As the owner and CEO of your business, your primary role is to move the business forward. You drive in the fast lane, covering as much distance as you can in the limited amount of time available.
Yet you know that you can’t stay in the fast lane forever. At some point you will run out of gas!
Don’t wait too long. The exit ramp is on the opposite side of the highway and it’s dangerous to cross a three-lane highway at the last minute. You’ve seen others cause some serious collisions – some involving their own family members.
It’s much safer to gradually move over to the exit ramp one lane at a time and allow your junior driver to get the necessary experience before taking over in the fast lane.
There are some key things to know and do to ensure you change lanes safely.
- Yes you still need to run a good business by monitoring the traffic conditions and anticipating the roadblocks. It is vital that you are continually aware of possible bridge-outs in your marketplace or industry, and at the same time look for opportunities to diversify via a new highway.
- But before making any moves, you also need to signal your intentions through good communication with the next generation management and family members. Good communication will help ensure each stakeholder is going the same direction and knows what to expect. It is also critical that you check your blind spot by preparing for all contingencies.
- Finally, you need to be in position well before that exit ramp appears. This means having a plan that preserves and protects the equity you have built up over the years and clarifies how those assets will eventually be distributed.
An integrated transition plan will ensure you address all three of these key components of a business transition.
The Integrated Transition Plan
An integrated transition plan is a focused approach to addressing the inevitable changes to the leadership and ownership of your business.
Over the years you have amassed much more than mere physical assets. Your business, your family and your community all benefit from a number of equally important, intangible assets. Preserving and transitioning both the tangible and the intangible is the foundation of an integrated transition plan.
Consequently, transitioning a business involves much more than transferring the shares of the business. It’s about ensuring the business can not only survive without the current leader but has the ability to thrive under the new leadership. It’s also about ensuring that the family remains connected, regardless of whether you decide to pass the baton to one or more next generation members or sell to a third party.
The BDO SuccessCare Program™ was designed to help you prepare an integrated transition plan that meets the needs of three key areas of your business:
- The Family or Personal area which focuses on the continued support of individuals, the family unit and other stakeholders such as employees and their families;
- The Ownership area which centres on the preservation of the physical capital entrusted to the shareholders; and
- The Business area which is responsible for building and maintaining the wealth engine that generates the wealth for the stakeholders.
In the Family/Personal area, your plan focuses on developing a long-range vision that clarifies your direction and purpose for the next 1000 months. It builds on your guiding principles and philosophy to sustain and grow the social capital that is so important to both your family or partners, and the continuity of your business. This social capital includes intangibles such as your reputation in the marketplace among customers and suppliers alike. It includes the culture that keeps your employees engaged and committed. And it serves to keep your family nurtured, connected and supportive of one another. Essentially, you have a plan that defines the legacy you will ultimately leave your family and your community.
The Strategic Ownership Program™ prepares both the exiting and succeeding generations for the transition of the physical assets. In order to adequately protect these assets, this program first clarifies the overall ownership philosophy and puts the wheels in motion to develop the appropriate ownership structures and agreements.
The objective of the Business Enhancement Program™ is to keep the wealth engine running and determine what needs to be done to ensure the business can continue to be profitable beyond a change in leadership, and at the same time attractive to a prospective buyer. This plan includes processes to professionalize the management system, groom the next generation leader(s), transfer the knowledge and relationships to the new leaders, and ultimately affirm that the business can thrive without the current decision-maker.
The BDO SuccessCare Program™ will help you meet your objectives in each of these three key areas. Through our unique, future-focused approach, we help you maintain a balance by:
- Clarifying what is important to you in each of these three circles.
- Communicating your vision to family members and other stakeholders.
- Creating a “we-focus” for the current and succeeding generations.
- Identifying all potential roadblocks to reaching that common vision.
- Developing a game plan to address those roadblocks and then assisting you in implementing the appropriate measures.
Planning a business transition is just like managing any other project except that the outcome of this project is critical to the future of many people. Success is dependent upon the right investment of time and resources.
Any business owner who has successfully transitioned a business will acknowledge that it takes a long time – possibly as much as five years or more – to put processes in place that enable the business to run successfully under new leadership. Unfortunately, the majority of business owners believe they can wait until they are almost ready to retire to begin planning their exit. It’s not surprising that there are so many collisions on the highway as they try to move to the exit ramp when that fuel warning light comes on.
For many, transitioning a business is a “once in a lifetime” journey. It’s a new and different challenge that requires a roadmap or a GPS. The BDO SuccessCare Program™ is your guide. It goes beyond the technical aspects of a share transfer. It helps you and your family articulate what you want and guides you through the process of developing the strategies to get there.
To take advantage of the resources available, call your BDO advisor or our Business Transition Services Team at 1.800.598.6400. We will help ensure you have easy access to the exit ramp when that fuel warning light comes on!