee ownership represents a huge change, which subconsciously registers as risk.
- Overconfidence and control: Entrepreneurs often succeed because they believe in themselves, but this can become overconfidence. After years of calling the shots, a founder might believe only they can make the right decisions, or that disaster will strike in their absence.
- Identity and habits: Perhaps most importantly, many founders have intertwined their personal identity with their role in the company. Their daily habits – from the 7 AM staff meetings to signing off on every expense – are deeply ingrained. Walking away is not just changing jobs; it is redefining who they are. Psychologically, this can resemble a grief process, as the individual faces detachment, reinvention, and mourning for the life chapter that is closing.
In short, even brilliant businesspeople are still human. They need more than technical advice; they need help managing the human side of transition.
Redefining the founder’s role for a smooth transition
One of the greatest benefits of financial coaching is how it can redefine the founder’s role in a positive way.
Rather than viewing succession as a hard stop – a binary ‘in’ or ‘out’ – coaching encourages a nuanced plan where the founder transitions from owner to mentor/coach within the company. This often means the founder can remain involved, but only in areas that truly add value and do not impede the new ownership.
Research on nonprofit founder successions in the US, for example, found that organisations had the most success when founders stayed on in an appropriate supporting role, such as fundraiser, ambassador, or mentor to the successor. In these cases, “founders made positive contributions, and 75% thought the benefits of a continuing founder role justified the complexity.” The key phrase is ‘appropriate role’ – the founder must shift from being the driving CEO to a supportive guide.
Financial coaching is the ideal vehicle to negotiate this shift. A coach can help a founder honestly assess where their continued involvement is welcome…versus where it becomes meddling.
Financial Coaching: With vs without
Use the slider to see how the transition process could play out. These scenarios are hypothetical, but draw strongly from real-world examples.
Conclusion: Coaching completes the succession puzzle
When founders undergo financial coaching as part of their transition to employee ownership, everyone wins.
The founder wins by finding peace of mind and a sense of purpose beyond the CEO seat. They avoid the trap of becoming, as some say, “wealthy but miserable” – the founder who got a payout yet feels empty and meddles in the company out of boredom or fear.
The employees-turned-owners win because the transition is smoother and clearer. Knowledge transfer happens gradually and thoroughly – the founder openly shares their wisdom, trains successors, and then steps back without continuously interfering.
The business itself wins too. Succession done right – with coaching – means continuity of vision without stagnation. The founder’s values and knowledge are not lost; they are passed on in a controlled way. But fresh energy and ideas also get room to flourish, which is crucial in an employee-owned firm.
Finally, advisers and trustees in the employee ownership space win as they have happier clients (founders who feel genuinely supported) and more durable succession deals. The last thing any adviser wants is to see a carefully structured transition falter because the human element was mishandled. Incorporating coaching is like adding an insurance policy for the succession plan’s success.
Next steps
As the old Chinese proverb says: “The best time to plant a tree was 20 years ago…the second best time is now”. The same is very much true when it comes to succession planning.
Montgomery Charles are an independent financial planning company with nearly three decades of specialist experience advising business owners. This, alongside our work advising EO business on financial planning, gives us a unique insight into the challenges that business owners face in the transition to EO.
If you’d like to have a chat, use our ‘complimentary consulations for EO businesses’ facility to book something in.
