Many business owners want to transition their businesses to key employees or to family members. If the owners are fortunate, there are qualified successors eager to take the reins and ensure that the business continues well into the future.Oftentimes, your qualified successors have worked for the business for many years, and they become anxious to learn how and when the business will be transferred to them. They patiently wait for their turn, but they can lose heart if you don’t have a transition plan. In addition, if too much time passes without being told of a plan, the successors may actually lose their self-confidence or simply give up and walk away.
Developing an exit plan and succession plan can provide owners with the roadmap you need to achieve your own goals, and it also can provide hope and a plan for the next generation of company leaders. The transition plan should include three key elements:
- Timelines for the transfer of responsibilities as well as the transfer of ownership shares. These timelines may be different. Owners may decide to give up their responsibilities at a slower or faster pace than they give up shares.
- An agreed-upon role (or not) for the owner. Along with the timeline, it will be important to discuss exactly what, if any, role the transitioning owner will have after the official transfer of shares is complete. Many owners would like to continue to work in the business, however in order to achieve a successful transition, the owner will eventually need to let go of the CEO role and mindset. This is not easy for every owner to do, but it is critical that the employees look to the new owner and successor for their marching orders. They can’t be confused about who is in charge.
- A plan to develop the leadership skills of the successor(s). While there are some leadership skills or attributes that are simply present at birth, others can be taught and honed with experience. There are numerous CEO groups, courses, seminars, and advisors ready and willing to train successors and help them develop the skills required to take over the reins.
Our exit planning process, including developing a Business Ownership Transition Plan, always begins with identifying the goals of the current owner(s). We believe those goals are paramount in determining the best strategy. However, if exiting owners are committed to transferring the business ownership internally to key managers or family members, you must also be committed to ensuring that your successors are positioned to succeed.