When was the last time you put some serious thought into what you would do after you sold or transferred your business to someone else? Seriously? I know that we all have those moments when we are so frustrated that all we want to do is get past what we are doing today. I know there have been times when I have said as much as “just take this business away from me – I’m done with it!”
But that is not what I mean. I’m talking about the serious, deliberate discussion with your inner circle of advisors – your business partner, spouse, CPA, banker, financial planner, business coach and other trusted colleagues. Let me guess – not lately. Why? Why aren’t you having this discussion? Is it too soon to be talking about a succession plan? Are there too many issues that need to be resolved in the business before you have these discussions? Really?
Welcome to Stage 45 in this year’s Tour de Profit. This week’s stage is focused on Building a Succession Plan for your business. That’s right – we’re going to discuss how you should do the preparation to make an orderly transition to a new owner of your business. Because we know that having that discussion well before the event will result in a more thoughtful plan – one that is not tainted by the emotions that are certain to rise up as the time for this transition comes near.
So why is this such an important topic? Because every business owner will eventually go through a transition of ownership. Whether it is a transition to a family member, a sale to an existing employee group, a sale to an external buyer, or one of the three “D’s” – disability, divorce or death, every business will go through a transition from one owner to another.
I suppose the only exception is when the current owner makes the decision (or because of a lack of decision) to shut the business down. And given that you have poured your heart and soul into the business, that is not the desired outcome!
So let’s spend some time on this subject this week. I want you to do this exercise with me:
Fast-forward time and imagine yourself at the stage of your life and the life of your business where you have decided it was time to sell. Take out a notepad and write down the things that are most important to you about how that transition occurs. This can be a list of concerns or a narrative of the situation, emotions, people involved and desired outcomes. No matter, put it in language and a format that works for you.
Answer these kinds of questions: Who are the specific people you want involved in the process? How will you share the news with your key people? What are the specific outcomes that you want to occur? What are you doing following the event? Where are you going? Who are you going with? What is the predominant feeling that you and your spouse have as a result?
Most importantly, get your thoughts down on paper.
If this is the first time you have given this much thought, you may need to begin the list and come back to it from time to time to add additional thoughts. Whether you do this in 10 minutes or 10 days, it is important to get your thoughts together before you begin having discussions with others. Not that you should not listen to their wise counsel, but I find it beneficial to always do your own thinking first then make adjustments as you see necessary.
Once you have a complete picture of your desired transition, now schedule time to visit with your close circle of advisors. You can either visit with them one by one or you can call them all together and share your thoughts. I believe it best to gather those you trust together so they can hear your ideas and desires, ask questions, and be prepared as a team to help you come to the best approach.
My experience is that most business owners do not take advantage of the knowledge, experience and wisdom of their close advisors on matters such as these. Rather than calling a small group together to think through this important transition, many will simply try to execute a transition on their own, or with the help of a previously unknown outside third party broker. What a missed opportunity!
Lean on those you know, trust and respect. They will help you think through many aspects of a succession plan that would otherwise be missed. Take this opportunity to gather additional notes, critical issues to address, potential minefields to avoid and traps to watch for. All of these can go into your succession plan notebook. With these insights and valuable lessons learned, you are much better equipped to make the right decisions at the right time to achieve your desired outcome.
Building a Succession Plan is as much about putting your desired thoughts on paper as it is about deciding who should replace you as leader of the business. Most corporate organizations think about Succession Plans as simply the replacement of one person for another. For a business owner, this topic is far more significant and far more complicated. That is why you should schedule the time to put this plan in place now. You can always revisit the plan and make adjustments as you get closer to the actual decision date.
Take the time this week to build your plan. It will add clarity to the critical issues in your business while at the same time give you peace of mind that you are thinking ahead and making thoughtful decisions.
Good luck with this week’s stage ride!