What does transition mean to you? For each of us, it takes on a different significance depending on where we are in life. Transition is movement—it’s part of a process, a journey that leads us from one chapter to the next. As a business owner, this journey often involves navigating the complex and sometimes daunting process of business transition. I see entrepreneurship as an expedition, one with a natural progression that requires careful navigation. I don’t have all the answers, but I do have a process, and I’ll be with you every step of the way.
One day, you’ll face a pivotal question: What’s your end goal? For founders, entrepreneurs, and next-generation family leaders, this is about more than just running a business—it’s about preparing for change, whether it’s a change in control, ownership, or how you’re involved in the business.
A survey from the Business Enterprise Institute (BEI) revealed that only 20% of business owners have a written exit plan. Even if that plan exists, it’s often not communicated clearly. If your plan is just in your head and not laid out in a way others can see and understand, is it really a plan?
In guiding you through this process, I focus on three Strategic Readiness Pillars: business, personal, and financial. These pillars need to be in balance for a smooth transition. Let’s explore what each one entails.
Business Readiness: This involves managing risk, ensuring transferability, and positioning your company for a successful transition. It’s about having a written and communicated plan that everyone involved understands.
Financial Readiness: This is about knowing what you need to sustain the lifestyle you want after you exit the business. It includes understanding your company’s worth and how it fits into your overall net worth. For many owners, the business represents 80% to 90% of their net worth, making this a critical component of the transition process.
Personal Readiness: This focuses on your ability to step away from the business. It’s about creating “pull factors”—things in your life that excite you about the next chapter and make the transition easier.
We don’t always like to think about the end, but as Stephen Covey wisely said, “Begin with the end in mind.” This mindset not only prepares you for the future but also enhances your business’s value today.
Why Timing Matters in Business Transition
Just like people, companies have a life cycle. The best time to sell your business is when it’s in a healthy, thriving stage—not when it’s in decline or, worse, freefall. If a personal crisis leads you to consider selling, the business might not be worth much by that point. That’s why it’s crucial to plan your exit while your business is still flourishing.
According to The Value Builder System, an analysis of over 1,500 business owners showed that the owner’s personal reasons for exiting and the actions they’ve taken to prepare play a significant role in the business’s value. Two similar businesses in the same industry, geography, and size can have drastically different values based on these factors. Up to 53% of the difference in value can be attributed to the owner’s readiness and their approach to the transition.
Many owners resist exit planning because change is uncomfortable. We all prefer certainty and the familiar, especially when others depend on us for their livelihoods. If you’re the rainmaker in your company, it’s easy to stay focused on running the business and push thoughts of transition to the back burner. But avoiding the topic doesn’t make it any less important.
It’s often not until a spouse, business partner, or advisor like me brings up the subject that business owners start thinking seriously about their transition. When that time comes, it’s essential to have a plan that aligns with your goals and sets you up for success in your next chapter.
The Role of Strategic Planning in Business Transition
Strategic planning is a critical component of any successful business transition. It’s about more than just knowing when to sell; it’s about creating a roadmap that guides you through the complexities of the process.
Your transition mindset plays a significant role in this planning. Are you running toward the next chapter of your life, eager to start something new? Or are you looking to step back due to burnout, boredom, or other challenges? Understanding your motivation is key to crafting a plan that meets your needs and protects the value of your business.
For those who are eager to move on, the challenge is often timing. It’s about knowing when to let go, especially if your business is growing. Conversely, if you’re feeling burned out, it’s crucial to ensure that your desire to step away doesn’t negatively impact your business’s value. That’s where strategic planning comes in—it helps you navigate these challenges and ensures that your transition is as smooth and successful as possible.
Planning for a business transition doesn’t have to be overwhelming, and you don’t have to do it alone. Whether you’re years away from exiting or considering your options now, taking proactive steps can make all the difference. Let’s discuss how to position your business for a successful transition.
Book a complimentary 30-minute strategy call with me, and let’s explore how we can protect your legacy and set you up for future success.
