Transitions – What's your transition story? Answer is key

Imagine you are a 62-year-old successful business owner — the busy entrepreneur who just doesn't pay much time or attention to eventually transitioning out of the business.

Things are going well. There's no urgency to think about what to do next.

Then the "unexpected event" happens, and suddenly you need to hastily plan an exit in a crisis environment. From your experience in creating and building a business, you know this kind of reactionary planning usually results in lost income, personal and family stress and unintended consequences.

One Minnesota business owner added to this hypothetical scenario by saying that he wanted to control every part of his business while building it, but, when it came time for the transition away from his own company, he ended up with less control over the process because he failed to begin planning early enough.

Early planning works

Passing a business to the next generation stands right up there in terms of life priorities. Owners have invested most of their professional lives in the company they started, which represents most of the wealth they have generated.

For many baby boomer owners, and those a little bit older, transition is becoming an increasingly important part of their business and personal life whether they like it or not. Transition not only includes either finding a successor or selling the company, but also its impact on the owner and the owner's family.

According to the book "Preparing Heirs," by Williams and Preisser, eight out of 10 business transitions fail to reach the next generation for two basic reasons: first, lack of communication; and, second, absence of a transition plan with specific steps and timing.

Important questions that emerge early in transition planning become driving forces as they are reflectively answered:

  • "Where am I now?"
  • "What if I have no idea about what to do next?"
  • "What is next in my work?"
  • "What should I do with the rest of my life?"
  • "How can I avoid predictable mistakes?"
  • "What is the best path for the next generation?"
  • "How much can I do myself? What help might I need along the way?"
  • "Who else should be involved in plans for the future?"

These are not easy questions. Many will take years to answer. The sooner an owner gets started, the smarter he or she will look.

Proactive vs. reactive

Owners in transition wonder how they might use the deep business knowledge and personal relationships they've developed as they now enter a period after full-time business ownership. They also are concerned about their legacies after leaving their companies, and about how they will be remembered by their employees, families, customers, suppliers and communities.

Owner stories that have high success rates in transition planning without stressful drama or mistakes come out of thoughtful, documented input for each of the following important areas:

"I have…

  • a clear understanding that my family shares the same vision as mine.
  • a business succession strategy that includes financial planning for my personal, family and business needs.
  • a sense of legacy that will ensure that my lifetime work will be honored, and that my new stage of life will be based on my passions and values.
  • structure, purpose and a new role for myself when I leave the business.
  • a source of encouragement and accountability for sustained progress toward my transition goals.
  • an awareness of the important emotional forces involved in my transition."

If an owner cannot put a strong check mark beside each of the above statements, some tangible succession help is probably needed.

Just "hanging on" is not going to be helpful for either current or new owners. Recent business research shows that when an owner is involved in a personal transition, he or she makes the decision to proceed on a new path based primarily on emotional factors, not just business ones. So if owners are not taking action on transition, they need to look inside themselves to determine what is holding up the process.

Power of a story

An old proverb says: "Without a vision, there is no satisfying future."

And so do many owners. The research confirms that no one but the owner is responsible for initiating and then charting a successful transition path. What are the steps to get started?

One of the first transition steps owners must take is to think about their own business story and to realize how special it really is. Business owners who have had successful transitions will describe how important it was for them to first pull their own stories together and share them with others. They said this cathartic exercise helped them realize how significant their businesses and personal stories were.

To begin creating a personal story, owners should ask themselves two simple questions:

  1. "Do I have a future company vision?" Many owners say that the first step to getting serious about a transition was developing a long-range (five- to 10-year) vision for their companies, for themselves, and for their business partners or families.

    In truth, in order to get a next-generation owner interested in becoming a successor, a compelling and exciting future for the company needs to be portrayed to those who will carry it forward.

  2. "Do I have a personal vision for my own future?" Besides advising other owners to think about the future of their companies, many owners also suggest thinking seriously about what to do with life after running a company.

One owner stated that the motivation to do better future-life planning was the result of flunking retirement. He said, "If you don't have a better place calling to you, then you can't leave where you are now."

Personal vision of the future is a first transition step. If an owner has passions and interests beyond his or her company, it will be easier to break the strong attachments to the company.

This personal vision should also contribute to the urgency of beginning the transition planning process as soon as the owner is willing to invest time, energy and money while life is calm. The sooner owners begin transition, the sooner they can begin the rest of their lives.

Remember the words of recently slain journalist Steven Sotloff: " Live your life to the fullest. Everyone has two lives. The second one begins when you realize you only have one."

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