Your business that is……
One of the big questions every business owner who is doing an internal transition must answer is when do I turn the reins over. You certainly don’t want to do this too early and if you do it too late there’s a good chance the people you want to run the business will have left.
This is something I went through with my father when I bought his business and merged it into mine.
Don’t make this a conflict ridden process.
When I bought the business from my father the transition was one that was fraught with conflict and distrust from each of us. I think the main reason this happened was because I didn’t know what my father was thinking and he didn’t know what I was thinking.
If you’re transferring your business to your children or your managers’ good communication isn’t just a good idea, it’s the only idea. Without good communication you can be sure that you’re going to have a tension filled transition that might not happen the way you want it to.
Don’t let this happen to you, make sure you communicate and even over communicate what your plans are. Make sure you listen and listen deeply to what the next generation thinks about your plans.
I Know this is a broken record, get a financial plan done.
Before you even start to talk about the process of transitioning you need to get a retirement plan done. I know, I talked about this before and you might feel like I’m being a broken record.
If you know where you stand on the road to financial independence and you find that you’re going to be fine, it’s an easy conversation to have with the next generation of owners. If, on the other hand you find there is retirement planning work to be done you need to be very clear with the next generation of managers what that work is and how it will be accomplished.
Once you know you can afford it, start the process.
Assuming your financial plan says you can afford to leave, it’s time to start the process. It might not be through actual stock transfer. It could be starting to transfer real authority and real responsibility allowing the next-generation to make their own mistakes.
When they make mistakes and they will, your job is to calmly have a conversation with them about what they learned and what they’ll do differently next time. When the next time comes you need to make sure they learned the lesson and you have confidence that they can be successful as the next owners of the business.
After all, there’s a really good chance you’ll be playing bank for your next generation owners and you want to be reasonable sure you’ll get paid what’s owed you.
Make sure you communicate what your time frame is going to be.
You can’t just say someday I’m going to transfer the business. You must have a timeframe for when you plan to do this. Make sure the timeframe is realistic and is one that’s acceptable to all parties in your transaction. If you don’t, I can promise you there will be misunderstandings and those misunderstandings could lead to some real negative consequences.
If you’re in your 60s or 70s get started now. If you’re in your 50s set a reasonable timeframe that everybody is comfortable with. You don’t want to be around your company when you’re too old or too sick to continue being a great owner.
Start a transition plan, not an abdication plan.
When you start your transition plan you can’t just wipe your hands and walk away. You have to test the new owners. You have to make sure they’re competent to not only manage the company but own the company as well. You’re probably very aware that there’s a big difference between being a manager and an owner.
That main difference is that an owner has to think like an owner and not like an employee. As much as we want our managers to think like owners they usually don’t. It takes time for managers to make the transition and you have to help them develop a new mindset about what that means.
Monitor, Monitor, Monitor
Once you start the transition process make sure you inspect to see that things are being done in a way that will likely lead to a successful transition. You might not even know what this looks like. If that’s true, find someone who has successfully gone through a transition or someone who has coached people like you in this process.
No one likes to pay lots of money for outside consultants. At the same time there are times you want to do so and this is one of them. You only get one chance of transitioning your business and you don’t want to screw it up.
Find something to do with your life that doesn’t involve your business.
This is a big deal. Unless you find a compelling future that’s outside your business the chance of you letting go is pretty slim. If you really want to transfer your business you need to find something else to do that will keep you just as involved as your business does.
Ride off into the sunset
Finally, after you’ve completed the transition process it’s time for you to ride off into the sunset. The new owners don’t want you looking over their shoulder and you’re going to find it frustrating if you do so.
You really need to find a way to let go and let the new owners run the business their way. There’s even a good chance that their way as long as they’ve been properly trained will be better than your way.
Why don’t you click here and let me know what you think. I would love to have a conversation with you about your transition plans and what you think is the best idea for finding a great way you to leave your business.