4 unexpected realities for owners in transition

The earlier that owners start down the path toward change, the smarter they can be in making the transition for themselves and others.

Unexpected business transition realities may be unavoidable, even for the most controlling entrepreneurs and business owners.

The same leaders who have a long, successful history of seeing an opportunity and charging ahead without delay are those who strongly believe that stepping away from their life-long business will happen on timelines they choose, and take only a few, easy steps.

They also believe these transitions will be achieved quickly and that they can do it themselves.

Actual results for owner transitions are often quite different from these expectations.

Here are four, more realistic and predictable patterns that commonly occur among owners:

1. Timing surprises

Transition timelines are dominated by forces that owners can’t choose or control: market economics that speed up or slow down the best time to exit; the overwhelming surprise that best time to exit is much earlier than owners expect, often driven by a valuation from higher multiples of EBITDA; the sudden emergence of a premium interest from a large strategic buyer; or simply owner fatigue.

Timing delays often come from lack of management depth or an internal successor, loss of a major customer, weakening market demand, or owner fatigue.

2. Unforeseen complications

There’s often a belief that a path to realize obvious owner goals is simple and direct — one that everyone should understand. However, most stakeholders, private investors or family members do not understand owner transition goals because there is a significant lack of communication.

The majority of owners and stakeholders who will be impacted by the change have not sufficiently communicated with each other to know, understand and arrive at a new vision of planned transition that is “something I (the stakeholder) can live with.”

A second complication that makes transition harder, not easier, is answering the question: Who will run this business when the owner isn’t coming to work every day? Another easily overlooked complication is: What will give me (the owner) a challenge with purpose and fulfillment in the next stage of life?

And perhaps the most overlooked issue is emotional loss in the years following an exit as a result of leaving behind the people who have worked hard to make the owner successful, or no longer being able to influence the culture that grew the company, or not having a heart-stirring purpose to get out of bed each new morning. Enjoying world travel and playing more golf won’t provide this heart-stirring purpose for former owners.

3. Slower than expected timing

Unless an owner is forced by the big unplanned event into a one-year resolution of estate, tax and financial matters, most business transitions take at least five years or more from the first active conscious awareness that transition is coming until the owner is actually implementing a plan with clear transition goals, steps and a timeline.

Many transitions take 10 years from concept to completion. The best transition plans have been conceived 20 years before completion.

4. Transition team is better than DIY

For those owners who declare, “I can do this myself,” the answer is, “You can, just like you can do your own plumbing, carpentry, auto repair and IT support.”

Overwhelming evidence shows that it takes a team with expert resources coordinated over many years. Every owner needs a go-to person who provides accountability for sustained effort over years. All owners need an advisor to provide wills, trusts or estate plans to show how people and assets are protected into the next generation. All owners need long-term business and personal financial plans that include their expected lifespan and core capital needs.

And finally, all owners need someone who nudges and encourages exploration — beyond business life — where passion and purpose will lead to a fulfilling legacy in the next chapter of life.

Key reality: The earlier that owners start down the path toward change, the smarter they can be in making the transition for themselves and others.


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