Ensuring the Legacy of Your Business
Since starting Excellerate Solutions over three years ago, we frequently find ourselves working with small business owners, many of whom eventually face a common critical question: How do I successfully transition my business to the next generation or to new owners? In many cases the current owner wants to continue to play a role in the business after the transition which may generate a source of income for them depending on that role. Interestingly enough, this question entails answering many questions that are common with any business.
So, what are some of the questions to address when considering transitioning a business to the next generation or to a non-family prospective buyer where the current owner retains a role in the business? While every company has unique qualities and needs, there are some generic areas that should be explored.
- Long term alignment: How well are the current owners and the next generation aligned on the core values and vision of the business? The core values are non-negotiable and transcend ownership changes. They define the way the people in the business behave, both internally and externally. The vision defines what success looks like well into the future and provides the foundation for day-to-day decision making. One client discovered that the next generation of owners envisioned growing the business so that they could profitably sell it off and do what they really wanted to do. This was quite a different vision than the owners had, which was to grow the business to stay in the family for successive generations and provide a source of income and part time employment throughout their later years.
- Company structure: How will the company be structured in the future after the ownership transition takes place? What role will the current owner play? What will happen to facilitate the transition to the eventual structure so that the next generation owners obtain all of the experience necessary to be successful? A critical question to address here is if the new owners involve joint ownership, how will conflicts be resolved? Oftentimes, a board of advisors/directors consisting of the new and previous owners as well as other trusted advisors is created to help with any transition issues as well as conflict resolution.
- Internal Operations: What are the strengths and limitations of the organization? What should be done to build on the strengths? What should be done to address the limitations? How does the business differentiate itself from the competition? Having a frank discussion and assessment of the current organization helps position the business to understand what needs to be done to ensure a successful transition to the new owners. Oftentimes, this analysis uncovers hidden strengths that exist with the current owner which need to be addressed once they change roles.
- Market Opportunities: What market opportunities exist with the company now and in the future? How will new clients be acquired? How will the relationship with existing clients be nurtured? Many times, the current owner created the business and likely has been a significant player in developing and maintaining customer relationships. Specific plans may need to be implemented to continue to develop new clients and business with the next generation owners.
If you are a business owner, have you thought about issues involving ownership transition? Proper planning is essential to ensure the legacy of your business, which you have so carefully cultivated.