Closing a business: how to support the entrepreneur

#Crisis management · 21/05/2024

When we think of business, the first words that come to mind are: creation, development, growth, performance or management. There’s a tendency to overlook the end of the cycle represented by closure, to avoid dealing with it, or to deal with it quickly in order to get it over with as quickly as possible. We might also think only of the economic or financial consequences. Then there’s the question of managing employees and their future.

The man or woman who receives the least attention, and yet plays a decisive role in this phase, is the company director. Managers often find themselves at a loss when faced with the complexity, discomfort and anxiety generated by a decision that is difficult to make and, above all, to implement. The thoughts that arise are linked to anxiety, fear, stress, and sometimes even a sense of shame or failure. With the right support, a responsible manager can have a significant and positive influence on this complex process.

So, when closing a business, why is it so important to support the manager as a priority? How can the company, its employees and partners be guided to a safe harbor without compromising the quality of professional relations? This article will attempt to explore these questions and suggest some answers.

Supporting the manager first and foremost

Entrepreneurs – especially those who create their own business – nurture an intimate bond between their work and themselves. Separation from the company can be experienced as a real rupture. It can be an anxious, lengthy and discouraging process. Of course, there are several possible scenarios. Depending on the situation, the apprehension of the company’s closure will be totally different:

Voluntary retirement: retiring without wishing to sell, or without having been able to find a suitable buyer for the business.
Forced closure:
- Internal difficulties (governance, management), insurmountable financial difficulties, absence or low profitability despite best efforts. Business closure may also be unavoidable in the event of the owner’s personal or family problems necessitating such a decision.
- External factors: a major change in the industry or market rendering the company’s activity unviable, inability to maintain a satisfactory level of quality or service for its customers.

It’s therefore important to surround yourself with experts in the fields of law, finance, tax, communications and business strategy to explore all the options available.

The emotional impact of this process cannot be overlooked either, whatever the case may be.
With the right support, the business owner will have the best chance of making the most appropriate decisions for the company and its stakeholders: reassuring employees, customers and the market.

A few tips to help you stay on course during a company closure

1 – A company director’s assumption of responsibility: an essential prerequisite

It’s certainly not time to put away your business suit. On the contrary, in the uncomfortable phase of winding down a business, the entrepreneur must shoulder his or her responsibilities, set a course and involve all stakeholders. It will be his or her responsibility to manage all internal contacts, acting as support and reference at every stage.
However, it is also important to emphasize his obligation of means rather than results. He cannot be held responsible for external factors beyond his control:

How long will it take to liquidate assets?
How can professional transition measures be put in place to help employees find new jobs?
What communications strategy should be adopted, internally? with professional networks? in the marketplace?
How long will it take for the founder to grieve for his company?
Taking care to maintain interpersonal relations despite the discomfort of the situation is no guarantee that everything will go smoothly. On the other hand, it will be essential if the process is to run smoothly.

2 – Demonstrate your commitment to the health and well-being of your employees

The importance of demonstrating a commitment to employee well-being throughout the life of a company is well established. It is just as important to maintain this commitment during a closure, for a number of reasons:

Social responsibility: Companies have a social responsibility towards their employees. They have made a commitment, contributed to the company’s success and, in some cases, been loyal to it for many years. Taking care of employees, even in difficult times, is an acknowledgement of this responsibility.
Employer brand: The way in which a company treats its employees, in situations as delicate as a cessation of activity, can have a significant impact on its reputation and brand image. Respectful and considerate treatment of employees can build trust and a good reputation in the long term, particularly when it comes to the creation of new professional projects or the retraining of some employees in other sectors.
Impact on the wider community: The closure of a business can also have repercussions for the entire local community and family circle, and not just for the employees directly concerned. By demonstrating a commitment to employee well-being, the company is also demonstrating a broader commitment to society.
Strengthening ties: Taking care of your employees during a critical period can generate positive feedback, such as maintaining good relations with former employees, favorable recommendations and even possibly recruiting some of these employees for future projects or ventures.

Finally, paying as much attention to the well-being of your teams as you do to economic, legal and financial management at the end of an organization’s cycle can be positive on a moral level. It can also generate tangible benefits in terms of reputation, professional repositioning for employees and the management of new projects for the company head.

3 – Communicate with authenticity

When it comes to closing a business, strategy and communications management are crucial. It is advisable to be both transparent and empathetic, while clarifying all the elements leading up to this difficult decision.

Thus, the announcement of the closure should be made quickly internally to avoid leaks or employees learning the news from the outside. Leaving room for speculation and corridor conversations will only reinforce doubts, mistrust and inertia. A clear, objective explanation of the reasons behind the decision is also essential to avoid blaming employees for the company’s lack of performance.
Finally, it will be vital to provide concrete information on the next steps, to offer support to employees who may wish it, and to make time available for exchanges during this difficult period.

Communication conducted with authenticity, pragmatism and humanism will be indicative of the care and respect management has shown its teams in managing this process.

Conclusion

Like crisis management, contemplating the end of an entrepreneurial adventure is never easy. However, taking this step is a real leadership revelation! Faced with the weight of responsibilities to manage, the fear of failure and the anxiety induced by the closure of his business, the manager will need :

support on all strategic and human issues, as well as legal, financial, tax, sales and communication issues.
support from family, friends and their professional network.
In practical terms, then, it’s difficult to envisage this process without preparation, guidance and support. In the end, closing a business is a normal process: you could compare it to arriving at your destination after a long journey.

“Nothing is permanent in this world, not even our problems”, said Charlie Chaplin. It’s all very well to feel satisfied when you’ve successfully completed a complex process, arrived at your destination and are looking forward to a new horizon. The questions that will then arise will be of a new nature: How can we bounce back and map out the prospects for a new journey? What are the next projects to be implemented? What will be the new outlook on life? To be continued….

Originally published on Mag RH N°26