When I wrote “It’s a Journey” several years ago, we focused on the emotional side and the human side of business transitions because we believe in a people-first concept. Over the years, I’ve worked with hundreds of people to create transition roadmaps, and I consistently see the same pattern: people start with the “how” and the “how much.”
They’re thinking about how much money they could get for their business, whether it’ll be enough, and how to structure everything—the estate plan, the trust, how to manage the money afterward. Don’t get me wrong, those are all important questions. But what most business succession planning strategies miss is the people side of the transition.
Just 30 minutes before recording a new podcast episode, I got off a call with a wonderful man who has successfully transitioned three different companies over the years. Three! And guess what? He still doesn’t know what’s next for him. Because of that uncertainty, entrepreneurs tend to get out of their business, become unhappy, and end up starting another business from scratch—which we all know is incredibly challenging work.
https://youtu.be/45JHjvuZkII
Interested in listening to the podcast episode? You can do that here.
Here are the five critical elements that most business transition planning overlooks:
1. Envisioning Your Next Adventure™️
The first thing that most transition plans miss is helping you envision your next adventure and actually taking time to figure out what’s next for you. If you’re focused solely on the transition without seeing what you’re moving toward, you have a high likelihood of leaving and being unhappy.
If it happens to be a family business transition, you also have the high likelihood of thinking you’re leaving yet still hanging on. Why? Because you don’t have anything else to move toward.
In order for human beings to be happy, we need to be fulfilled. And to be fulfilled, we need something that’s fun for us to do, something that makes us happy. Without that clear vision of your next chapter, you might successfully transition your business yet find yourself lost or tempted to start all over again.
2. Developing Your Successor with Intention
A successor has one of the highest learning curves of anybody going through this business transition. Yes, as the transitioning owner, you have to figure out your next adventure—and many people think that’s pretty luxurious, having time and hopefully money to do fun things.
But think about developing your successor: they’re coming into your role. You’ve been in that role, and even with all your knowledge, wisdom, and years of experience, you still know how challenging it is.
When you think of developing your successor with intention, that’s something that family business succession planning tends to miss. How does this person actually get the knowledge, skills, experience, and intuition they need to successfully take the business forward?
In your succession planning strategies, you can include clear milestones that a successor can commit to achieving, and you can commit to both teaching and training and mentoring—but also to letting go. Those important conversations can happen and become part of your transition strategy.
3. Honoring Emotional Journeys
The emotional journey is big, and it’s big for everybody involved in business transitions. Being able to honor that is something that gets missed when transition plans focus on function, taxes, structure, legal documents, and who can or can’t be a partner.
As the leader and transitioner, many times you’re tired because you’re doing this transition journey on top of your normal job—unless you’ve already started working your way out and your successor has taken some things off your plate. Most entrepreneurs don’t have part-time jobs; they have full-time jobs building and growing their companies, sometimes full-time plus.
Don’t forget about everybody else’s emotional journey:
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Your successor might be feeling unsure, inadequate, or challenged to earn the respect of others that you already have
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Your spouse is going through an emotional journey because when you’re around more, there’s a shift and change in their life too
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Other family members and employees are processing their own hopes, fears, and concerns
You want to make space for those conversations and take time to notice and invite people to talk with you. We’d rather have curiosity and conversations than conclusions that people are running around with—conclusions that might be true but many times are not.
4. Alignment of Multiple Objectives
One of the biggest things people miss in succession planning is alignment. As a transitioning owner, because you’ve been the leader, carried the weight on your shoulders, and been the decision-maker from start to finish, it’s likely that you’ll take this whole transition planning process on yourself.
It’s also likely that you’ll try to create a plan or strategy that has many, if not all, the answers. But here’s the thing: in a transition strategy, you can’t do it by yourself. You have to have other people who actually want to come in, who can’t wait to come in so much that they’re willing to push you out (which is super uncomfortable as the owner, but necessary).
What gets missed is the alignment of multiple objectives—not just your objectives, but other people’s objectives. If you’re focused on the how and how much, the money and function, you miss the people objectives.
Why do people miss these? Because they’re hard to figure out. The only way you determine other people’s objectives is by asking them what their objectives are. You can assume you know—like thinking your kids will be happy each owning an equal amount of the company—but that’s a parent’s objective, and it might not be the kids’ objectives.
These conversations are deep. We’re talking about: How do you want to live the rest of your life? What’s important to you? What do you want to accomplish? What are your dreams for your family? Is this business the right place for you? These include personal objectives and business objectives that need to align.
5. Clear Governance Structures
Finally, most business owners miss thinking about governance. If you’re a single owner in a private business, you typically are everything: the CEO, the chairman of the board, the owner investor. You make all the decisions, and that is your governance structure.
When people say, “I don’t have a governance structure,” I tell them: “Yes, you actually do. Your governance structure is all tied up into one person—you. You can hold your board meetings and owner meetings whenever you want because you make all your own choices.”
But creating clear governance structures is important for the future success of your business. When you’re everything and all those roles are blended together, you don’t see that there are decision levels. In our Evolve program, one of the first things we do is talk about decision levels:
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CEO-level decisions
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Chairman of the board-level decisions
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Owner and investor-level decisions
By having those three levels and understanding which decisions go where, you create what I call an accelerator and brake system. You might keep many decisions at the board level initially and not let the CEO level make big decisions in years one and two. Then, as your successor gets better, you can give them more authority.
This governance structure also serves as a great training ground for your successor and helps you honor everyone’s emotional journey because you don’t let go too soon. You have fewer “train wrecks” along the way and can create what I call harmony in the work you do.
Using Time to Your Advantage
The difference between an event and a journey is time. The event is the transition of the business asset—when you actually transition that equity. But all the other work you do in preparation gives people time to come together, align their objectives, figure out how they’re going to govern, honor their emotional journey, develop successors, and explore next adventures.
If you’re planning to transition in the next two to 10 years, use time to your advantage. Embrace this process early. Our statistics show that 100% of the business owners we’ve worked with have businesses that are still together and working—we’ve blown the typical success statistics out of the water because we focus on the people side along with the functional side.
Most business owners tend to leave too soon, which is why those businesses fail. By addressing these five often-missed elements—envisioning your next adventure, developing your successor with intention, honoring emotional journeys, aligning multiple objectives, and creating clear governance structures—you can create a transition that leaves you fulfilled, your relationships whole, and your business thriving under new leadership.
Ready to build a stronger transition plan? Download our free guide: “5 Parts of a Succession Plan CPAs and Attorneys Often Miss” at transitionstrategists.co/5parts. This guide offers a shortcut to a stronger, smoother plan that you can use with your current advisors to ensure nothing important gets overlooked. Because our goal for you is a successful transition where your relationships are whole, you’re on your next adventure, the governance is working, and the business is thriving forward with confident leadership.
