It's not difficult to understand why business owners hesitate to start planning the transition of their business. While a part of them recognizes that time is running out, there is so much still to accomplish. Alternatively, they might have some doubts about passing the torch to their family or, never having experienced a transition before, don't understand the formal transition planning process. Whatever the reason, they are stuck in what we call The Inertia Stage.
To successfully transition your business one day, whether to a family member or someone outside the business, you need to not only fully understand the steps in the process, but also garner enough confidence in your own ability to address any concerns, and your trusted advisors' ability to guide you through the implementation.
At BDO, we have a process that helps you gain this confidence, beginning with taking that first step out of The Inertia Stage. The diagram below summarizes this process and represents how every one of us approaches a new task or project.
Whether it's a new job, a new house, or a business transition, the left side of the model represents The Learning Phase. In everything we do, before we can act with any confidence, we need to gather the appropriate amount of information (and knowledge) to see how we might overcome our concerns. Only when we feel we have enough information (and everybody will need a different amount of information even when the task or project is the same), will we be able to exit The Information Stage and cross The Line of Confidence to begin the process.
Once across The Line of Confidence, we enter The Initiation Stage where we begin to tackle the project under the guidance of an expert or someone more experienced who can warn us of impending potholes or roadblocks. This is The Communication Phase of the journey where we are confident enough to involve those who have a stake in the outcome. By continuing to use the resources available to us, we increase our knowledge and understanding and move forward to The Implementation Stage where we can make the necessary decisions to achieve our goal.
To explore this process, consider the plight of 65-year old Thom Penmaen who was truly stuck in Inertia.
From our initial meeting with Thom, it became clear that he had a number of concerns about the future. Some uncertainty mixed with a fair amount of apprehension was handcuffing Thom and fuelling his procrastination in dealing with his concerns.
To begin with, there was considerable uncertainty around the future direction of the business. Thom's plan to expand into Europe and Mexico had been met with opposition from the family. To quote his daughter Diane, “he should be slowing down, not adding more to his daily routine.” But Thom was excited about the expansion and in a hurry to get the project underway while he still had his health and the energy to see it through.
To compound matters, Thom had some doubts about choosing his successor. At this point in time, his son wasn't interested in the business and Thom wasn't sure if his eldest daughter Cathy would make a strong leader. Besides, Cathy's husband, who certainly had a huge influence on Cathy, was the biggest opponent of an expansion. Although Diane's husband Brian also played a key role in the business, how could Thom possibly choose a son-in-law over his own daughter?
Thom definitely needed our help to gain the confidence that a solution could be found.
Before Thom could ever have enough confidence to address his concerns or make any decisions around a future transition, there were a number of things that needed to be clarified. In particular, Thom and the key stakeholders in his family business needed to be clear about:
What a transition plan is and is not.
It's not about getting Thom to retire. Retirement means to take something out of use and for Thom, that's akin to death! Transitioning is about building a bigger future - building something that can sustain and unite his family long after he can.
What this bigger future might be.
We call this Thom's house on the hill – the place where he would ultimately like to be. What does Thom envision? Is it doable? And how do we get buy-in from the rest of the family to help him build that house? To move forward, there needs to be a gathering and sharing of facts to identify what that common interest might be and how it can be reached. If Thom's house on the hill is to extend beyond his lifetime or his current energy level and abilities, he will need to involve the next generation to realize his dream.
How they will achieve this bigger future.
It is important that they are in agreement about what the house will look like, and know exactly what is needed to build it. In other words, they must be willing to go beyond identifying where the business is headed and commit to developing and implementing an appropriate action plan to get there.
What might stop them.
Being future-focused is critical to the continuity of their business. But the Penmaens need to identify everything that might prevent them from reaching their vision and then look at appropriate ways to address these obstacles. They need to be business-focused about identifying roles and responsibilities and groom next generation leaders.
Why they must base their decisions on facts.
All too often we believe that our perceptions are reality - that whatever we think is true, must be true. The Penmaens need to validate the facts before moving forward with any decisions.
Why fears must be addressed.
Transitioning a business causes huge change and inevitably change results in some level of conflict. We all tend to see conflict as damaging or chaotic. The Penmaens need some help to see that their fear of change can be managed and the conflict that results can be positive conflict. In essence, if managed properly, this conflict can be healthy and beneficial and lead to even greater success!
The fact that they are on a journey together.
Knowing the destination and having a road map to get there are basic elements of any journey. However, feeling good about the journey also requires an understanding of, and confidence in, the method of transportation. Before they will take action, Thom and his family need to understand both the options and potential outcomes and be confident in their guide or coach's ability to get them to their desired destination.
With this knowledge, Thom and his family are now ready for the next step. In our next article you will read how we continued to simplify the process for the Penmaens and took them across The Line of Confidence and into The Initiation Stage where they were able to begin building their bigger future.
In the meantime, to begin your journey from The Inertia Stage to The Information Stage, simply contact your personal BDO advisor or our Business Transition Services team at 1.800.598.6400.