What’s NEXT For You: Business Owners Share Their Transition Stories

The reason people blame things on previous generations is that there’s only one other choice! — Doug Larson.

For millions of older business owners, the next major event in their lives will be selling or passing on the companies they have founded and grown. In almost every case, that transfer of ownership will be to a different generation.

Since most of these owners are Boomers, or those a little older, the new generation of owners will most likely be from the GenX/Diversity Generation, born between 1964-1981 — the first generation in American history to truly live diversity in their early core value-forming years.

“Let’s meet” vs. social media

Today’s business owners talk about the differences between themselves, their children, and non-related younger leaders in their companies. Among their concerns are: “I don’t understand their work ethic. What is all this social media about? Don’t people just meet in person anymore and figure out how to solve problems?”

Younger potential successors often ask, “Why does it take so long to get things done here? What is all of this process stuff about? Why should I be asked to take a big risk with my career? What specific skills will I take with me if I have to leave this company?”

A father who was trying to pass his business on to his son described the generational differences in this way: “For my son, the business experience seemed like a sprint; for me, it was always a marathon experience.”

Financial risks and rewards

Here are four important tips regarding transition and the next generation:

1. Those of this “daycare” and “divorced parents” generation often put family and friends ahead of work and business

They often spent a good deal of time alone as children and relied on their peers for social and emotional support. It is not surprising that many younger managers are willing to sacrifice financial rewards for the sake of maintaining their family and friend relationships. During the transition, owners need to respect this generation’s concern for family, especially time spent with their children.

2. The Gen X/Diversity generation tries to differentiate between having a strong work ethic and “workaholism”

Many have seen their parents as workaholics, and the results have not been particularly good for them. They do not have the same sense of loyalty that the older generation has had to an employer. Business owners in transition need to understand that work ethic varies with each generation. Members of the Diversity Generation work very hard but prefer to work on their own as long as they know that they’re being held accountable. Their sense of mission might be different from the owner’s, but they do have a sense of mission.

3. The younger generation loves technology and believes in “high tech, high touch”

This can be a real benefit for the future, given our society’s acceptance of technology as a primary business delivery platform. As an owner in transition, be sure to place a fair value on this generation’s knowledge of technology and information systems.

4. When it comes to financing an ownership transition, business owners and their trusted advisors might meet their greatest challenge.

“This younger generation is often not willing to invest its own money in business opportunities,” says Steve Coleman, my co-author of Find What’s NEXT For You: Business Owners Share Their Transition Stories. “These young entrepreneurs are not opposed to financing if they are in the business, but many do not trust bankers and complicated financial deals. I recommend that owners find someone closer in age to their next-generation successors to help develop the buy-sell deal.”

Source: The Business Journal

Business owners beware: The do-it-yourself approach to business transition has only a 30 percent probability of success, according to research presented in the book, “Preparing Heirs: Five Steps for a Successful Transition of Family Wealth and Values.”

That means people and assets are only 30 percent likely to make it into the next generation. What increases that probability of success to a whopping 80 percent? Open communications and a resulting plan on the part of owners who choose to pass the business down rather than sell it.

Get stakeholders on board. A clear understanding of the owner’s transition intentions is important to all stakeholders in the business and family. This includes company shareholders, family members and their spouses. Engaging in facilitated open dialog gets everyone on board and guides the owner’s vision for a successful transition, which can happen over several years.

There are four basic steps in the family communication and decision-making process:

1. Confidential conversations with each stakeholder

First step is to involve a neutral, third party (trusted advisor) to hold individual conversations with all stakeholders. These conversations are a consistent, confidential way for people to express their thoughts and help owners understand the best foundation for a transition plan.

In this way, everyone is included — no one is excluded — and, almost always, each person is thankful to be part of the process. Questions to ask each stakeholder:

• What are your hopes and aspirations for the business and its future?
• Do you see yourself involved in the business? If so, what is your desired role?
• What are the benefits of being involved in the business?
• Are there any other issues to put on the table?

2. Options to move forward

Based on step one, the ownership reviews the major findings with the trusted advisor and considers:

• What are areas of agreement?
• What issues need to be resolved before moving forward?
• Is there a preferred option for moving forward?

3. Meet with all stakeholders

The third step is to facilitate an information session that clearly communicates the owner’s transition intentions to all stakeholders. The purpose of the meeting is to share information, not gain consensus. This is not the time for problem solving, decision making or voting. Yet, the owner is looking for passive consent where everyone says, “I can live with that.”

Everyone in attendance is offered time to express personal opinions regarding the owner’s direction. This is usually a time of great affirmation. The trusted advisor facilitates this session to ensure that everyone has the same opportunity to speak, no one dominates and the start/stop times are honored.

4. Clear path going forward

The result is a destination, steps and timing to move the transition forward with annual review points. To keep all stakeholders in the loop, many owners continue annual meetings to maintain open and clear channels of communication.

“To gain encouragement and new ideas for each transition step, it’s important for owners to meet frequently with other business owners who are further along the transition journey and willing to share their experiences,” says Jim Gambone, co-author of “Find What’s NEXT For You: Business Owners Share Their Transition Stories.”

Source: The Business Journal

Even before a business owner is actively thinking about transition issues like success and retirement, fatigue and uncertainty can creep in when considering what to do next in life. That’s when it can be helpful for the owner to take a sabbatical away from the business to have time and space to truly explore life after work.

Freed up from day-to-day operations, owners can unplug from meetings, emails, voicemails and financial reports to spend time gaining a renewed outlook on life and filling up with new ideas. Usually, this starts off with rest and renewal, healthier life choices and travel. The exploration often takes owners to adventures, warm climates, international venues, seminars, conferences or classes for gaining new non-business skills.

Consider the following three-step process for taking a sabbatical:

1. Determine feasibility for a sabbatical

Experiences of other owners demonstrate that there are two requirements for an effective business sabbatical: a stable, healthy business with positive cash flow, and capable people to run the business while the owner is away.

In this way, everyone is included — no one is excluded — and, almost always, each person is thankful to be part of the process. Questions to ask each stakeholder:

2. Define parallel responsibilities

As the owner commits to going away for a specified time, usually 90 to 180 days, managers must commit to step up and take charge. The key to parallel commitments by owner and managers are well-defined expectations for bottom-line results.

Clear definitions about what the interim management team can and cannot do are important. Examples include hiring, implementing new products, changing financial institutions or selling the business. There may also be an expectation that the owner shouldn’t be disturbed unless there’s a death or near-death situation.

3. Negotiate a re-entry process

When returning from sabbatical, it’s better for the owner not to return to the same job or office. After all, the sabbatical has been a step toward making a transition. If management has done a good job, why demote them? Rather, this is a good time to redefine the owner’s new role and confirm new responsibilities earned by the management team.

After a negotiated re-entry, the owner and managers are held accountable by periodic reviews to ensure “gravity” does not pull either party back into the ways things were. Instead, keep the new picture clearly in view. New habits become rooted after several months. Gone is the fatigue and uncertainty so prevalent before the sabbatical. Take advantage of the renewed energy and focus.

Source: The Business Journal