Handing off your baby isn’t easy – or simple. Blood, sweat and tears; late nights and weekends spent working; sacrificed vacations and family time – indeed, a CEO’s feelings toward his or her business often mirror those of a parent has for a child.
Unfortunately, when it comes time to take the next step in life, the gravity of letting their baby go can prove overwhelming, say Kathleen Richardson-Mauro and Jane M. Johnson, two business owners who specialize in helping CEOs plan and execute their business ownership transitions.
Transition: The Blind Spot for Many Business Owners
“Successful business owners tend to pore over every detail in order to improve the venture; but what they often overlook is the fact that, like parents to a child, they will someday have to allow that baby to move on,” says Johnson, co-author with Richardson-Mauro of a practical new guide, “Cashing Out of Your Business,” and complementary website of self-help resources,Business Transition Academy (www.BusinessTransitionAcademy.com.)
“As business owners, we’ve both experienced difficult transitions professionally and personally,” Richardson-Mauro says. “So many CEOs, rather than dealing with the reality of their business’ future without them, carry on as if nothing will change.”
Richardson-Mauro and Johnson, both Certified Merger & Acquisition Advisors and Business Exit Consultants, say there are a number of measures owners can take to ensure the transition is smooth and they have what they need to be happy on the other side of it.
Tips for Handling Business Transition:
1. Change is natural; learn to accept it with regard to your business.
If you’re like most owners, you have invested some or most of the best years of your life, and most of your financial resources, in your business. By now, your identity and that of the business may now actually be one and the same.
Take heart: Now is the time to focus on your other passions, which may be family, traveling, catching up on reading, fitness and so much more. Consider your next act as a rebirth of you.
2. Learn to count beans – outside of your business.
Now is the time to take stock of the assets you’ve saved outside of the business and determine how much income you’ll need post-transition. Then, calculate how much money you’ll need to receive from the ownership transition. Most owners are not independently wealthy without their business; most need to extract money from their companies to fund the rest of their lives.
The more a business profits, the more owners tend to spread the wealth to family members, or ratchet up spending in other ways. Be realistic about how you want your money to be spent in the next phase.
3. Is your business transitioning “in-house”?
Small businesses – those with less than 500 employees – are responsible for nearly half of the GDP and employment in the United States. Many of these are family-run enterprises; naturally, owners often want to keep it in the family, which doesn’t always work out. Often, parents want to distribute evenly to their sons and daughters, even though only one was actually active in the business.
Attempts to be “fair” can cause businesses to crumble, with an absentee owner trying to call the same shots as someone who’s always there. Be honest about what will actually be good for the business and its employees.
It’s a good idea to include plans for upcoming transitions into your year end business assessments. Even if the transition is still several years out, it’s a good idea to plan for it. Is there an expected transition on your horizon? Do you have transitional plans in place? Tell us about it in the comments.
About the Authors:
Kathleen Richardson-Mauro, CFP, CBEC, CM&AA, CBI, has owned and operated five small companies and has successfully assisted more than 150 business owners in achieving their transition goals.
Jane Johnson, CPA, CBEC, CM&AA, owned her own business, which she exited successfully in 2007. She has been providing advisory services to business owners on how to plan and execute successful ownership transitions since that time. In 2010, Jane received the Excellence in Exit Planning Achievement Award from Pinnacle Equity Solutions.
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- Transition: The Blind Spot for Many Business Owners - December 15, 2013