Is it time to Pass It On! Is now the right time? What is too early? When is too late? To quote Stephen Covey: “Begin with the end in mind.” That means it is never too early and the amount of preparation has a direct result in the results you receive. Clients have started the process as early as when they started the business, to 6 months after the death of an owner. The actual time to transition the business is usually a full season. A full season will be different for each business. For some it is a calendar year, for others it might be longer allowing for changes in the business to take place. Most take from 1-3 years in the transition depending on the involvement of the current generation and their desire to be involved moving forward. The good ones really start planning ten years prior to actually leaving the business. When you are ready, here are some steps:
Step One: Identifying the roles and responsibilities for each member of the current generation and start identifying who might be able to take on those roles for the next generation. Who would be the CEO? Who would handle sales, operations, various divisions within the business.
Step Two: Begin to run the business as a business and not operating as a business hobby that changes based on the desires of the owner. For some businesses, this is an easy process as they currently operate as a business. For others, especially family business owners, this is a hard transition.
Step Three: Transition pieces of the business to the new owners. Introduce banking relationships, vendors, buying through processes. Review financials, teach how to recognize trends – both good and bad. Make sure the legal aspect of the transition is documented. Do NOT rely on hand written agreements, family discussions, or current operating processes to withstand the storm of death.
Step Four: Begin to back off making decisions. Don’t be the primary decision maker, let the next generation make the decision. Be the mentor, which means you ask questions, provide a safe place to ask any and all questions.
Step Five: Take a long, long vacation. At least a month. Upon return, review financials, ask questions, provide positive reinforcement and encouragement.
Step Six: Realize those kids did grow up, they can make decisions. They aren’t perfect, but neither were you. Become the elder statesperson that provides advice when asked, but has learned to keep quiet, only asking questions, never offering unwanted advice and go play with your grandkids.
What can this look like? A case study: One client started the transition almost 8 years ago. The owners knew they had to start running the daily operations of the business different. They needed a plan. The plan needed to include the family members in the business. A discussion on roles, responsibilities, goals and transition timeframe needed to happen. There was some infighting. Who would become CEO? What about other siblings not in the business, what would their role be, if any? Would the siblings allow for a leader to actually be in control?
These discussions have taken place over the last 8 years. The foundation was laid, the process has taken longer than anticipated, but in part due to good health and a desire to work on the part of the business founders. The next generation is in place, they are working, producing, learning and growing. When the parents eventually step out completely, there will be a loss. Their presence, their wisdom and their advice. Yet, the business will continue, it will grow and it will thrive in the next generation.
What is your story and how will your generational story be written?
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