In recent months, I’ve come across a number of business owners who are “not getting any younger” and are contemplating their transition out of their business. Many don’t have that one person identified as the next in line for the business. Maybe the owner has no children or the children aren’t interested in the business, or maybe there are multiple children who are interested but none that seem qualified. Sometimes there are a couple of employees who might be good candidates to take over the business. The business owner, though, is reticent to approach these folks for fear that it won’t work out, relationships will be damaged, or the business will suffer – and are, therefore, paralyzed. When no obvious plan for the business exists, the question I get most often is “Where do I start?” and “How do I have these conversations?”
First, you need to know what you’re trying to accomplish and what your business needs operationally. You need to evaluate what you, as the current owner and leader, do for the business. In understanding your role, you can evaluate what gaps will exist if you are no longer present. (As a side note, this exercise is really important for emergency planning as well.) This knowledge enables you to look at others’ skills and determine who can step into your shoes. It helps you to be more objective in evaluating candidates to fill the role or even to breakdown the needs into multiple roles. You can begin to create a structure for what the company might look like with others sitting in these leadership and operational chairs. You may find that you don’t have someone to fill a particular role and that’s good information, too.
Once this map is outlined, you can look to ownership. You’ll need to understand your own priorities in transitioning the business such as keeping the business in the family, creating wealth in the family by extracting cash from the business, or simply retiring. Your priorities may drive who the likely owners are. Even if family members aren’t the right people to operate the business, they might be the right people to retain ownership. Possibly the employees who are the new leadership are the likely owners as well. With ownership transition, you’ll need to evaluate the buyers’ ability to finance the purchase and how they will do so. This again can play into your priorities and needs in the short and longer term.
A major hurdle to this exercise is the emotion associated with any business transition, especially where the answers are not obvious. It starts with some objectivity and planning to get beyond the paralysis of the uncertainty and emotion. You need to focus on your goals and priorities in transition, the role you really play, and who the likely candidates are for leadership, operations, and ownership. Many people can begin to tackle this on their own but it’s usually helpful to get an independent perspective involved to help balance your biases and overcome your fears. You may bring in a family business consultant, succession planning expert, or create an advisory board to support your efforts – find some trusted people to help you move your plan forward.